Last year, Chinese authorities introduced a new program aimed at stabilizing pork markets by buying up pork when the ratio of hog to grain prices falls below a certain threshold.
A Sept. 3, 2009 article about the selection of a company in Mengcheng of Anhui Province reveals a little about how the pork purchases work. According to the article, provincial authorities chose some large scale processing enterprises near central cities to purchase up to a 4-month inventory of frozen pork for the reserve program. Companies had to have at least 2000 tons of temperature-controlled warehouse capacity and daily slaughter capacity of 1000 head or more. The companies were chosen through a competitive bidding process. Dongsheng (East Rising) company, assigned 1,200 tons of frozen meat reserves, receives lump sum financial support of 800,000 yuan for its costs.
"Reserve purchases bring the “reservoir” effect into play, preventing declines in hog prices, stabilizing county-wide production of hogs, preserving profits of hog farmers, promoting stable development of the hog and pork markets."
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