China Pork Prices “Will Continue To Rise Sharply”, Analysts
In a report on Monday, we detailed how pork spot prices have soared across China as the African Swine Fever has killed 50% of the country’s hog population. The price increase (as ‘pig ebola’ spreads) has already pushed up consumer inflation to a six-year high. Now analysts are telling Reuters on Tuesday that pork prices are expected to move significantly higher through year-end.
New data published Monday from the Ministry of Agriculture of the People’s Republic of China showed the pig-apocalypse continues to get worse.
Retail pork prices in the country have jumped 84% from last year to $2.78 a pound.
Jim Huang, chief executive of China-America Commodity Data Analytics, told Reuters that prices are expected to continue a parabolic move that began in July.
Huang said pork prices had already accelerated by mid-October, after a week-long holiday, called National Day, that was celebrated in the first week of October.
Live hog spot prices jumped “from a national average of 27 yuan per kg in September to 31 yuan per kg in the first week of October, and hit 35 yuan per kg on Monday,” said a Reuters commodity analyst.
Prices in Guangdong province hit over 50 yuan per kg Tuesday.
“Every week it’s a new record,” said Huang. “We saw it really shoot up on the 12th as the market started rebuilding commercial-level inventory after the holiday.”
The cause for the price surge is well-known: African swine fever, which has been raging across China, and Asia, has decimated pork supplies in the last several months.
Pork prices are likely to remain elevated for some time, said Betty Wang, a senior economist at ANZ. She said farmers had culled so many pigs that it would take a while for supplies to build up again. “If people feel that food inflation is going up, it may spur policy actions,” she added, although it wasn’t clear just how Beijing can find a quick and easy substitute to domestic farms.
Chenjun said further releases from state reserves would have a minimal impact on arresting out of control prices.
“Q4 is the high season, and there’s still room for further increase,” she said.
Beijing said Tuesday that it bought 700,000 tons of US pork and 700,000 tons of US sorghum as goodwill gestures towards the Trump administration for a future trade deal.
A trade truce between China and the US could be what China needs to stabilize its pork supplies. But in a surprising motion on Tuesday morning, China said it would require the Trump administration to remove all trade tariffs before it makes $40-$50 billion in agriculture purchases.
Already at record highs, pork prices in China are likely to accelerate through year-end. Rapid food inflation will force the government to intervene in markets to suppress prices. If food inflation gets out of control, it could easily trigger social unrest.
Tue, 10/15/2019 – 20:35