The exchange rate hog-to-corn ratio is closely monitored as a critical reference and a key indicator of inflation. It is used to speculate on changes in policy in a broader context.
Pork is the staple meat in China and is a heavyweight in the basket of prices used in calculating the Consumer Price Index (CPI). The ratio of live hog sales prices at farms to wholesale corn price, calculated by the National Development and Reform Commission (NDRC), rebounded to 5.29 on Wednesday after it fell to a five-year low of 4.6 in April. When the ratio is above 6, pig farmers can start thinking about profits.
Live pig prices have fluctuated wildly in recent years, raising concerns that volatility could bleed into monetary and fiscal policy due to the CPI weighting.
The NDRC has also intervened, buying frozen pork on the market for national reserves in March and May, which raised the national average hog price to 11.14 yuan per kilogram by April 30, ending 19 weeks of decline.
Oversupply has been blamed for the price decline since the beginning of this year. Farmers sold 716 million live pigs last year, 20 million more than 2012.
Thursday May 29, 2014/ MoA/ China.