The price of pork in China has been pushed up by a rise in labour costs, higher feed prices and a drop in pig numbers. China will release pork reserves into the market when needed to help stabilize prices as the country struggles to contain inflation.
According to the Chinesse Ministry of Commerce, there are 200,000 tones of pork in reserves, which will be released into the market when needed. In June, prices of pork, the most consumed meat in the world´s most populous nation, were about 57% higher then they were a year earlier and accounted for more than one-fifth of the overall inflation rate.
Not only pork prices have been rising after an disease outbreak two years ago that led farmers to a cull of livestock and delays in increasing production, but also the tight supplies are the result of farmers reducing herds after prices declined almost 20% until March 2010. At the same time, demand for meat has been rising in China as consumers become richer.
According to analysts, China consumes about 50 million tones of pork a year, so 200,000 tons amounts to about one to two days of demand. Spot wholesale prices of pork reached a record 25.51 yuan ($3.95) a kilogram on 1 July, according to a weekly index compiled by the Ministry of Commerce. China´s consumer price index increased by 6,4% in June compared to a year earlier. That is the highest level since June 2008, and well above the government´s target of 4% for this year.
China will offer subsidies for hog production to prevent excessive increases in pork prices, but government policies supporting it will not have much impact in the short term because production cycle is very long. Given that the production cycle is about a year, supply will not fully recover until February or March nex year.