Hog shortage perks up pork prices

Pork prices rose in China for a third consecutive month in July, a lean period for sales, due to a significant reduction in the number of hogs available for slaughter, industry sources said.

In July, streaky pork prices were hovering at 27.27 yuan ($4.4) a kilogram, up 15.6 percent from the levels seen in April. Prices for pork hind legs were 27.04 yuan a kg, up 16.6 percent from April, according to data provided by the National Bureau of Statistics.

Industry sources said such high prices for pork have not been heard of in the last two years. The previous spike in pork prices occurred between June 2010 and June 2011. Since then, the commodity prices have been constantly falling and many farmers incurred huge losses. The falling yields led to a huge shortfall in the number of pigs available for slaughter and sows, which in turn perked up prices.

Pork accounts for 2.9 percent of China's Consumer Price Index and the higher prices may trigger a higher CPI in the second half.

"The government adjusts the weightage of different products in the CPI every five years. Food accounts for about 32 to 33 percent," said Niu Li, director of the economic forecasting department at the State Information Center, a government think tank.

"It takes about a year and a half for pork prices to peak after bottoming out. The prices touched their bottom and then began to pick up, and will keep rising till the next pigs are fattened and ready for slaughter in six or eight months."

Some analysts expect pork prices to see more hikes later this year. While that is good news for those who raise pigs, it is not for those who buy pork from grocery stores.

Du Yuangen, a 32-year-old salesman at Jiangsu Food Group's meat arm in a RT-Mart supermarket in Shanghai, said pork prices have spiraled upward due to a supply shortage and the increased availability of high-priced products.

Producers in the pork supply chain were affected by the low prices of the meat in late 2013 and 2014. Many producers could not break even and as a result, cut herds to reduce losses, said Du.

Lu Bing, a sales manager with a Hong Kong-based supermarket chain in Shanghai, said: "Organic pork from pigs raised in free ranges and fed only on acorns can be really expensive. In the past, they only accounted for a very small portion of consumers' daily cuisine, but now more consumers are buying such meat frequently."

Lu said the most expensive pork product, organic chops from pigs raised in the Changbai Mountain area in Northeast China is about 252 yuan per kg and has been among the supermarket's best-selling products for several weeks.

Chen Jiao, an analyst with Industrial Securities Co Ltd based in Fuzhou, Fujian province, said: "The number of pigs in stock is extremely low. The shortage of supply has resulted in a price surge, and the trend could continue till next year."

Consumers have felt that pork prices have been rising, but the impact on their dining is not that significant.

"On average, the pork price is about five yuan higher per kg than the beginning of the year. Now we choose to dine lighter, with less consumption of too oily and heavy meat. Once we decide to have pork for a meal, we choose the high-quality, branded meat. I spend about 100 yuan on pork each month, which is still at an affordable level," said Wang Yaqin, a 62-year-old retiree in Shanghai.