China starts pork reserve restocking as hog prices plunge

China’s state-owned stockpiler is to start buying pork from the domestic market again in an attempt to put a brake on falling hog prices in the country due to poor demand and excessive short-term supply.

The key indicator of the hog-corn price ratio in China fell below 5:1 for the first time since late April last year, causing the stockpiler to start replenishing the national pork reserves.

This is a sharp policy reversal from the government agency, signaling the hog market in China has flipped from a state of shortage to oversupply.

Hog prices have been falling since late October last year due to the stockpiler’s continuous pork reserve sales.

As of last week, the average hog price in China hit 14.68 yuan per ton, a nine-month low. It was down more than 45% in the past three months.

Despite China’s removal of Covid-related restrictions, pork demand rebound is stagnant and it cannot keep up with the increase in supply.

Meanwhile, hog slaughtering volume in China reached a 7-year high of nearly 700 million heads in 2022.

Weak demand coupled with a bigger supply triggered the price plunge, which in turn pulled the hog-corn price ratio lower.

China’s stockpiler closely monitors the ratio and would issue a “first-degree” alert if it falls below 5:1 and start buying pork from the market. Conversely, if the ratio is above 10:1, it would start selling reserves to put pressure on hog prices.