By Song Yao and Wei Chengwu

News, page 6

Issue 526, July 4, 2011

Translated by Feng Jie

Original article [Chinese]

 Wholesale pork prices for the last week of July were down 0.5% from the previous week, marking the first time in three months that the Ministry of Commerce data showed two consecutive weeks of falling prices.

Pork represents 9% of China’s consumer price index, so if its prices drop inflation is likely to slow. But is this a signal of pork prices finally going down after increasing for over a year?

 As more data is collected, this price drop is not what it appears because pork prices will remain high for a while. It won't be until the next Spring Festival that prices will go down.

 Two consecutive weeks of falling prices

 The current price drop is a result from increasing supply and decreasing demand.

 In June the number of live pigs increased to 456 million, an increase of 0.5% compared to last year, according to data released by the Ministry of Agriculture.

 From the statistics released and the time it takes for baby pigs to grow up, there will be an increase in supply of pork this month and in February next year. In addition, the Ministry of Commerce plans to release pork reserves onto the market.

 Summer is traditionally the low season for pork consumption.

 Did prices really drop?

 Zhou Wangjun, deputy-director of the Price Division of the National Development and Reform Commission, says it will be another six months before the pork supply increases.

 He states that before the Spring Festival, pork prices should remain stable or increase slightly during the coming peak season that starts from the mid-autumn festival in mid-September.

 Zhou expects pork prices to fall considerably next spring and warns farmers not to raise too many pigs.

According to Zhang Jing, an analyst of Huatai United Securities, pork prices should remain high despite the small increase of pigs. It won't be until the end of this year when the prices go down.

 Rising costs will increase pork prices in the short run because corn, one of the two main feed for pigs, will be short on supply by the end of September. The price of bean pulp, the other feed, may also go up, forecasts Hu Yanni, analyst of Zhongxin Construction Securities.