Pork prices are sluggish, and pig farmers sigh that these past few years have nearly given them heart disease

Pork prices lead the plunge

"It's like riding a roller coaster. These past few years of pig farming have nearly given me heart disease." Wang Hu, a farmer in Luliang City, Shanxi, described it this way.

Having been in the pig farming business since 2007, Wang Hu has experienced repeated sharp rises and falls in pork prices. When pork prices soared in 2011, he earned more than 500,000 yuan that year from pig farming alone; after this year's Spring Festival, pork prices slid all the way down, and he nearly lost all the savings he had accumulated over years of pig farming.

There are many other pig farmers with experiences like Wang Hu's. What Economic Observer heard from Shandong, Shaanxi, Shanxi and other places was a widespread reaction that this year's successive "dives" in domestic pork prices have made many farmers cry out that they "can't take the hit." To reduce losses, some small-scale backyard farmers have begun to exit the market, and quite a few larger pig farmers have also started to cut back on investment. "The pork-to-grain price ratio has long since fallen below the break-even line. From piglet to slaughter, each pig loses 200-300 yuan to raise," said Feng Yonghui, chief consultant of China's Hog Warning Network. "Affected by this, sow inventories have declined in many provinces." Feng Yonghui judged that this round of pork price declines will continue until around National Day, and looking further ahead.

Apart from pork prices, barring special circumstances, grain prices, edible oil, vegetables and other agricultural product prices, which are relatively closely linked to CPI, are expected not to fluctuate significantly during the year.

Multiple experts have reached a relatively consistent analysis of the overall stability of agricultural product prices: since the end of last year, the nationwide advocacy of strict frugality and the sharp reduction in publicly funded dining and gift-giving have spurred the transformation of various catering businesses. Demand for agricultural products from hotels, restaurants and other major meat-consuming units has noticeably decreased. Combined with this year's avian influenza incident and the incident of dead pigs floating in the upper reaches of the Huangpu River, taken together, these factors have driven down prices of agricultural products, with pork as the main one.

Pork prices remain sluggish

The National Development and Reform Commission announced during the "May Day" period that the ex-farm price of live pigs in large and medium-sized cities nationwide had fallen for 8 consecutive weeks, and the pork-to-grain price ratio had also remained below the official break-even point of 6:1 for pig farming for 8 consecutive weeks. Corresponding with the NDRC announcement, results released by the Ministry of Agriculture in the same period also showed that the average price of piglets in 480 rural markets nationwide was also declining, down 23% from the same period last year.

Farmers' feelings are more vivid than the officially released data. A farmer surnamed Sun in Sunzu Township, Yinan County, Shandong, raises more than 200 pigs. He calculated the accounts this way: to fatten a 110-kg live pig, the feed cost is 4×1.4×230 yuan=1232 yuan, epidemic prevention fees 40 yuan, water and electricity 15 yuan, labor 86 yuan, interest 14 yuan, totaling 1477 yuan. But now the ex-farm price of live pigs is less than 12 yuan per kg, and every pig sent to slaughter now loses quite a bit of money.

Also in Shandong, multiple pig farmers in Sishui County and Gaoqing County said that because pork prices have continuously "dived" since the Spring Festival, both farmers and farms are now raising pigs at a loss. Even for pigs bred and raised on their own, from piglet to slaughter, raising each pig loses more than 200 yuan.

Economic Observer also heard from some farmers in Shandong, Shaanxi, Shanxi and other places that at present credit lending and special breeding funds tend to support large-scale farmers, while backyard farmers and small-scale households generally find it hard to obtain loans smoothly. Ordinary farming households mostly can only start breeding with startup capital from private lending at high interest, which also creates a heavy production burden.

As to whether this round of pork price declines will continue, Zheng Fengtian, vice dean of the School of Agricultural Economics and Rural Development at Renmin University of China (Caiyuan), said, "The decline in pork prices has not yet reached bottom, and the oversupply in the live pig market is expected to persist for several more months."

Feng Yonghui, who has long followed the live pig breeding industry, told Economic Observer that the National Development and Reform Commission may recently launch another round of frozen pork purchases for reserves, but he also said that based on past precedents, the state's pork reserve purchases amount to roughly a few hundred thousand tons, while China's annual pork consumption is 50 million tons. Official pork policy reserve purchases can hardly play a role in boosting market pork prices.

In fact, because pork prices continuously "dived" after the Spring Festival, the National Development and Reform Commission already launched a round of frozen pork reserve purchases on April 7. The reserve purchase price was determined on the principle of "slightly above market price," and the scope was implemented simultaneously in more than 20 provinces nationwide, but judging from the current situation, the policy effect has not played much of a role.

Grain prices rise slightly

Apart from pork prices, among agricultural products it is grain prices that are most closely linked to CPI.

According to analysis by Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, Jiao Shanwei, a senior analyst at China Grain Network, and other people in agricultural circles, if no major agricultural natural disaster occurs during the year, the prices of the three major staple grains--wheat, corn and rice--will basically remain stable. The reasons are, on the one hand, that grain has maintained a bumper harvest for 9 consecutive years and state inventories are relatively ample; on the other hand, influenced by the central government's advocacy of strict frugality, demand for grain from the entire catering industry and agricultural product processing industry has also decreased.

Looking at the situation from multiple angles, edible oil and imported soybean prices will not rise sharply in the second half of the year either. A more specific analysis is that in March and April this year, soybeans in Brazil, Argentina and other South American countries had a bumper harvest, and the price of China's imported soybeans accordingly fell sharply. Extending from this, several major domestic edible oil producers have also recently begun to cut prices. So far it has been publicly announced that Yihai Kerry Group's brand Arawana has cut prices for blended oil and soybean oil, with soybean oil reduced by 15% and blended oil reduced by 8%; relevant personnel at COFCO Group also disclosed that the group's blended oil and soybean oil will also be reduced in price nationwide, by about 16%.