MNI: China Pork Prices To Stage Muted Rebound In H2

Chinese pork prices, a key component of CPI, should recover moderately in Q4 as weak demand and fierce competition prompt smaller producers to leave the market and the government signals it wants higher prices, local analysts told MNI.

Average pork prices fell 41% to CNY15.6/kg in April from the September-October 2022 high of CNY26.6/kg. Small producers are set to walk away and the National Development and Reform Commission earlier this month said it would consider increasing state pork reserves to boost prices back to a reasonable range, a move which analysts said served as a market signal despite its limited impact on physical demand.

“Prices won’t go too high and will top out near CNY20/kg, as major producers continue to expand output in a bitter competition for market share,” said Darin Friedrichs, co-founder of Sitonia Consulting, a Shanghai based agricultural research company, noting that the NDRC reserves move will only add up to a few hours of national consumption. While prices for pork, a staple for workers, has been weak, Friedrichs said beef prices had remained resilient this year, illustrating how the more affluent middle class has driven China’s rebound.

SUBDUED DEMAND

This muted demand will continue, limiting upward pricing room for pork, analysts said.

“Output will remain high and consumer demand subdued,” said Wang Lingyun, pork analyst at Shanghai based commodity research company Mysteel. “After Q1, demand typically cools into summer before coming back in winter. Prices will consolidate but remain low.”

Weak pork prices drove a steep decline in Chinese year-on-year inflation to 0.1% in April, from September’s 2022’s two-year high of 2.8%. The NDRC expects inflation to pick up again later in the year, despite local traders' downgraded economic outlook found in April’s MNI China Liquidity survey. (See MNI CHINA LIQUIDITY INDEX: Index Tighter, Economy Outlook Down - Bonds & Currency News | Market News)