September 14, 2006

China's hog prices continue to rise in August

China's hog price recovered in August, based on data provided by the country's Ministry of Commerce. Analysts say this recovery will continue into the next few months as meat demand is seen to rise with the approach of major festive seasons at the end of the year and early next year.

Average hog price during the month in review stands at RMB 7.58/kg, up 8.9 percent compared with a month ago. In the July to August period, prices had recovered at an increasing rate. The 8.9 percent rise in August was 2.5 percentage points higher than that of the previous month. In Sha'anxi, Guizhou and Jiangsu provinces, average hog price increased 26.3, 20.8 and 16.2 percent respectively.

August's hog price recovery had helped many raisers in China, who had incurred losses since October 2005 when hog prices began to slump, reaching very low levels in the first half of this year. Since then, discouraged raisers had either reduced hog inventory or sought greener pastures. Current farm hog inventory in China was below normal levels and market supplies of pork were thus lower.

Ministry officials say that recent flooding in some regions had caused hog supplies to fall. Meanwhile, prices of corn--which is a key macro ingredient in hog feed production--has stayed high, effectively raising the cost of hog production. Efforts by some bigger raisers to restrain market availability of hog had also contributed to higher prices in August.

RMB1=US$0.126