News in Brief:
– Pork prices in China are in a prolonged slump, causing distress for local farmers and prompting government intervention to stabilise the market.
– The oversupply crisis, coupled with reduced production targets and potential bankruptcies among major players, threatens both domestic and global economies.
China is facing a prolonged downturn in pork prices, disrupting the market and impacting consumer prices. This trend, highlighted by the FAO, not only jeopardises local farmers but also poses significant challenges to the Chinese government.
Pork futures on the Dalian Commodity Exchange, a bellwether for pork prices, have plummeted to approximately 14 yuan ($1.93) per kilogram, a news report says. This sharp decline from the peak of 26 yuan in October 2022 signifies a distressing 40% drop.
The oversupply crisis, exacerbated by government-mandated production targets, spells trouble for local farmers. Historically, prolonged price slumps force farmers out of business, disrupting the delicate supply-demand equilibrium. Major players like Muyuan Foods are already bracing for significant losses, signaling potential bankruptcies in the sector.
In response, the Chinese government plans to reduce the target number of breeding sows, aiming to mitigate the oversupply. By revising acceptable thresholds, authorities hope to stabilise the market and prevent further economic turmoil.
China’s efforts to curb pig production could reverberate across the global grain market. A decrease in demand for feed imports like corn and soybeans is expected, potentially driving down international prices and impacting agricultural economies worldwide.
The impact on consumer prices is palpable, with China’s Consumer Price Index (CPI) rising a mere 0.1% year-on-year, far below the government’s target. While the drop in pork prices currently depresses the CPI, a potential reversal could alleviate deflationary pressures in the future.
