China’s National Development and Reform Commission, the country’s most influential market planner, had invited a dozen of hog breeding and feed producing companies for a meeting in Beijing on Monday to analyze the reason behind recent hog price rally and to increase market supply.
Top hog breeders such as Muyuan Foodstuffs, Wen’s Group and New Hope Liuhe were invited to the meeting that is aimed to “remind” companies to ensure a “normal” level of pork production and avoid purposefully stockpiling hogs, based on government document seen by Sitonia Consulting.
Prices for hog and pork in China strengthened sharply since late April this year as companies cut their fundings for hog expansion substantially amid hefty losses, and herd size shrank.
Meanwhile, the state-owned stockpiler began buying pork in the domestic market to replenish the national reserve and support pork prices since mid-March this year.
But the volume of pork sales from private companies to the national stockpiler slowed drastically in recent weeks despite a weekly tender of 40,000 tons.
A key driver behind companies’ reluctance to sell was that hog and pork prices had rebounded sharply and are expected to further strengthen in the second half of this year given the broader trend of shrinking herd across the hog industry in China.
Therefore, many companies are holding back hog sales and aim to sell them at a higher price later this year.
During the meeting, NDRC warned companies that purposefully bid up price will be met with “serious actions”, according to reports from local Chinese media.
One representative at the meeting said that the recent hog price rally is strongly correlated to lower market supply which was caused by negative margins and high grain prices.
Top breeders Muyuan and New Hope pledged to maintain a “normal” supply after the meeting.
Despite the government’s call to stabilize hog supply in China, hog futures on Dalian Commodity Exchange surged on Monday with the most liquid contract up nearly 8% intraday to hit the highest in nearly 11 months.