Pork prices in China rose after government purchases

“One of the factors behind the price reversal is that the Chinese government is supporting pork purchases,” said Li Xuelian, senior analyst at Marubeni Research Institute. In July, the government said it had purchased 20,000 tons of pork to bolster national reserves. This is the second such action this year after the one announced in February.

Pork is an important food item in CHINA and is used in a wide variety of dishes. It accounts for about 60% of all MEAT consumed in the country. In 2022, when "pork inflation" reached a dramatic high, the government released pork stocks to the market to stabilize prices . Although the authorities would prefer to see pork prices remain at a stable low level, the government did intervene in the purchases.

“Many pig farm operators are in the red,” said Ruan Wei, a scientific consultant at the Norinchukin Research Institute. Excessive pork supplies could force small pig farmers out of business , leading to insufficient supply and rising prices. China has experienced similar “pig cycles” of boom and bust many times in the recent past .

“In particular, the African swine fever epidemic in 2018 and 2019 sharply reduced the number of pigs raised, leading to measures to increase slaughter weights, which created conditions leading to oversupply,” said Kenshi Momosaki, principal investigator of the Research and Development Institute. Institute under the Ministry of Agriculture, Forestry and Fisheries of Japan.

Some experts predict that pork prices in China will continue to rise. Falling pork prices have pushed China's pig farmers into losses for a record seven months, but conditions are likely to improve in the second half of the year, an executive at Chinese pork giant WH Group said during a quarterly earnings call in August.

“There are events coming up when pork consumption traditionally increases, such as the Mid-Autumn Festival in late September, the National Day in October and the Lunar New Year next February, so the apparent oversupply will ease and supply will tighten. The demand balance will tighten somewhat,” said Li Xuelian, senior analyst at Marubeni Research Institute.

Higher pork prices are expected to have a noticeable impact on overall inflation trends. The consumer price index rose 0.1% year-on-year in August, marking the first decline in two years and five months recorded in July, according to the National Bureau of Statistics.

Concerns about deflation became a topic of discussion following the release of the July consumer price index. A narrower year-over-year decline in pork prices helped push inflation back into positive territory. But demand for appliances and other durable goods is weak amid a weakening economy and a fragile labor market. If a food item like pork becomes more expensive, it could lead to lower spending on durable goods and entertainment, possibly increasing deflationary pressures.