May 30, 2007

Pork shortage in China causes shares of food companies to soar

Rising pork prices have sent share prices of food companies soaring in Hong Kong.

Shares of China Yurun Food (1068), a meat processor also supplying Hong Kong, hit a high of HK$9.52 last week.

Even shares of CP Foods, which owns operate feedmills and poultry farms, was also driven up 17.11 percent to close at HK$0.445.

Analysts said investors believe pork prices will continue to rise for at least six to nine months and that the increases will spill over into other food categories.

Wholesale pork prices in 36 major cities jumped 43.1 percent in the first three weeks of this month from a year earlier, prompting to Beijing to declare it would do everything possible to stablise prices. 

As food plays a large part in China's inflation rates, the 3 percent target set by Beijing in March would likely be exceeded just as the country is having some success in cooling inflation.