China to sell more pork reserves as key indicator hits 5-mth high

Despite recent rounds of pork reserve sales in China, domestic hog prices continue to creep higher ahead of the seven-day public holiday starting this Saturday.

The national average hog price in the country jumped more than 3% week on week to 24.24 yuan/kg ($3.39/kg) last week, reaching the highest point since late April this year, according to latest data from the National Development and Reform Commission (NDRC).

Rising hog prices also dragged the key indicator of hog-corn price ratio to a five-month high of 8.48:1, triggering more pork reserve sales from the government to tame price inflation.

NDRC uses the hog-corn price ratio as its main metric to decide whether restock or destock the national pork reserve. When the ratio is above 7:1, it would typically trigger the government to destock reserves to cool prices.

Conversely, it the ratio falls below 5:1, the government would gradually start buying pork from the market to prevent prices from falling excessively.

Hog prices in China have risen sharply since July this year as major breeders slowed their pace of selling against the backdrop of a bullish view on future prices. In addition, the reopening of schools in September led to a seasonal peak of meat demand from canteens and restaurants as millions of students return to campus.

The national average hog price soared nearly 27% in the third quarter of this year, which forced the Chinese government to begin price intervention at the start of September.

“At present, the domestic production capacity of live hogs is generally sufficient, and the number of breeding sows, piglets and fattening pigs are all on the rise,” said NDRC on Tuesday, adding that “hog prices are already at a historically high level and there is no basis for a sustained sharp increase”.

The commission continues to urge breeders to maintain a normal level of slaughtering, and has pledged to release more pork reserves at the same time.

NDRC has been conducting weekly pork reserve sales since the beginning of this month. There are currently no signs of stopping in the short term.