Evaluation of new pork reserve policy: Based on the rational expectation storage model

China has clarified the response mechanism of using buffer reserve to stabilize hog market since 2009. The regulation rules have been updated twice. However, whether these adjustments can achieve better policy outcome is uncertain. This paper adopted and calibrated the rational expectation storage model using parameters representing hog market and government reserve interventions in China to simulate hog price movement and policy costs in the long run under two different policy scenarios: 2012 edition and 2015 edition, respectively. This paper also discussed the impacts of adjusting reserve capacity and changing triggering conditions for reserve intervention and forecasted the changes in policy outcomes and costs when supply and demand elasticities decreased. Results show that the coefficient of variation of hog price will decrease under the policy intervention scenarios. Comparing 2012 edition policy and 2015 edition policy, results show that under 2015 policy, hog market performs better with lower costs (by 9.98 billion yuan), despite slightly decreased efficiency and the probability of hog prices below the lower limit is significantly reduced. The impact of adjusting reserve capacity is limited and reducing storage costs can significantly reduce policy costs. The efficiency of reserve to stabilize price volatility is weakening when demand elasticity is lower and policy costs may increase. In summary, this paper provides some suggestions: reducing government intervention, encouraging the participation of private sectors, and improving hog and pork market monitoring and early warning system.