China’s state-owned national stockpiler has unveiled the fourth round of pork reserve destocking on Wednesday, the second largest by offer size this year.
The auction this Friday will be selling 14,400 tons of pork reserves, down marginally compared to an offer of 15,000 tons last week.
Nevertheless, volumes of reserve sales since last week increased substantially from 6,900 tons and 1,600 tons in the first two auctions which took place at the beginning of this month.
China’s National Development and Reform Commission, one of the country’s most influential department, reiterated that pork reserve destocking will continue in order to ensure domestic pork supply and stabilize prices.
Cash prices for pork in China spiked in July and have since been hovering at a five-month high of 30 yuan/kg ($4.26/kg). Meanwhile, live hog futures on Dalian Commodity Exchange have been on an upward trend since February this year.
In the first half of this year, falling pork prices have kept food inflation in China at a low level by offset the impact of rising fruit and vegetable prices. However, pork prices began to rebound sharply in the second half because of tightening supply from private companies as they continued to cut production capacity.
Hence, a higher inflation drew significant attention from the Chinese government, forcing it to reserve make a U-turn on its policy from buying pork from the domestic market between March and August to selling pork reserve in September.
Despite the change, domestic pork prices remained strong and could strengthen further due to the upcoming public holiday in early October, during which pork demand is expected to rise.