China Plans to Release Some of Its Pork Stockpile to Hold Down Prices

And with the price of pig meat up 38 percent in major cities since the start of the year, the government is about to open its floodgates.

China’s Commerce Ministry said Friday that it planned to release part of the central government’s 200,000-metric-ton stash of frozen pork onto the market, following earlier releases from pork reserves held by cities and at least 11 provinces trying to cap rising food prices.

So far, they have failed. Year-over-year inflation in China rose to 6.4 percent in June. The ministry says the price of pork in big cities soared by 17 percent last month alone, propelled by higher feed prices, rising wages and increased demand.

“As we know, pig breeding has experienced consecutive increases the last three years,” the ministry’s spokesman, Yao Jian, said at a briefing on Friday. “But with the progress of urbanization and increasing consumption of pork by the people, market control faces new challenges on the quantity of pork consumption.”

If a reliable supply of pig meat does not sound like a national priority, consider this: pork makes up more than half the meat consumed in China, and up to 70 percent in some areas, China’s state-run CCTV television network reported in May.

As living standards and meat consumption have risen, the demand for pork has jumped apace. The average Chinese consumer ate four times as much pork in 2007 as he did in the early 1990s, the English-language newspaper China Daily reported at the time. While per-person consumption is still higher in some nations like Denmark, the Chinese, over all, produce and eat more than half the world’s pigs.

The crush of demand for pork has made the supply vulnerable to all sorts of fluctuations, from epidemics of pig diseases to weather changes that affect the price of grain that fattens pigs. But a nation that runs on pork cannot afford to run short. So in 2007, the government decided to establish a national pork reserve, reasoning that a backlog of frozen meat could be used to make up for shortages and stabilize prices when necessary.

In practice, a strategic pork reserve has problems. Frozen meat does not keep for more than about four months, and live animals must be fed and constantly replenished to keep the reserve stable. In Shaoxing, a large city in coastal Zhejiang Province, the local government keeps a virtual reserve of pork by paying farmers a subsidy of 20 renminbi per pig — about $3 — to keep their herds at a set level.

The government’s latest plan to open the pork floodgates faces a different problem: even at 200,000 metric tons, which is about 220,000 tons, the reserve is too small to make a dent in demand, and so is unlikely to have a big impact on rising prices.

Not to worry, however. The National Development and Reform Committee, China’s powerful state planning agency, says prices will stabilize in the second half of 2011, according to an interview in The 21st Century Business Herald, a state-run daily newspaper.

Li Bibo contributed research.

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