“Pigs at front line in China inflation battle”

Pork is serious business here in China. Considered the standard, the staple meat of the country, pork is what you get if a restaurant menu says “meat” but doesn’t specify which animal. Rising food prices have hit pork as well as everything else, leading to slightly surreal quotes like this one, from a Financial Times story on the subject:

“A stable pork market is the government’s unavoidable responsibility,” declared Wen Jiabao, premier, on a recent countryside visit, adding that pork was a “firmly fixed consumer necessity of the masses”.

Ahahaha, look at that quote! It’s beautiful. I hope that kind of language catches on internationally, because I can’t wait until the day Obama solemnly declares Doritos and funyuns a fixed consumer necessity of the American masses. On a more serious note, though:

The Chinese are among the world’s top pork consumers, tucking away some 37kg per person each year. That appetite, which has grown hugely in recent years as Chinese have grown more prosperous, means pork prices figure prominently in calculating monthly consumer price inflation. In June, pork prices were the single biggest driver of food inflation, which hit 14.1 per cent, and contributed 140 basis points to headline consumer price inflation of 6.4 per cent.

China’s pig prices are susceptible to a boom-and-bust cycle that has seen prices fluctuate wildly in recent years.

This year pork prices have been driven to record highs as a result of a fall in the number of pigs being bred. Because of low pork prices last year and rising prices for feed, some small farmers – who account for about 40 per cent of total pork production – decided not to raise pigs at the start of this year.

Many analysts believe pork prices will soon peak. And after nearly a year of interest rate rises, falling pork prices could give Beijing room to loosen monetary policy and ease fears of a sudden slowdown.

The government has tried to calm pork markets by releasing reserves of frozen pork into the market, although the amounts released have been too small to have a significant impact. Despite these efforts, small pig farmers complain that raising pigs has simply become too risky.

This is what happens when a billion Chinese jump sit down and eat some dinner.

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Filed under China, inflation

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