September 23, 2022
Increasing pork prices in China trigger concerns of inflations
Pork prices in China have continued to rise, despite the government releasing pork from its state reserves, diminishing consumer demand and triggering concerns of inflation, South China Morning Post reported.
According to financial data services provider Wind, pork prices in China have increased by more than 50% compared to a year ago, averaging CNY 31 (~US$4.40; CNY 1 = US$0.14) per kg in 22 provinces and cities as of Friday, and were at their highest level since May 2021.
Although rising prices since April have alerted Chinese authorities, relatively low pork prices are thought to have contributed to reducing inflation pressure. Pork has the highest weight among foods in China's consumer price index (CPI).
To ensure market supply during the upcoming week-long National Day holiday at the beginning of October and the upcoming three-day Mid-Autumn Festival, the National Development and Reform Commission (NDRC) has already released two batches of pork reserves this month.
The third batch of 14,400 tonnes of frozen pork from China's state reserves will be released on Friday, bringing the total monthly releases of national and regional pork reserves close to a record-breaking 200,000 tonnes.
NDRC spokeswoman Meng Wei said standard foods like vegetables and pork are in high demand as the National Day holiday draws near, adding that the work of ensuring supply and price stability of staple foods is under some pressure, as a result of unfavourable factors like the spread of pandemic outbreaks and heavy rainfall in some areas.
She said to guarantee supplies of pigs and pork and that the prices stay stable, the cost of the released reserves should be less than the market.
A report released by Trivium China, a Beijing-based policy analysis firm, showed that food prices - especially those for pigs and pork - are on the rise due to normal cyclical and seasonal factors, rising energy and logistics costs, and the impacts of severe drought and heatwaves across much of South and Central China.
Officials are likely to take an even more activist stance than usual to keep food prices in check over the next two months because of the weak economy and the approaching 20th party congress.
China's August inflation data showed that overall food prices increased by 6.1% from a year earlier, down from July's 6.3% growth. Pork prices increased by 22.4% from a year ago last month, up 2.2 percentage points from the month before.
Dong Lijuan, a senior statistician for the National Bureau of Statistics (NBS), said that the increase was primarily caused by the lower base in the same time last year.
The overall CPI in China increased by 2.5% in August compared to the same month a year prior, which is significantly less than Beijing's target of "around 3%" for the entire year. Comparatively, while American inflation eased to 8.3% in August from a nearly 40-year high of 9.1% in June, it still remained high.
S&P Global Ratings' Asia-Pacific Chief Economist Louis Kuijs said rising pork prices are raising overall consumer prices.
He said generally speaking, China's CPI inflation remains moderate despite weak domestic demand. In the upcoming months, they anticipate that situation to hold true.
When there was an oversupply of pork from farms, prices remained relatively low, but as the supply peaked, prices began to rise.
Although prices have entered the cycle's upward phase, NBS spokesman Fu Linghui said last week that there is no justification for significant price increases because farming capacity is still within reasonable bounds.
Zhang Zhiwei, chief economist at Pinpoint Asset Management, said the price of pork will continue to rise, and the government will try to use reserves to slow the pace of pork price inflation.
However, because the price of pork is currently on the inflation cycle after a lengthy period of deflation, it still has room to rise.
The ongoing COVID-19 virus and the ensuing lockdowns and restrictions have already had a negative impact on consumer confidence, and restaurants are now feeling the pinch from the rising price of pork.
- South China Morning Post