* NDRC issues first warning on drop in hog prices
* Prices down 60% since January
* Farmers unlikely to respond to govt warning - analyst
BEIJING, June 16 (Reuters) - China's state economic planning
agency urged pig farmers on Wednesday to keep pig production
capacity at a reasonable level, after a closely watched
indicator of production costs last week fell far below the point
at which most farmers make money.
The average hog-to-grain price ratio fell to below 6:1 last
week, said the National Development and Reform Commission
(NDRC), adding that it had issued a level-3 warning of an
excessive drop in live hog prices.
The pricing division at NDRC "will closely monitor live pig
production and market price trends ... carry out reserve
adjustments in a timely manner, and promote the smooth operation
of the live pig market", it said in a statement.
Live hog prices have plunged by 60% since the start of the
year and are currently at an average 14.68 yuan ($2.29) per
kilogramme, according to Shanghai JC Intelligence Co Ltd - their
lowest level in two years.
The sharp decline has caught the market by surprise, coming
even before the herd fully recovered to levels prior to the
African swine fever outbreak that began in 2018.
NDRC attributed the plunge in prices to farmers sending
heavy pigs to slaughter, an increase in pork imports and weak
Pan Chenjun, senior analyst at Rabobank, said farmers are
unlikely to respond to the government advice to hold onto pigs,
with a supply shortage of live hogs in the second half now
"At the moment there's a kind of panic [as prices keep
falling]," she said. "When there's panic selling, many follow
and that makes it worse."
NDRC said last week it would adjust its early warning system
that alerts the authorities when hog prices fall too low or rise
too high to make it better reflect market conditions and improve
its role in steadying supply.
Hog prices have fallen further this week and are close to
the 5:1 hog-to-grain price ratio that triggers the highest level
warning under NDRC's new guidance.
It did not say if it will start purchasing pork from the
market to shore up prices.
Live hog futures fell 5% on Tuesday to new contract
lows of 19,035 yuan per tonne, though were up 0.4% on Wednesday
Shares of major listed producers Jiangxi Zhengbang
Technology Co Ltd, Tech-Bank Food Co Ltd
and New Hope Liuhe Co Ltd are all down sharply since
($1 = 6.4049 Chinese yuan renminbi)
(Reporting by Dominique Patton; Editing by Jacqueline Wong and