(Yicai) June 24 -- After pig prices dropped to a 10-year low, Chinese regulators have summoned major pig-producing provinces and enterprises to stress the importance of continuing to lower the production capacity of live pigs to improve the supply-demand relationship and consolidate the foundation for the recovery of prices.

At the seminar, the Ministry of Agriculture and Rural Affairs and relevant departments of the National Development and Reform Commission acknowledged a contraction in production capacity, but then added that the industry needs to continue on this path. The pace of capacity reduction in the pig farming sector is expected to accelerate.

The average price of three external pig breeds in China hit a 10-year low of CNY8.77 (USD1.28) per kilogram in mid-April, after declining since the beginning of the year, according to data from Zhuwang.Com. As of yesterday, the average price slightly rebounded to CNY9.60 per kg, but it was still down 25 percent from the beginning of the year and 34 percent from a year earlier.

Large pig farming firms should actively respond to the initiative by taking the lead in cutting pig production capacity, strictly controlling secondary fattening, eliminating weak piglets, and lowering market weight, the authorities said at the seminar.

Moreover, major producing provinces should enhance supervision at all stages, share monitoring information, expedite the revision and implementation of provincial production capacity regulation plans to better create a cohesive policy effort, and continue to make substantial capacity reductions.

Summer -- the traditional off-peak season for pork consumption -- is approaching, and the short-term boost from the Dragon Boat Festival holiday has dissipated, so pig prices are expected to exhibit a weak and volatile trend in July and August, an agricultural analyst told Yicai.

The market for live pigs will maintain a strong supply and weak demand pattern, leading to fluctuating prices within a bottom range, with little likelihood of significant rebounds or declines, the analyst predicted.

Policy support is laying the foundation for the bottom of the pig price cycle, the analyst said. On the one hand, the combination of market- and policy-driven capacity reductions is expected to accelerate the clearing of excess production capacity. But on the other hand, publicly listed pig farmers, especially large ones, are maintaining their production scale due to advantages in funding, cost control, and continuously improving farming capabilities, adding uncertainty to the timing of market capacity clearing.

While the bottom of pig prices has likely already been established, the timing of the upward turning point still depends on the actual progress of capacity reductions and the recovery of consumer demand, the analyst noted, adding that a true rebound in pig prices will require further clarity on supply contraction signals.

Editor: Futura Costaglione