“Rising pig prices could affect inflation”

25-05-2007 | |

Rising prices for pork and eggs could well push inflation in China above 4%.

It is expected that this should prompt the Chinese central bank to raise interest rates at least two more times this year, experts said.

A note by Goldman Sachs, one of the world’s largest global investment banks, said that “the surge in pork prices will likely push year-on-year CPI inflation to above 4% very soon.”

Rapid increase
Official figures show that in China’s 36 major cities, the pork price increased 4.4 yuan (€0.43) per kilogramme to 14.5 (€1.41) in the first 20 days of May.

Figures on the website of the Chinese ministry of agriculture reveal that the pork price on average increased 69.5% compared to last year – and the prices have risen every day.

Now other food like eggs, poultry and beef are also affected. Meat constitutes about 7% of the Chinese Consumer Price Index (CPI) basket.

The rising pork prices have caused people in the streets of e.g. Beijing to buy and eat less pork as it has become unaffordable.

Reasons for the price hike
One reason for the price hike, is thought to be a significant drop in the supply of live hogs caused by PRRS in some pork-producing provinces last year, wiping out more than a million pigs.

The cost of raising pigs has also risen sharply in the last few months, as prices for corn and other feed ingredients has increased tremendously.

Corn-based ethanol could well be to blame for that, as China encourages the use of biofuels in an attempt to decrease air pollution before the Beijing Olympics next year.

Several government departments are reportedly dispatching inspectors to pork markets around the country to investigate the price rises.

The Chinese government is also said to be planning to set up a ‘meat reserve’ if pork and poultry prices keep rising.

China boasts the world’s largest population of hogs, with about 485 million head at the end of 2006.

Related news item:
• As Chinese pork prices rise – sales fall (24 May 2007)

Related websites:
• Chinese ministry of agriculture (in Chinese)
• Goldman Sachs

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