BEIJING, June 21 (Reuters) – China’s government-backed livestock industry body urged pig farmers on Monday not to panic as hog prices fell further and investors continued to sell shares in major producers.
Live hog prices in the world’s top pork consumer have plunged 65% since the start of the year as domestic production surged and huge volumes of imported pork reached the market.
Some farmers, expecting prices to rise, had purchased almost fully grown pigs to fatten them up further, anticipating large profits.
With the rapid decline in prices, farmers have been selling off overweight pigs, further pressuring prices, and raising concerns that the sell-off will quickly turn to a period of tight supply.
“In a period of declining prices, don’t panic, and further, don’t listen to rumours and plan production with a gambling mentality,” said the China Animal Agriculture Association (CAAA) in a notice issued on Monday.
The warning followed a similar message from China’s state planner last week.
Farmers apparently paid little attention to the advice however with average prices continuing to fall, hitting 13.05 yuan ($2.02) per kilogram on Monday, according to Shanghai JC Intelligence Co Ltd.
Meanwhile investors sold shares in major producers, and live hog futures traded on the Dalian Commodity Exchange closed down almost 7% on Monday at 16,735 yuan per tonne.
The contract has fallen 37% since the start of May.
The CAAA urged farmers to focus on cost-cutting and higher efficiency.
It recommended producers speed up the elimination of less efficient breeding sows, especially market pigs that were held back for breeding amid previous shortages.
Some analysts expect prices to keep falling however.
“Currently large companies are at 55% of their slaughter schedule and small farmers still have a lot of stock on their hands. We expect supply pressure to be quite large in late June,” said Cofco Futures in a note.