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  •   Phillip Daniel Daninga

  •   Zhang Qiao

Abstract

China’s demand for pork has been increasing at a relatively constant rate and its pork imports are increasingly determined by the fluctuations of its domestic supply. This fluctuation in domestic supply has resulted in making farmers suffer from the shocks of price instability. Despite the absence or underdevelopment of livestock insurance in most developing countries, an experience from China and US serves as a lesson for these countries to pay attention to the subsector with potential contribution to the country’s economy but having little or no efforts accorded to the same. This study explored the importance of Livestock Gross Margin (LGM) insurance by analyzing the pork price fluctuation trend in China and linking the risk to the impacts on revenues of pork producers. The sources of data were national surveys reports, research papers and data obtained from China’s Ministry of Agriculture (MoA). Findings revealed that Pork producers in China had been faced with adverse price fluctuations that posed threats to producers’ revenues. The study shows LGM insurance as an important and alternative tool to smooth incomes of the producers in the pork industry when it is managed in its advanced stage. For pork industry to continue prospering, the study recommends establishment of reliable futures market to provide partial income risk insurance to producers whose output is risky.

Keywords: Price fluctuation, Livestock Gross Margin Insurance, Pork Producers, Futures market

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How to Cite
Daninga, P., & Qiao, Z. (2020). Managing Price Risk of Pork through Gross Margin: A Depiction from China and US. European Journal of Business and Management Research, 5(5). https://doi.org/10.24018/ejbmr.2020.5.5.504