November 16, 2011

 

Pork price drop eases China's inflationary pressures

China's pork prices have declined or stayed flat for eight consecutive weeks as of November 13, reaching the lowest level in more than four months and easing inflationary pressures, data from the Ministry of Commerce showed Tuesday (Nov 15).

 

Pork was the single largest contributor to the rise in China's Consumer Price Index (CPI) in last several months, as supply tightness drove prices of the country's most-consumed meat to record levels in mid-September, when prices were around 50% higher than a year earlier.

 

Last week, wholesale pork prices fell 1.9% to RMB24.28 (US$3.82)/kg, contributing to a total drop of 8.2% since mid-September, the ministry said.

 

Many hog raisers have sold their stocks before the winter - peak season for pig diseases - easing market supply tightness, while increased imports have contributed to price declines, analysts said. The release of pork reserves by some local governments also helped stabilise prices.

 

Last month, an on-year increase of 39% in the price of pork contributed 1.12 percentage points to the CPI rise of 5.5%, according to the National Bureau of Statistics (NBS).

 

The pork price surge contributed 1.24 percentage points to the 6.1% CPI rise in September, and 1.27 percentage points to August's 6.2% CPI rise.

 

But traders said they do not rule out a rebound over the next two months, as the coming Lunar New Year holiday in January is the peak demand season for pork.

 

Returns from hog production, measured by the hog-to-corn price ratio, also fell for an eighth consecutive week, to 7.19 as of November 9, according to the National Development and Reform Commission. A ratio of 6 is roughly a break-even level for pig farmers.

 

The central government release state pork reserves when the ratio hits 9, which it has not so far this year.

 

In the first nine months of the year, China imported 870,000 tonnes of pork, up 40% from a year earlier, the commerce ministry said earlier. But this is a small amount, since China's annual pork consumption is more than 50 million tonnes, analysts said.

 

China produced 35.68 million tonnes of pork in the January-September period, down 0.6% from a year earlier, the NBS figures showed.