China to restock pork reserve amid weak hog price, futures spike

China’s state planner said it is preparing to stock national pork reserve as hog price has fallen below a critical level.

The Chinese government could soon replenish its pork reserves across the country hog-to-corn price ratio slumped to 5.57 to 1, said China’s National Development and Reform Commission (NDRC) on Tuesday.

The ratio is currently at its lowest level in three months and has been fluctuating between a “level-two warning” range of 5:1 to 6:1 for the past three weeks.

NDRC will start pork reserve restocking “depending on the situation”.

While cash corn price in China has stabilized at 2,760 yuan/ton (US$434/ton) since late November 2021, cash price for hog has slumped more than 17% during the same period to 15,450 yuan/ton (US$2,431/ton).

Hog-to-corn price ratio has been used as a key indicator for the government to decide whether hog price is too high or too low for state intervention.

The ratio uses corn as a benchmark as the feed grain makes up more than 60% of hog feed in China and serves as a main source of energy for the animal.

Though soymeal is a key source of protein, it is often substituted by other vegetable meals or grains depending on price competitiveness.

This announcement shed bullishness to the hog market in China which has faced oversupply in 2021 after aggressive herd expansion in 2020.

Hog futures on China’s Dalian Commodity Exchange jumped as high as 3% on Tuesday to touch a two-month high of 14,965 yuan/ton (US$2,354/ton).

China’s hog herd has recovered to a level before the African swine fever (ASF) epidemic that culled millions of hogs in the world’s largest hog breeding market.