(Yicai) Aug. 14 -- China's pig farming industry is still dealing with overcapacity even though prices of live hogs have started to rebound, according to an analyst.

From Aug. 1 to 10, prices of live hogs jumped by almost 15 percent to CNY17.3 (USD2.40) per kilogram from 10 days earlier, according to data the stats bureau released today. In early July, the average price slumped as low as CNY13.72 per kg. Economists pay close attention to the data as changes in pork prices affect the Consumer Price Index.

The glut is not over despite the rising prices. Consumption has not recovered yet as prices of hogs dropped in early July, reflecting expectations of insufficient demand, an agricultural analyst said to Yicai. The summer months of July and August tend to be the low season for pork consumption in China.

The price rebound this month is caused by regional floods that led to trimmed inventory, government policies about pork reserves, and measures to control swine diseases, the above-mentioned analyst said. "We are not optimistic about future hog pricing," the source said, adding that overcapacity is still a problem even though demand is expected to recover in the second half.

From January to July, listed pig breeders increased their number of fattened hogs slaughtered for sale by 15 percent from a year ago, according to sales briefings. Last month, the corresponding boost was as high as 29 percent, reflecting excess supply.

Farmers can also speculate. The recent upward price movements could prompt farmers to wait and refrain from slaughtering pigs that already weigh more than the standard, the analyst said, adding that this intensifies price fluctuations and is harmful to the sector's de-capacity efforts.

A senior executive of New Hope Group said to a market research institute recently that the third quarter is relatively crucial for the performance of the major pig breeder but prices are not expected to be great between September and October. If prices keep falling in the quarter ending in September, the whole industry will face de-capacity pressures, the executive added.

But finally, there will be balance. Pig breeders are expected to be forced to accelerate their attempts to reduce excess capacity after this year as by then, they are predicted to have eaten up the profits they earned during the high prices of last year, according to a recent research report released by China International Capital.

Editors: Tang Shihua, Emmi Laine