May 19, Retail prices of pork hindquarter in 50 Chinese cities rose 40.8% year-on-year to RMB 24.84 per kilogram between May 1 and May 10, according to data released by the National Bureau of Statistics (NBS).
Belly pork had a bigger gain of 44.5% compared with a year earlier, the NBS data showed.
The increases in nationwide pork prices accelerated after Shuanghui Group, China’s largest meat processor, found that some of its pigs in Henan and other farms had been injected with clenobuterol, a banned chemical that could cause dizziness, fatigue and other complications.
The scandal indirectly cut the supply of pigs as Henan authorities blocked the transportation of pigs for a short period after state-run broadcaster CCTV reported the clenobuterol issue.
Wholesale and retail prices of pork have both risen by around 40% y-o-y, and the month-on-month growth of prices has also gradually gained, so the real supply of live pigs may be lower than official data show. “Otherwise pork prices will not increase so much,” said Feng Yonghui, chief analyst at Soozhu.com, a pig industry consultancy.
Although the NBS cut the weighting of food in the basket of the consumer price index (CPI), the surge in pork prices has still spurred concern over inflation in China as the CPI reading hit a 32-month high of 5.4% in March. The CPI eased slightly to 5.3% in April.
Based on last year’s figures, an increase of 20% in pork prices will lift the CPI by 0.6 percentage points (pps), said Li Mingliang, an analyst at Haitong Securities.
Feng believes an increase of 15% in the purchase prices of live pigs will drive up the CPI by one pps, while the current 40% growth rate may push the CPI up by as much as three pps.
Pork prices will hit a string of new highs in May and June before peaking at the end of this year, Feng added.
Li Huiyong, chief macroeconomist at Shenyin and Wanguo Securities, said inflation is generally manageable as monetary growth will slow down in the first half and oil prices are starting to fall back.
“The government can sell meat reserves to tame rapid gains in pork prices. So the dire shortage of pork in 2007 and 2008 which resulted in a quick rise in the inflation rate is unlikely to be repeated this year,” he said, adding that China’s full-year CPI growth would be within 5%.