May 31, 2007

China to subsidise pig farms to stabilize pork prices

China will help pig farmers and has ordered to immediately prioritize transport of pigs to market in an effort to offset a rise in pork prices that threatens to push inflation past central government targets.

In a notice carried by the Xinhua news agency, the state has ordered told local governments and city mayors to "maintain basic pork price stability", monitor pig production, and focus on the quality and safety inspections of pork.

The State Council, China's cabinet, said that a proper price hike in pork could help increase farmers' incomes and encourage them to raise pigs but excessive price rises will affect low-income residents.

Chinese pork prices have skyrocketed in its highest in a decade as widespread disease and a slump in prices last year discouraged farmers from raising new pigs. Higher grains prices were also the main factors that have contributed to the increase.

The rise in meat and grains prices has fed into inflation, which rose by an annual 3.3 percent in March and 3 percent in April. Economists, including Goldman Sachs, forecast China's inflation could be around 4 percent this summer, over Beijing's goal for 2007 of a 3 percent rise.

China would compensate pig farmers and regions known for pig farming, especially in central and western China, Xinhua said without giving further details.

An unusually widespread outbreak of blue ear disease, also known as Porcine Reproductive and Respiratory Syndrome (PRRS), has claimed up to a million pigs since it began last May, industry officials estimate. China has not officially released figures.

The disease causes stillbirths and abortions in piglets and higher infertility.

Xinhua said if higher prices could affect the living standards of low-income people, local governments would raise minimum cost-of-living payments.