June 30, 2011

China's average wholesale pork prices were at a fresh record of RMB24.68 (US$3.81) a kilogramme as of June 24, an increase of 4.5% from a week earlier, the Ministry of Commerce's pork price monitoring system showed Wednesday (Jun 29).

Pork prices, which have risen more than 60% over the past year due to a combination of falling supply, soaring corn prices and higher wages, represented the largest contribution to the nation's accelerating inflation in May, when China's consumer price index rose by a 34-month high of 5.5%.

Pork prices contributed 1.2 percentage points to the 5.5% CPI inflation in May. CPI inflation is expected to reach 6.3% in June, with 1.6 percentage points attributed to pork prices, experts said.

"Pork prices will peak in just a few months, sooner than markets expected," analysts said. "With no significant diseases, rising profits of pig farming driven by surging pork prices likely will soon attract new supply, which would curb pork prices."

Meanwhile, prices of corn, the most widely used raw material in pig feed, have shown signs of weakness after an around 15% gains recorded this year, tracking global oil prices.

Data from the Ministry of Agriculture showed that hog stocks as of May 31 rose 0.8% to 453 million animals compared with a month earlier, while the number of hogs for sale rose 3.1%. Both hog stocks and the number of animals available for slaughter in May rose for a third consecutive month.

The number of breeding sows rose 0.3% on-month in May, after declining in each of the previous four months, the ministry said.

The National Development and Reform Commission, China's top economic planner, said earlier this month that pork prices will likely rise further, as prices of live hogs have risen much faster than pork prices.