China adds to pork reserves to stabilize prices

Updated: 2012-08-08 10:17


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BEIJING -- The government will again purchase frozen pork to stabilize the market, as high hog production has led to falling prices, the country's price regulator said Monday.

Due to a slack season and continued overproduction, pork prices have shown signs of sliding and likely remaining low for a period ahead, the National Development and Reform Commission said in a statement on its website.

The statement advised farmers to weed out low-yield reproductive pigs and optimize the production structure to reduce losses.

Pork prices have generally shown a declining trend this year. In April, the hog-to-corn price ratio, a major indicator of the sector's profitability, fell under 6 to 1, the break-even point for farmers.

To avoid drastic price fluctuations, the government then initiated a round of frozen pork purchases. Price drops narrowed in May and reversed to moderate gains in June and July.

Food prices have a one-third weighting in the calculation of China's consumer price index, the major gauge of inflation, with pork prices being an important component.

The country's volatile hog market has made the government's price control efforts extremely difficult over recent years. Pork prices were the main driver of the sky-high inflation figure last year.