[A-List] Rising Pork Prices in China Signal Pricier Times Worldwide

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

<http://www.iht.com/articles/2007/06/08/africa/pork.php>
Rising pork prices in China signal pricier times worldwide
By Keith Bradsher
Friday, June 8, 2007

GAOYAO, China: Few things are as essential to the Chinese as their pigs.

> From pork spare ribs and mu shu pork to char siu bao - barbecued pork
buns - pork is a staple of the Chinese diet. So in this Year of the
Pig, an acute shortage of pork has been national news, as butchers
raise prices almost daily and politicians scramble to respond.

Steep increases for pork loins and bacon are the most tangible sign
that after a decade in which prices have fluctuated but not moved
significantly upward, inflation is creeping back into China. In
response to this pressure at home, Chinese companies are starting to
raise prices for exports, removing what has been a brake on inflation
in the West.

With the global economy expanding at a robust pace, and prices rising
in fast-developing countries like India and Mexico, central bankers
and investors are becoming concerned. Interest rates are inching up in
the United States and Europe as lenders demand that borrowers pay more
to offset the erosion of buying power over time.

Business executives say that with wages rising 10 percent or more a
year in many Chinese cities, the country's days are numbered as the
world's lowest-cost producer of many cheap labor-intensive products,
like toys and shoes.

"People tend to underestimate the deflationary impact over the last 10
years" from Chinese exports, said Michael R. P. Smith, the chief
executive of HSBC's Asian operations. "It has got to the limit: you've
had wage inflation, you've got rising natural resource prices. There's
just no more give."

The crisis over pork prices in China, like the jolt many Americans
feel when gasoline prices jump, offers one example of how prices can
suddenly soar.

The Chinese government is struggling to cope - including deliberating
whether to sell a snuffling, smelly strategic reserve of hundreds of
thousands of live pigs kept at special subsidized farms for precisely
the shortage the country is now facing.

Chinese officials offer several reasons for the high pig prices. The
cost of animal feed has risen by one-quarter in the last year, partly
because more corn is being made into ethanol and partly because more
prosperous workers are eating more meat.

The cost of pig veterinary medicine has soared. Some pig farms, shut
down because of low prices last year, were unprepared for strong
demand this spring. And outbreaks of disease have killed many pigs,
though no reliable estimates of how many are available.

The most recent statistics from the Agriculture Ministry show that
prices for live pigs rose 71.3 percent in April from March, while pork
prices climbed 29.3 percent. The price of pork followed pig prices
higher in May as well, to the dismay of shoppers.

Some consumers showed irritation with pork prices on two recent
afternoons at a busy street market in metropolitan Guangzhou, an area
of perhaps 12 million in southeast China. A woman walked up to Zhang
Hanbiao, a butcher standing behind an unrefrigerated counter of raw
pork under the glare of two large light bulbs, and asked him the price
of the dark red slab of pig liver.

Told the answer - 7.5 yuan a catty, or 89 U.S. cents a pound, up from
6 yuan a catty - she stalked off in silence without buying.

Her response angered Zhang, a butcher with a faint mustache who has
followed a Chinese tradition of letting his nails grow long on the
little finger of each hand.

"No business!" he exclaimed. "I've lost 1,000 yuan in three days
because the meat goes bad before I can sell it."

Another woman came to the counter, sniffed some pork suspiciously,
then kept walking. "After it turns color, people won't buy it," Zhang
said, adding that roadside snack vendors buy unsold meat at a discount
each evening.

Wu Lijuan, a Guangzhou resident who bought a small plastic bag of lean
pork from Zhang, said that she was eating less pork and more fish as
pork prices rose. But prices for chicken, beef, fish and eggs are also
increasing sharply this spring, along with the higher cost of animal
and fish feed, although rising not quite as fast as pork prices.

In a move to head off any protests among sometimes volatile student
populations, the Education Ministry has ordered colleges and
universities to subsidize pork instead of raising prices on campus.
The Civil Affairs Ministry has instructed municipal governments to
subsidize pork for low-income families, while the Railway Ministry has
given priority to pig shipments.

Prime Minister Wen Jiabao visited the pork counter at a supermarket in
Xian in central China on May 26 and called for local governments to
pay pig farmers to increase production. The Commerce Ministry has
raised the possibility of distributing pork from China's strategic
pork reserves.

State-controlled television in Shandong Province in northeastern China
carried a detailed report late last month on the reserves.

The Commerce Ministry keeps a national reserve of frozen pork and live
pigs, and local governments keep their own reserves as well,
constantly selling older supplies and procuring fresh stock.
Government agencies pay a pig subsidy to farmers to keep their animals
in the program.

"The sties are very roomy, there is heat in the winter and fans in the
summer," the television program said, describing conditions very
different from those endured by many other pigs in China, including
those here in Gaoyao, 80 kilometers, or 50 miles, west of Guangzhou.

Yang Yuanji stood in sweltering heat next to his fetid, crudely built
pigpens on a recent afternoon and contended that he needed high prices
to pay for costly animal feed and medicine.

"Everyone says pork prices are high - I don't think so," he said.

One of his neighbors, Yang Ming, said he did not believe that farmers
were withholding pigs from the market - as the state media
occasionally hint - in hope that prices will keep rising. "I don't
wait, I sell a pig as soon as it reaches 180 catties," or 198 pounds,
he said.

Pork has been a cornerstone of the Chinese diet for centuries. Rows of
2,100-year-old terra cotta pigs were recently discovered near Xian, a
city better known for terra cotta warriors. China's 1.3 billion people
eat more than 92 billion pounds, or 42 billion kilograms, of pork a
year - a fifth of a pound a day for every man, woman and child.

And just as higher gasoline prices can lead to a political reaction in
the United States, the Chinese government is particularly worried
about soaring pork prices because of their impact on household budgets
and the way they can exacerbate income inequality.

Pork is a critical source of protein for Chinese of all incomes, but
particularly for low-income workers like those who keep American and
European families well supplied with $49 DVD players and other popular
consumer products.

Broader measures of consumer prices showed just 3 percent inflation in
April, but Goldman Sachs now predicts that higher meat prices will
help push this above 4 percent "very soon."

Heavy investments in new factories, roads, rail lines and ports have
helped limit inflation until now in manufactured goods, as
productivity improvements mostly offset rising wages and higher prices
for food, oil and metals.

Economists and business executives say that manufacturers face growing
pressure to raise prices as well, particularly with the torrent of
money pouring into China, which has helped push up the prices of
Chinese stocks and real estate.

But the price that many Chinese care about most these days is the
price of pork. Not far from Zhang's butcher counter is a small shop
selling unrefrigerated barbecue. Cherry Zhou, a shop worker, said it
had raised prices 25 percent in the last few days.

Blaming pork distributors, she added, "It's more expensive by the week."
--
Yoshie