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Soaring pork price not to trigger inflation in China

(Xinhua)
Updated: 2009-09-07 15:06

Although the pork price in China has risen for 13 weeks straight, it is not likely to trigger an inflation as it did previously, economists and industry analysts observed.

Food, of which pork is one key component, makes up a third of China's consumer price index. Recent increases in pork and eggs prices fueled concerns that the hike would jack up prices of grain, vegetables and other agricultural products, therefore touching off a new bout of inflation.

"The markup was a natural result of prices being too low in the previous period," said Xu Lianzhong, director with the analysis and prediction office under the Price Monitoring Center of the country's top economic planner, National Development and Reform Commission (NDRC).

Xu's view was shared by many participants at the World Pork Conference held Thursday and Friday in east China's Shandong province.

"Unless a new disease breakout leads to a steep cull of pig stocks, the pork prices won't reach last year's high," said Huang Yunhua, president of the Association of Pig Producers of Shaxian County in southeast China's Fujian province.

The spread of blue-ear disease in 2007 led to a huge pork shortage in China. Subsequently, pork prices soared in early 2008, sparking the country's worst inflation in recent years.

From March to June this year, China's pork prices fell straight on oversupply and concerns that the A/H1N1 influenza virus was connected with pigs, according to the NDRC.

The NDRC statistics showed that the lowest price so far this year was 9.7 yuan ($1.42) per kilogram on May 6, which was 28.62 percent lower than the peak price on January 7.

The government then started to stockpile frozen pork to stabilize prices and protect pig breeders from losses and frustration.

On August 19, prices for live pigs and pork reached 11.98 yuan per kilogram and 15.7 yuan per kilogram, up 23.5 percent and 22.3 percent respectively from the lowest price of 2009, but both were still 12 percent lower compared with the same period of last year.

"The stockpiling program played a key role in bringing up the prices," said Xu.

Low prices pushed breeders to cut hog stocks. Statistics from the Ministry of Agriculture indicates that in the first half of 2009, the number of sows declined steadily and so did the live hog stocks except for March and April. The decreases in market supply also helped push up the prices.

Jing Jizhong, a senior editor with www.zhue.com.cn, a pig industry website, said with government policy support, the sector had begun to profit.

"I suffered huge losses around April and nearly gave up," said Ruan Xin, a pig breeder from Binzhou city of Shandong. "Phone calls of demand pour in recently and I now begin to have some confidence again."

"Profit drives up supply," said Huang Yunhua. As it takes only four months to raise a hog for slaughter, he believed the supply increase later this year would crimp the price hike.

Related readings:  China Q3 GDP to up 8.5%, no inflation: think-tank  Race against inflation  Statistics chief: No inflation risk in 2009  Is it too soon to address inflation?

China needs about 410 million live hogs, including 41 million sows, to balance the pork consumption market, according to NDRC statistics. Data from the Ministry of Agriculture showed that at the end of June, China had 450 million live hogs, including 48 million sows. Analysts believe the supply is able to meet the demand.

The heavy drought this year in China's main corn and rice producing regions will not affect the food price either because of the sufficient state reserves of grain and corn from previous six years of harvest, economists say.

Chen Xiwen, director of the office of the central leading group on rural work, said Friday at a news conference that China will not see big price fluctuations in agricultural products, let alone inflation led by agricultural price rises.