July 27, 2012

 

China's food prices show little increase, pork prices ease

 

 

The food prices in China increased to some extent in the week ended Sunday (July 22), according to the Ministry of Commerce on Monday.

 

China's food-price movements indicate inflationary pressures, with food accounting for about a third of the nation's consumer price index.

 

But wholesale pork prices, a major inflation indicator, fell 0.2%, it said. Pork inventories remain high, and prices are 23.5% lower than during the same period last year, the ministry said.

 

Beef prices rose 1%, while mutton prices rose 0.2%, it said. Chicken prices were flat.

 

A US drought drove global grain prices to record highs late last week, prompting concern that the surge would revive inflationary pressures on Chinese food prices, which were a major culprit behind high inflation in 2011.

 

However, analysts say the global rally won't immediately feed through to domestic food prices, though they would almost certainly drive pork prices later in the third quarter or fourth quarter.

 

"Soybeans used for soymeal are almost entirely imported and so is corn, but we don't think the price increase will happen right away," said Rabobank analyst Chenjun Pan.

 

Most of the soymeal pigs eat is made from imported soy, which account for 80% of China's soy consumption. Chinese soymeal prices have risen 40% so far this year, while domestic corn prices have risen 15% so far.

 

Still, rising hog supplies have kept pork prices declining throughout most of the year. China is protected by large grain and soy stockpiles at ports and in government warehouses.

 

Analysts say pork prices were already set to rebound around the fourth quarter on lower hog supply, which will be compounded by the global grain price rise.

 

China's consumer inflation may rebound in the second half this year, contrary to earlier expectations that consumer price inflation would continue to slow in the second half, said Ma Wenfeng, an analyst with Beijing Orient Agri-business Consultant Co.

 

The food price rise will likely slow the pace of the government's economic stimulus measures, Ma said.