Measures are taken to boost pork supply

"We will implement relevant policies from the central government," said Lu Guoping, an official of the Jilin Animal Husbandry Bureau.

Imports have been increased to fill the gap in the domestic market. And the authorities have taken out pork reserves to increase market supply and stabilize prices.

Moreover, as China and the United States signed the Phase One trade deal, the country is set to increase imports of pork from the US, which will help increase domestic supply.

"Prices of live pigs hit 40 yuan per kilogram in the wake of the seven-day National Day holiday, the highest level this year," said Wang Dali, head of a pig farm owned and operated by Jilin University in Changchun, Jilin province. However, consumers could not afford such high prices and the demand decreased, leading to price falls, he said. "Even without the government measures to control prices to make pork affordable, prices will drop."

He said the State's release of pork reserves into the market is not on a large scale and cannot satisfy market demand. "But the move sends an important signal to the market: the State will not allow pork prices to continue to rise; then pig farmers will not wait for higher prices and increase sales of pigs, leading to more supply and lower prices," he said.

On Dec 27, 2 million tons of pork reserves were released into the market, the seventh such move this year. Some local governments have also taken similar measures to increase pork supply. China's output of pork amounted to 54 million tons in 2018.

But given the advent of the Lunar New Year, which falls on Jan 25, pork prices may not drop significantly and may even rise moderately during the Spring Festival holiday, analysts said.

Traditionally, demand for pork increases seasonally in the month before Spring Festival, said Zhang Ming, an economist of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences. The rising demand may bring extra pressure on pork prices, although the authorities would also take measures to intervene, he said.

With all these factors taken into consideration, he said, pork prices may hover at high levels until March 2020 and start to moderately fall starting from the second quarter of 2020.

"Given the expected increases of supply and high base effect, pork prices may decline sharply in the third quarter of 2020," he said.

If that happened, China's consumer inflation measured by CPI may peak in the first half of 2020 and fall sharply in the third quarter, which would provide room for China to cut its interest rates to boost growth, Zhang said.

While falls in pork prices, which are expected to happen after the summer of 2020, will benefit consumers and the country's inflation controls and monetary policy maneuvers, they will not be good news for pig farmers.

"For pig farmers, the profit margin is high, but things are not always so promising," said Zhu.

This year, following price rises, profits are on the rise. "But costs are also rising," Zhu said, adding that the salaries of his workers rose by more than 30 percent this year. "As prices rose, there are more investors building new pig farms and they hire new hands, which leads to a shortage of labor."

Although he made a lot of money this year, the profits cannot cover his losses last year, when prices were extremely low, Zhu said, adding that if the current high prices continue, his profits would cover losses by January 2020. "We sold live pigs at about 6 yuan per kilogram at the lowest level last year and the more we sold, the more losses we suffered."