Hog prices in China continue to fall with March futures making new lows at 12.36 yuan/kg (US$1.94/kg) and cash prices edged further lower to 12.57 yuan/kg (US$1.98/kg), the lowest level since October.
Losses at hog farming operations worsened with the hog-to-corn ratio falling to levels that trigger the government’s highest alert and induced state stockpiler to step in and buy pork from private companies for the national reserve.
But Economic Daily, a state-run paper which often opines about agricultural policy in China, argued on Tuesday that there is no need to fix the ‘pig cycle’ of rising and falling prices.
It stated that the price cycle in pigs, which often involves farmers adding excessive capacity when prices are high, and vice versa, is simply the market at work and is inevitable.
The government’s effort to buy pork from the market to support prices is a tiny fraction of the overall market, and is unlikely to fundamentally change the supply and demand equation.
Instead, China should focus more on the production side and create a modern pig industry and aim to stabilize production at 55 million tons per year, it argued.
Large publicly traded hog producer New Hope provided a negative view as well today. They expect a further downturn of hog prices in the first half of this year, and the price rebound might come in the second half.