China's hog population in July rose 1.1% compared with the previous month to 3.8 million head, based on a sample of 2,000 key producing areas, marking a fourth consecutive month of increases, the state-backed China National Grain and Oils Information Center said Monday.
While a rising hog population has in part helped stabilize pork prices, government officials have warned that farmers are overstocking piglet inventories, and this may contribute to pork prices falling sharply once the high-consumption season tails off--after the Lunar New Year in January.
Pork has a relatively heavy weighting in China's consumer-price inflation, which is near multiyear highs.
The latest available data from the Ministry of Commerce show wholesale pork prices have been flat after two weeks of declines amid signs that China's inflation unexpectedly accelerated last month to 6.5%, the fastest rate in more than three years.
The sampled hog population also increased 1.1% compared with a year earlier, the CNGOIC said in a research note.
The sampled population of reproductive sows, a key subset for the pork industry, rose 1.4% on month to 468,600 head, marking the third month of increases, it said, calling the latest rise "on the strong side."
Feed mills and traders had done some restocking of their feed inventories, but haven't been buying much recently, which is likely to create upward pressure on feed prices as they return to the market later, the CNGOIC said.
"Meal prices may show high volatility as demand rises in the longer term," it said.
The government's top pricing authority has warned that pork prices may be headed for more cyclical volatility as well.
"Piglet prices are now double pork prices, which shows that hog farms are enthusiastically replenishing stocks," Zhou Wangjun, deputy director of the National Development and Reform Commission's pricing section said last month, describing piglet prices as "not normal."
The commerce ministry earlier this month asked local governments to step up their stockpiling of meat and grains, though government-linked economists have also argued macroeconomic policies can "do little about the 'hog cycle' and usually should not respond to it."
Meanwhile, the government has released frozen pork stockpiles and reintroduced subsidies to stimulate hog production as part of a program that favors large-scale farming.