Friday, September 19, 2008

Pork Prices Continue to Fall

According to the Ministry of Agriculture (MOA), the national average pork price slid below 10 yuan per jin for the first time this year. It is now generally recognized that this is a typical hog price cycle (but with greater amplitude than usual). In Henan, prices started to shoot up May 18 of last year. The peak price was around February of this year (just after the spring festival). Prices have been slowly falling since then and seem to be dropping faster now as more signs of oversupply become evident. Currently (September 2008), prices are about 2 yuan below their peak and at about the level they hit in August 2007. People thought prices would pick up at the mid-Autumn festival but prices kept falling.

Profit margins are getting slim. Farmers report that prices are nearing the break-even level where their profits evaporate.

According to monitoring of 3600 large and small hog farms in 20 provinces, hog inventories were up 10.6% in the first half of the year, slaughter was up 4.8%, and breeding sows were up 20%. This reflects a big expansion of production capacity. Last year the government began subsidizing hog breeding--quick response.

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