The Vital Role of China’s Pork Prices
By Alex Frangos and Juliet Ye
From China Real Time Report:
While property values go through the roof in China, the price of an vital consumer staple is plunging: pork. It’s roiling farmers, but making some economic policymakers quite pleased.
- Bloomberg News
Pork prices have fallen 14 weeks in a row according to China?s Ministry of Agriculture, their lowest level in four years, and cheaper even than some vegetables. In the first week of April, the average hog price was 9.43 yuan ($1.38) a kilogram.
The porcine price plummet has forced the government to add to its much vaunted frozen pork reserve, a run of icy warehouses around the country it set up a few years ago to stabilize pork prices.
One Chinese press report, citing government statistics, says live pig prices have dropped 21% this year. Another report says pork prices have fallen below the lowly lentil. (In Chinese)
The hope is that by adding to the frozen pork hoard, the government demand will take sufficient meat off the market to drive prices back up.
Why does the government want higher prices? Farmers are complaining. According to several tales in the Chinese press too many slaughtered pigs are coming to market, driving farmers to despair.
Pork plays a vital role in China?s commerce. There are nearly half a billion pigs in China, one for every three people. In yucky terms, like in humans, China dwarfs other countries in pigs. And there?s no India of pigs to rival China. The next largest producer is the U.S., which has 65 million pigs, according to the United Nation?s Food and Agriculture Organization. In fact China produces more pigs than the next 43 pork producing countries combined.
The cause of the recent glut of pigs was a reaction to a shortage just a few years ago. An epidemic of blue pig ear disease wiped out pigs across the country and sent pork prices skyrocketing, chief inflation to perilous levels. The virus attacks pigs? reproductive systems.
After the 2007 and 2008 price spike, the government set up the frozen pork reserve and offered subsidies to pig farmers to get the pig population back up. It seems to have worked too well.
A Ministry of Agriculture report also says changes in the economy have also curbed the progression in the nation?s pork appetite. Demand for pork from migrant workers in huge cities has ebbed as more country folk stayed home after the economic slowdown.
There are two bright sides. First, the lower prices are fantastic for China?s many pork consumers.
And diminishing pork prices have kept a lid on inflation, a major worry now that the economy is, according to some economists, running too hot. China grew 11.9% in the first quarter and had a 2.4% inflation rate in March. Food makes up one-third of China’s inflation figures, according to HSBC estimates.
China?s economic leaders have acknowledged the clear economic effect of the pork glut. People’s Bank of China deputy governor Zhu Min cited government efforts to boost pig populations at an investment conference in Hong Kong last month.
?Two years ago China had a total of 420 million pigs. Today it?s 480 million and that 60 million makes a huge difference,” in fighting inflation, he said.