October 27, 2011

 

 

A resurgence of a variant of foot-and-mouth disease (FMD) is threatening China's hog supply and underpinning pork prices, an analyst with Rabobank Group said Wednesday (Oct 26).

 

The disease, which affects most parts of the world that have major animal husbandry industries, may pressure pork prices and keep food costs elevated at a time when Beijing is seeking to combat high consumer-price inflation.

 

"Hog inventories have risen a bit but disease is quite serious," Chenjun Pan said. "From the industry, we know the disease is coming back and it might worsen depending on the weather change and the vaccination and sanitary measures taken by the farmers."

 

Average wholesale fresh pork prices tracked by the Ministry of Commerce have fallen 3.7% this week since reaching a record RMB26.44 (US$4.14)/kg in mid-September.

 

However, October prices are still up about 45% on-year, suggesting hog supply has not significantly improved, Pan said.

 

"In the second half of the year, foot-and-mouth disease will continue to be prevalent, especially in hog populations that were already affected last year," according to Hunan Province Hog Production Technique System, a provincial-level think tank.

 

Chinese veterinary authorities reported an outbreak of the disease, which affects cloven-hoofed animals, in Ningxia Autonomous Region last week to the World Organisation for Animal Health.

 

China also reported an outbreak among swine, sheep, cattle and goats in Guizhou province in July and among pigs in Xinjiang Uighur Autonomous Region in March.

 

In the last two weeks, retreating food prices signalled some success for the government's efforts to contain inflation.

 

Inflation slowed in September, up 6.1% from a year earlier, compared with August's 6.2% increase.

 

"The characteristic of food-price-driven inflation is that when the supply shock is over and supply responds to higher prices, prices do stabilise and usually come down again," analysts said. "This is the single most important reason why China will see [a] lower consumer price index in the coming months."

 

The government's credit tightening measures are helping to bring down non-food inflation, and declining energy and commodity prices will further ameliorate cost pressures, experts said.

 

Major grain prices that affect pork prices as feed meal, have also been declining in recent weeks. Corn spot prices in key northeastern producing areas have fallen 17% since early September.