UPDATE 2-China calls on hog sector to ensure steady supply as prices surge

(Recasts with NDRC statement)

BEIJING, July 4 (Reuters) - China’s state planner urged top hog breeders to ensure steady supply, it said in a statement late on Monday, after prices surged in recent months.

Hog prices in the world’s top pork producer are up 50% since early May, driven in part by tighter supply following a reduction in the breeding herd.

But the main reason is the “irrational reluctance to sell and secondary fattening in the market”, said the National Development and Reform Commission (NDRC), following a meeting with top producers.

Secondary fattening refers to farmers buying market-ready hogs and raising them to heavier weights to benefit from high margins.

NDRC said some media had exaggerated and fabricated information regarding the higher prices, aggravating farmers’ reluctance to sell.

“At present, the production capacity of live pigs is generally reasonable and sufficient,” the NDRC said in a statement.

It said there was weak consumption and no basis for a sustained price rise.

The rising prices are driving a rally in live hog futures, with the most active contract closing up 7.7% on Monday, the biggest daily gain since the contract launched in January 2021.

The September contract traded on the Dalian Commodity Exchange reached 22,695 yuan ($3,389.24) per tonne, the highest level since November last year.

Major hog producers promised at the NDRC meeting to slaughter at a regular pace and not hoard supplies, the NDRC said.

But major hog producer Muyuan Foods told investors on an interactive platform that the recent rise in prices was mainly due to a “marginal” improvement in the supply and demand, rather than emotional or short-term factors.

Average hog prices had reached 22.08 yuan per kilogramme on Monday, based on data from Shanghai JC Intelligence Co Ltd, still well below the record prices reached in 2020 and the first half of 2021.

The state planner said it would release pork reserves to the market in a timely manner and strengthen market supervision, cracking down on behaviour that causes panic and drives up prices.

$1 = 6.6962 Chinese yuan Reporting by Dominique Patton; Editing by Kim Coghill, Jacqueline Wong and Jane Merriman