August 10, 2007

 

Beijing buys pork, soyoil on mounting inflation worries

 

 

Beijing has purchased pork and soyoil ahead of China's peak consumption season as inflation worries are increasing with little relief seen from record pork and vegetable oil prices.

 

Industry sources said state-owned trader COFCO (China National Cereals Oils and Foodstuffs) had sealed agreements to import 70,000 tonnes of pork mostly from the United States for state reserves ahead of the National Day holiday in October.

 

It wants more than 100,000 tonnes total, but China's strict quarantine regulations have posed difficulties for imports in large quantities, they said.

 

Deng Fujiang, secretary general with the China Meat Association, said they would gradually import small amounts for state reserves for emergencies and possible shortages in some areas.

 

China bans the use of ractopamine which is used in the US as growth promotant of lean meat.

 

Pork prices hit all-time highs in June by 67.7 percent from yearago. The high pork prices helped push annual consumer price inflation to a 33-month high in June, prompting the central bank to raise interest rate last month.

 

High grain prices around the world coupled with outbreaks of blue ear disease in China have discouraged farmers from rearing hogs. This has created a shortage, despite Beijing's efforts to boost supply.

 

China's Central Bank warned that the country may face increasing inflationary pressure and that food and meat prices would not ease in the short term.

 

The supply shortfall in pork is expected to last well into next year. In addition, the price of piglets has soared, so do prices of animal feed which raised risk for pig farmers.

 

Xie Hong, executive vice president of New Hope's Sichuan Southhope Industry Co. Ltd., a leading feed producer said piglet and feed prices are still and only big farms are willing to restock.

 

The traders said China was buying soyoil for state reserves. COFCO and other state-owned traders had paid as much as US$905 a tonne, delivered to China --- levels well above what private buyers were willing to pay, they said.

 

However, a COFCO senior official denied the reports.

 

But traders from international houses said COFCO had bought nearly 200,000 tonnes since late last week, including more than 50,000 tonnes overnight for shipment this year.

 

A trader based in Shanghai the Chinese government is very uncomfortable about pork and vegetable oil price appreciation.

 

He added the high prices are the government's action to raise supply as it is very worried about oil prices surging during the autumn/winter season plus lesser supplies of palm and rapeseed oil.