Bloomberg News

Pork Prices in China Seen Staying at Highs as Shortage Persists

June 21, 2011

June 21 (Bloomberg) -- Pork prices in China, the biggest producer and consumer, may stay at their highest level in more than three years as a shortage persists, said Wang Xiaoyue, an analyst at Beijing Orient Agribusiness Consultant Ltd.

Prices climbed 20 percent this year by June 10 to 22.52 yuan ($3.48) a kilogram, the costliest since April 2008, according to the Ministry of Commerce. They advanced a further 4.8 percent in the week to June 19, the ministry said today, without elaborating.

Pork is the country’s most consumed meat and its weighting in the food component of the consumer price index means every 20 percent year-on-year increase leads to a one percentage-point gain in the final inflation gauge, Beijing Orient’s Wang said. China has ordered banks to keep more money as reserves six times this year and raised interest rates twice to rein in inflation that accelerated in May to the fastest in almost three years.

“The shortage looks set to continue in the next year because the herd size was reduced sharply,” Wang said by phone from Beijing today.

The tight supplies are the result of farmers reducing herds after prices declined almost 20 percent in the 15 months through March 2010, Wang said. It takes 12 months for a piglet to become mature enough for slaughter, he said.

Higher production costs will limit how much prices may decline, Wang said. The total cost, including labor and animal feed, has gone up to 1,700 yuan to 1,800 yuan per hog, so that the pork must sell for at least 20 yuan a kilogram for farmers to breakeven, he said.

Record Prices

The price of pork and live hogs surged to a record this month, the China Daily reported today, citing Feng Yonghui, chief analyst at Soozhu.com, a website that monitors the market. The price for live pigs rose to 18.57 yuan a kilogram by the end of the third week of June, exceeding the previous record set in April 2008, the newspaper reported, citing Feng. The price of pork rose to 27.67 yuan a kilogram last week, also exceeding a record set in 2008, according to the report.

China produced a total 50.7 million tons of pork in 2010, according to Beijing Orient’s data, and represented about 70 percent of total meat output last year. Production may be flat to lower this year, according to Wang’s estimate.

--Feiwen Rong. Editors: John Liu, James Poole

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net

To contact the editor responsible for this story: Jim Poole at jpoole4@bloomberg.net


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