July 25, 2011


China's pork prices moderate on state reserve sales


Pork prices resume climbing in China but the pace of increase has slowed after the government released stocks earlier this month to ease the pressure.


The rally in pork prices has by far outpaced inflation among other major food categories, with the sudden surge in prices moving US futures and prompting government directives last week to stabilise the market.


The measures, which included releasing frozen pork reserves and resuming a RMB2.5-billion (US$388-million) programme to stimulate hog output, appeared to have blunted the rally.


Fresh pork prices have stayed mostly flat in the last two weeks, rising just 0.2% last week on-week to RMB26.10 (US$4.05)/kg, according to Commerce Ministry data.


"In some areas, prices have fallen a bit this week," analysts said. "The release of reserves probably were the most effective measure in the short term."


Insufficient hog numbers, rather than hoarding and speculation, were chiefly responsible for the price surge, experts said.


The government currently has only about 200,000 tonnes of frozen pork stockpile, just 0.4% of China's annual 50-million-tonne consumption.


Still, the state stockpiles around the country were sold at RMB3-4 (US$0.46-0.62)/kg lower than market rates, which "had an important psychological effect in prompting sellers to dump their stock," analysts said.


High pork prices remain a leading cause of inflation. Commerce Ministry data showed pork prices rose 38.4% in the January-to-mid-July period. In comparison, prices of grain products rose 9.8%, poultry 6%, eggs 4.5% and cooking oil rose just 4%.


"The retail pork price is likely to drop sharply in the coming months. As it does, headline inflation will drop back too: inflation in the prices of all consumer goods other than pork has been stable since late in 2010," experts said.


Still, it is unlikely for China to rely on imports to resolve the pork shortage as global supply remains tight, they added. Pork accounts for three-quarters of all meat consumption in China.


China's hog population reached 456 million head in June, the fourth consecutive month of marginal increases, Agriculture Ministry data showed.


While pig prices may slow after August as hog production rises, they are likely to stay at relatively high levels due to high breeding costs, Wang Zhicai, husbandry director at the ministry, said earlier this month.

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