China To “Immediately” Replenish Pork Supplies As World Short Commodities

China’s top economic planner, the National Development and Reform Commission (NDRC), announced Monday to “immediately” increase pork stockpiles around the country after prices fell last week, according to Bloomberg. 

NDRC said the country’s staple meat stockpiles are being replenished as an index monitoring pork prices slipped below a critical threshold. The national average of pork prices against grain prices index registered 4.98 to 1 between Feb. 21 and 25, falling below the 5 to 1 ratio. The ratio signals the need for China to increase pork supplies. 

Hog prices are back to levels not seen since before the African swine fever ravaged pig herds across the country, right before the virus pandemic. 

NDRC will increase pork purchases to provide the hog market with stability. As much as 40,000 tons of frozen pork will be added to state reserves. 

“The goal of stockpiling is to stop the market prices from excessive fall, to improve supply-demand balance, and boost prices (of pork) and the confidence of farmers,” Wang Zuli, a researcher at the Institute of Agricultural Economics and Development under the Chinese Academy of Agricultural Sciences, told Reuters. 

The economic planner will work with authorities to immediately stockpile for state and local reserves. Stockpiling has already begun in the provincial level, including Beijing, Jiangxi, Hubei, and Chongqing. 

As early as September 2020, we noted China began panic hoarding commodities. Bloomberg, at the time, called them “mammoth” purchases of crude, strategic materials, and farm goods, and Michael Every of Rabobank said, “This is being done to ensure China can ride out any repeat of this year’s supply disruptions, or deterioration in trade relations with the US, for example.”

More than a year and a half later, China has a greater internal circulation of commodities than the rest of the world. 

JPM’s Marko Kolanovic noted last week, “The world is short Commodities. China is not.” The Croatian quant said, “China currently holds an estimated 84% of global copper, 70% of corn, 51% of wheat, 40% of soybeans, 26% of crude oil and 22% of aluminum inventories.” 

These massive stockpiles “serve as a hedge to inflation, geopolitical risks, and COVID reopening in what we see as a continued cycle of economic expansion. Although commodity inventories have contracted sharply, China’s share is abundant,” Kolanovic said. He added that only 48 days of consumption remain in global commodity inventories worldwide above ground.

China’s latest move to panic hoard hogs may suggest record high global food inflation is dead ahead as the Russian invasion pushes up soft commodity prices on fears of supply disruptions.