SHANGHAI, Oct 11 (Reuters) - China's live hog futures hit
its upside limit of 8% on Monday afternoon, tracking spot prices
and helped by government stockpiling and falling sow inventory.
Live hog prices on the Dalian Commodity Exchange
were last up 8% at 15,285 yuan ($2,374.44) per tonne - a
one-month high. Prices also marked their sharpest intraday gain
since the contract's launch in January.
"The driving force mainly came from the supply side," said
Rosa Wang, an analyst with Shanghai JC Intelligence Co Ltd,
citing decreasing sow inventory as a factor.
China's sow herd contracted by 0.9% in August versus the
prior month after a 0.5% fall in July - the first decline in
almost two years, according to data published by the Ministry of
Agriculture and Rural Affairs.
"Losses are expanding for pig farms as prices had (earlier)
dropped too much and to even below 4 yuan per 500 grams in some
areas," said Wang.
Live hog spot prices in China's northern, northeastern and
central provinces such as Henan <JCI-HOG-LUOHE>, Shandong
<JCI-HOG-SHOUGN> and Hubei <JCI-HOG-NANZH> have increased or
held steady since the end of September after months of declines.
Large volumes of heavy pigs being sent to slaughter have
weighed on prices, driving firms such as Jiangxi Zhengbang
Technology Co Ltd and New Hope Liuhe to
sharp net losses in the first half of the year.
With falling hog prices causing sharp losses, producers sent
their pigs including sows to slaughter to save on feed costs,
eventually leading to a contraction in future output.
Analysts say the government's stockpiling of pork for
reserves also supports prices.
China's commerce ministry announced on Monday it bought
30,000 tonnes of pork for state reserves on Oct. 10, the latest
in a series of purchases.
Its state planner also said last month the total volume of
reserves purchase will significantly increase, and that several
provinces had already bought pork for their reserves while
others plan to buy during the fourth quarter.
"In the short term, the second round of reserves buying will
definitely provide spot price support," said Haitong Futures
analyst Yuan Shiyang.
($1 = 6.4373 Chinese yuan)
(Reporting by Emily Chow and Dominique Patton; Editing by
Subhranshu Sahu and Jacqueline Wong)