CHINA’S live hog futures hit its upside limit of 8 percent yesterday 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 percent at 15,285 yuan (US$2,374.44) per ton, 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., citing decreasing sow inventory as a factor.

China’s sow herd contracted by 0.9 percent in August versus the prior month after a 0.5 percent 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, Shandong and Hubei 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. 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.

(SD-Agencies)