Economy

Rising pork prices heightens inflation concerns

(Xinhua)
Updated: 2011-06-16 15:09

JINAN -- Since early May pork prices in China have kept rising mainly due to the cyclical live-pig supply shortage and higher costs for pig feed caused by rising grain prices.

"My family has to add around 130 yuan ($20) extra to the monthly budget due to rising food prices, especially pork," said Zhang Liang, a resident in Jinan, capital of east Shangdong Province.

Related readings:  Reserves ratio hiked as CPI hits 34-month high  Soaring CPI puts squeeze on manufacturers  China's CPI up 5.5% in May  May CPI prospect heralds another rates hike

All across the country pork prices have soared in recent months.

Pork is the most widely consumed and affordable meat in China, and its price weighs heavily on the CPI.

Statistics from the China Animal Agriculture Association (CAAA) show that in 2009, pork accounted for 65 percent of the meat consumed by Chinese.

China still faces upward pressure on prices in the near future, said Sheng Laiyun, a spokesperson for the National Bureau of Statistics (NBS), on Tuesday at a press conference.

According to the new figures published by the NBS, China's CPI, the main gauge of inflation, rose 5.5 percent year-on-year in May, 0.2 percentage points higher than in April and hitting a 34-month high.

Sheng said that the rising CPI is due to the rises in food prices, pork and egg prices in particular.

"The price of live pigs was 18.8 yuan per kilogram recently, surpassing the historical high in 2008," said Zhang Jianming, a farmer with 4,000 pigs in the city of Dongying in Shangdong.

A string of upsurges has been seen in China's pork market since early June 2010. During the past four weeks, pork prices have been surging to their highest level since 2008, according to Xinhua's statistical data.

Analysts with the Shandong provincial livestock information center suggest that high pig feed prices caused by rising grain prices are partly to blame.

Feng Yonghui, an expert with ZhongKeYiHeng, an institute of agriculture information and technology in Beijing, said the recent price of live pigs is about 17.52 yuan per kilogram with an year-on-year increase of about 87 percent, while average pork prices have reached 26.97 yuan per kilogram, an increase of around 79 percent.

However, pig farmers say they are hesitant about increasing their pig numbers.

"Although we can gain about 600 yuan from a live pig, no one wants to take the risk of raising more pigs since the market is unstable," said Wang Shoujing, a pig farmer from Tancheng County in the city of Linyi in Shangdong. "Besides, the cost of the piglets is also high," Wang added.

Last year's pig epidemics are also partly to blame for the inefficient supply of live pigs.

"A total of 1,000 pigs died from swine fever on my farm," Wang said.

A shortage of pigs and rising feed prices will remain as problems in the short term, and pork prices will probably remain high for sometime, Feng said.

The entire live pigs supply cycle needs about 12 months, thus the supply shortage will linger for a while, Feng explained.

Yao Minpu, director of the Swine Industry Association of the CAAA, believes that corn prices will keep rising, which may also boost pork prices since corn is the main feed for pigs.

"Pork prices account for a large proportion of China's food prices, which take up to 30 percent of the CPI, so high pork prices will definitely lift the CPI," said Li Tiegang, a professor with School of Economics of Shandong University.

"An increase of 20 percent in pork prices will drive up the CPI by 0.6 percentage points," said Li Mingliang, an analyst at Haitong Securities.