The high cost of pork—China’s most popular protein—threatens to breach inflation targets and complicate efforts to stimulate growth in the country, Bloomberg reports.
With inflationary pressures increasing around the world, China’s spike in pork prices, currently at a six-month-high, might possibly push the consumer price growth above the central bank’s 3 percent target, Goldman Sachs Group Inc. estimates, making it harder for the People’s Bank of China to continue easing policy without risking out-of-control inflation.
Pork prices reached an all-time high in 2019, following the country’s African swine fever (ASF) outbreak, with an estimated loss of 225 million pigs in one year, according to the American Society of Microbiology.
To help curb current high prices, China plans to manage herd numbers through farmers directly, encourage banks to lend to breeders and sell pork from its state reserves, Bloomberg explains.
However, these tactics face strong headwinds.
During times of high prices or in a bullish market, people hoard supply. While prices continue to increase in the short term, it will likely cause lower dips once expectations shift.
Supply and demand play a large role in these current prices, as China’s supply of piglets has been down after the collapse in prices last year that resulted in a more extensive cull of sows, Bloomberg explains.
This lack of fresh meat has recently become apparent, as China comes out of its ‘Covid Zero’ lockdown restrictions.
Pig production will not likely increase any time soon, as farmers face high feed prices resulting in less profit on each animal and a decreased desire to increase pig herd numbers.
With increased feed costs and destocking by pig farmers, along with an increased demand from reopening restaurants post-lockdown, Even Pay, a Beijing-based analyst at consultancy Trivium China told Bloomberg, “it’s likely that the market actually does support higher pig prices.”
Will China turn to more drastic measures to keep inflation pressures near target levels? How far will the country dip into reserves before looking outward and increasing imports?
