China to aid hog farmers | TSLN.com

China to aid hog farmers

Lin Tan
DTN China Correspondent

BEIJING (DTN) – In the face of sharply lower hog prices, the Chinese government may implement a plan to protect the domestic pork industry from price volatility and key hog-producing provinces have announced emergency plans of their own.

The plans could help Chinese producers maintain herds and they may put a damper on pork imports.

“The plan was formulated last year while we were facing higher prices,” said Fang Ping, director of China Hog Producers Association. But it may first be tested in this current low-price environment.

Both the state and provincial plans use the price ratio of live hogs and the wholesale price of corn as a base. A ratio higher than 9:1 means pork prices are too high and the government will increase market supplies by releasing government reserves and increasing pork imports.

“China imported 370,000 tons of pork last year while pork prices were high,” added Fang.

A ratio between 9:1 to 6:1 is a green zone, meaning pork prices are normal. The government will keep observing the market and pay attention to the market trend with the ratio in this range. A ratio between 6:1 and 5.5:1 is a blue zone, indicating pork prices – and hog producers’ profits – are decreasing, so the government will increase meat reserves.

Recommended Stories For You

If the ratio is between 5.5:1 to 5:1, the yellow zone, supply exceeds demand and farmers are losing money. The government will increase its reserve and require processors to increase production capacity and will seek to increase exports. If the ratio is lower than 5:1, the red zone, it means there is a great surplus of hogs and the government needs to subsidize hog producers.

The plan allows a one-time subsidy of RMB 100 ($14.60) per boar and sow. When hog prices are low, farmers tend to cull sows to decrease hog population, but then it’s hard to recover when hog prices rise. That is why the government plans to subsidize sow and boar stock only.

The current ratio is lower than 6:1 because of lower live hog prices and higher grain prices. Hog prices have fallen because of weak demand, but grain prices remain strong because the Chinese government keeps buying corn and soybeans for state reserves, in order to support feed prices.

It’s too soon to judge what impact the government plans may have. “… I have not seen any real action related to the plan yet,” said Liu Chaoyang, a board member of Henan Zhongpin Food Co., one of the largest pork producers in central China’s Henan Province.

The trigger points for subsidies may need to be adjusted higher because the plan was drawn up when pork prices were higher, Liu told DTN. With a lower pork price and higher government-supported corn price, the plan may not provide enough protection for the industry.

BEIJING (DTN) – In the face of sharply lower hog prices, the Chinese government may implement a plan to protect the domestic pork industry from price volatility and key hog-producing provinces have announced emergency plans of their own.

The plans could help Chinese producers maintain herds and they may put a damper on pork imports.

“The plan was formulated last year while we were facing higher prices,” said Fang Ping, director of China Hog Producers Association. But it may first be tested in this current low-price environment.

Both the state and provincial plans use the price ratio of live hogs and the wholesale price of corn as a base. A ratio higher than 9:1 means pork prices are too high and the government will increase market supplies by releasing government reserves and increasing pork imports.

“China imported 370,000 tons of pork last year while pork prices were high,” added Fang.

A ratio between 9:1 to 6:1 is a green zone, meaning pork prices are normal. The government will keep observing the market and pay attention to the market trend with the ratio in this range. A ratio between 6:1 and 5.5:1 is a blue zone, indicating pork prices – and hog producers’ profits – are decreasing, so the government will increase meat reserves.

If the ratio is between 5.5:1 to 5:1, the yellow zone, supply exceeds demand and farmers are losing money. The government will increase its reserve and require processors to increase production capacity and will seek to increase exports. If the ratio is lower than 5:1, the red zone, it means there is a great surplus of hogs and the government needs to subsidize hog producers.

The plan allows a one-time subsidy of RMB 100 ($14.60) per boar and sow. When hog prices are low, farmers tend to cull sows to decrease hog population, but then it’s hard to recover when hog prices rise. That is why the government plans to subsidize sow and boar stock only.

The current ratio is lower than 6:1 because of lower live hog prices and higher grain prices. Hog prices have fallen because of weak demand, but grain prices remain strong because the Chinese government keeps buying corn and soybeans for state reserves, in order to support feed prices.

It’s too soon to judge what impact the government plans may have. “… I have not seen any real action related to the plan yet,” said Liu Chaoyang, a board member of Henan Zhongpin Food Co., one of the largest pork producers in central China’s Henan Province.

The trigger points for subsidies may need to be adjusted higher because the plan was drawn up when pork prices were higher, Liu told DTN. With a lower pork price and higher government-supported corn price, the plan may not provide enough protection for the industry.