(Updates prices in sixth paragraph.)
Oct. 28 (Bloomberg) -- Pork imports by China, the biggest consumer, may rise to a record this year as domestic supply fails to keep pace with demand and low U.S. prices spur state buying to help ease high inflation.
Imports, most of which are from the U.S., may jump to more than 400,000 metric tons, said Feng Yonghui, general manager of Soozhu.com, the country’s biggest independent hog researcher. Purchases of offal, which isn’t categorized as pork by China customs, may gain to 850,000 tons to 900,000 tons, the highest level ever, said Joel Haggard, Hong Kong-based spokesman of the U.S. Meat Export Federation.
Increased purchases may support prices of Chicago lean hogs, which extended the longest slump in six months yesterday amid rising U.S. supplies. China’s wholesale fresh pork prices surged to a record last month after hog inventories declined as disease killed herds and rising production costs deterred investment. Inflation gained to a three-year high in July, fueled by a 57 percent jump in pork prices.
“U.S. pork is quite cheap compared with high prices here, so a few companies including China Tuhsu,” are importing, Feng said in an interview in Beijing. “Prices are likely to stay high until at least the Spring Festival” in January, which will sustain imports, he said. High-volume purchases will likely continue into the first half next year, he said.
China Tuhsu Import & Export Co. is a unit of COFCO Corp., the country’s biggest grains trader. Two calls made today to COFCO’s Beijing-based spokesman Yin Jianhao were not answered.
Hog futures for December settlement fell 0.4 percent to 86.65 cents a pound on the Chicago Mercantile Exchange yesterday. The price dropped for the seventh-straight session, the longest slide since April. The contract gained 0.3 percent to 86.875 cents a pound at 4:14 p.m. Beijing time.
Pork imports in the first nine months jumped 86 percent to 250,123 tons, according to customs data. Shipments were 372,941 tons in 2008 during the last round of price gains when the so- called Blue-Ear disease shrunk the country’s herds.
Imports of offal, or off-cuts and internal organs, were 620,598 tons in the first nine months, compared with 702,240 tons in total last year, said the U.S. Meat Export Federation’s Haggard.
China may have been buying U.S. pork “for the reserves to reduce price swings,” and some of the purchases may have already been sold onto the market, Haggard said. China is an “opportunistic” buyer any additional purchases will be conditional on domestic prices, he said.
Buying may rise to 480,000 tons in 2012 from an estimated 445,000 tons this year, the U.S. Department of Agriculture said in a report on Oct. 5. China’s rising incomes will create more demand for pork in the world’s most-populated country, FCStone analyst Troy Lust said Oct. 21.
China’s hog prices, which have eased from record highs, are likely to rebound as disease reduced herds, cutting meat supplies, Soozhu.com’s Feng said. Live hog prices in Henan have fallen more than 10 percent after peaking at 19.40 yuan ($3.06) per kilogram, data from Shanghai JC Intelligence Co. show. Henan is the second-largest producer according to the China Agriculture Yearbook.
“It’s a vicious cycle: the more people slaughter now, the faster the decline in prices, and we will see an even sharper rebound in prices,” Feng said.
Swings in prices of pork will directly impact inflation, said Feng, who has researched the market for almost a decade. Inflation eased to 6.1 percent last month from a three-year high of 6.5 percent in July.
“October’s inflation will certainly drop to 5.6 percent to 5.7 percent: it’s strongly tied to pork prices,” Feng said. “But it’ll bounce back again in November-December.”
Soozhu.com grew to be the largest researcher helped by the 5,000 pig farms which feed information through proprietary software, Feng said.
--Richard Dobson. Editors: Richard Dobson, Jarrett Banks
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