MNI REALITY CHECK: Lower Pork Prices To Push China CPI Lower

By Wanxia Lin

     BEIJING (MNI) - China's consumer prices will likely slow further in May as

pork prices, a key inflation driver, continue to fall as a lack of demand from a

still recovering restaurant sector ensures an excess supply in the shops,

industry insiders told MNI.

     Key points from their comments ahead of the June 10 CPI data release:

     **Pork prices continued to decline since February

     **Vegetable and fruit prices fall on increased supply as weather improves

     **Fuel costs little changed despite increased demand

     ANALYSTS AT CNHNB.com, A NATIONWIDE AGRICULTURAL B2B WEBSITE: The average

wholesale price of pork was CNY34.8 per kilo in May, a decline of 12% m/m. It

has been falling since February, as hog herds are replenished and the central

government releases frozen pork from reserves. With restaurants still recovering

as consumers stay home, pork demand remains sluggish, weighing further on

prices. Beef prices also fell 4% m/m to CNY56.8 per kilo.

     The platform also noticed a significant price drop of crawfish in Wuhan

city, falling 24% y/y to CNY22 per kilo as excess supply grew due following

lockdowns and a recent decline in export orders.

     Most vegetables prices monitored by CNHNB.com fell as better weather

boosted supply. The wholesale price of garlic fell 21% m/m to CNY6 per kilo. An

abundance of summer fruit pushed prices lower as non-staple food spending

remained weak.

     Supply of agricultural products "basically returned to normal as the

epidemic eases, but it will take some time for the market to fully recover," the

analyst said.

     STAFF OF LILONG, AN AGRICULTURAL PRODUCTS WHOLESALE MARKET IN GUANGZHOU

CITY: "The retail prices of pork and pork ribs were CNY30+ per kilo, compared

with the CNY40+ per kilo in April, a more than 10% decline from the previous

month."

     "There is a lot of fresh pork in the market right now, as more farmers

began to breed pigs," she said, adding that pork prices may continue to decrease

moderately.

     SANG XIAO, ANALYST AT ZHONGYU INFORMATION, COMMODITIES ADVISORY: "Fuel

demand picked up steadily as schools and businesses gradually reopened. The

five-day May Day holiday also lifted demand."

     "But gas stations remained cautious about raising fuel costs significantly.

Most of them tentatively adjusted prices based on sales and stocks."

     The average monthly wholesale price of gasoline for PetroChina and Sinopec

in 30 major provinces fell by CNY58 to CNY 5,483 per ton from April, while that

of diesel decreased by CNY27 to CNY 5,460 per ton, said Sang, adding that both

narrowing from the respective CNY491 and CNY325 declines in the previous month.

     "The Chinese government is unlikely to adjust the current fuel prices in

the near term as international crude oil prices may not rise above its floor

rates -- USD40 per barrel after rebounding to about USD36 per barrel in May."

     ANALYSTS FROM CIB RESEARCH: CPI is expected to further decelerate to 2.6%

y/y from April's 3.3% due to the continued decline in pork prices.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

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