August 14, 2012

 

 

China's egg and edible oil prices have increased significantly in August, causing inflationary concerns after the consumer price index (CPI) reaches a 30-month low in July.

 

The average wholesale price of eggs rose by 7.3% on August 11 from July 21.

 

Egg prices climbed sharply from May to a record high on June 11, and then started to drop. Prices began to rebound again in late July.

 

The main reasons behind the recent price hikes are decreasing egg output due to weather factors, rising cost of feed stuffs and increasing egg purchase from moon cake makers ahead of the Mid-Autumn Festival in September, Guo Liye, an agriculture analyst at the Distribution Productivity Promotion Center of China Commerce, said.

 

Guo expects egg prices to reach as high as US$1.5 a kilogramme by the end of September, which could help poultry farmers reverse profit drops.

 

But he noted that the price hike will have a limited effect on inflation because of relatively small weighting of egg prices in the CPI.

 

Another consumer product that has shot up in price is edible oil.

 

Peanut oil rose by 12.3% on August 10 from April 1.

 

"Peanut oil only accounts for about 10% of daily oil consumption, so a hike in its price is not likely to push up inflation," Guo Qingbao, an industry researcher at Zhengzhou-based oil industry website cnyouzhi.com, said.

 

"But we expect prices of soy oil and rapeseed oil to rise further. This could result in more severe inflationary pressures," Guo Qingbao said.

 

China's annual consumer inflation eased to 1.8% in July, the slowest growth rate since February 2010, according to the National Bureau of Statistics.

 

Some analysts expect the CPI growth would bottom out in August.

 

The inflation is expected to stay at 1.9% and 2.5% respectively in the third and fourth quarters, given the price rise in agricultural products and gasoline, China Merchants Securities said in a research note.

 

The National Development and Reform Commission said last week that local authorities offered temporary price subsidies to low-income groups in Guangdong and Shandong provinces and Tianjin in the second quarter, as the prices of some daily necessities were still high despite a drop in the CPI growth.