Pork prices, an important indicator of inflation on the mainland, have risen to record highs after low prices last year prompted pig farmers to exit the business.
Data from soozhu.com, a leading pork industry consulting website that monitors prices from 3,000 sources around the country, shows that the average price of pigs sold for slaughter reached 18.37 yuan (HK$22) per kilogram yesterday, up more than 90 per cent from the same period last year.
During the week of June 6 to 12, average wholesale prices for fresh pork in 36 major cities reached 22.52 yuan per kilogram, their highest point since 2008, according to statistics from the Ministry of Commerce. Market observers are blaming rising costs of feed and labourers, the impact of diseases and, most importantly, the reduced production that has resulted from so many farmers quitting the business.
'Since early last year, when we suffered a shortage of factory workers, a lot of small hog raisers have retreated to work in other sectors. And production from bigger raisers hasn't been able to fill the gap,' said He Zhonghua , a analyst at industry website chinameat.cn.
He said that since the fourth quarter of last year, pork prices have broken the normal seasonal pattern: 'Prices usually rise at the end of a year and drop at the beginning of the next year, but the trend has reversed in the past months.'
Chen Shuwei , senior analyst at Beijing Orient Agribusiness Consultant, agreed, saying the major reason behind the rising price was reduced production.
'Many farmers retreated from the business, and a period of short supply will naturally emerge as the lack of capacity can't be [compensated for] in a short period,' he said.
Commerce Ministry spokesman Yao Jian said at a news conference on Wednesday pork prices fell this time last year to the lowest levels of the year, so the number of pig growers fell.
He said: 'The average purchasing price of corn for growers has grown by 9.8 per cent. This might be one factor.'
Yao said the government would not intervene too much, depending on the market to adjust prices.
'As the weather grows warmer, consumption of meat will decline, and we're confident the pork market will resume its stability,' he said.
The last time pork prices soared on the mainland was in 2008. The average price of pigs for slaughter reached a record of 17.20 yuan per kilogram in April that year, triggering severe inflation as a result.
Beijing has been trying to keep inflation under control, fearing it may cause social instability. Authorities have talked to leaders from industry unions and large players in the food industry in the past months, asking them not to raise prices.
But the continuing round of inflation hit a fresh peak last month, with the consumer price index reaching a 34-month high of 5.5 per cent.
Of this growth, 65 per cent was contributed by increases in food prices.Topics: Inflation Peak Oil Economics Business Food Vs. Fuel