MNI REALITY CHECK: Pork Prices May Push China June CPI Higher

--Tighter Supply and Higher Demand Send Pork Prices Higher

     BEIJING (MNI) - China's consumer prices likely edged higher in June,

reversing 5 straight months of lower inflation as the cost of both pork and

vegetables rose as supply fell on seasonal factors, coming as demand picked up

following the wider opening of restaurants as social distancing restrictions

ease, industry insiders told MNI.

     Key points from their comments ahead of the July 9 CPI data release:

     **Vegetable prices higher on poor weather

     **Pork prices rebound as supply falls, demand picks up

     **Fuel costs inch higher as demand recovers

     JIANG HONGXIA, ANALYST AT JIANGSU LINJATO MARKET: "The first half of June

saw ample vegetables at low prices in the market ... but prices started to rise

as Southern China entered the rainy season from mid-month."

     Less produce saw rising prices for local leafy vegetables, drove up the

prices of other produce, both local and from the regions. The average wholesale

price of green vegetables in the market was CNY5 per kilo on June 22, up nearly

20% from the previous week, according to Jiang.

     "After the rainy season passes, we will go into the dog days of summer, the

hottest days of the year, also not good for growing vegetables," keeping prices

elevated, Jiang added.

     AN AGRICULTURAL PRODUCTS SELLER AT BEIJING XINFADI MARKET: "No trading is

allowed after the government shut down the Xinfadi market, many vegetables and

fruits were left rotting inside the market. The prices rose only moderately in

Beijing as the government stepped in to ensure supply after closing down more

wholesales markets to contain the spread of the virus."

     "Though the market remains closed, we (vendors in Xinfadi) may be allowed

to sell through other channels from the next week as restrictions ease," he

said, which may help to further stabilize prices.

     ZENG ZIHUA, ANALYST AT ZHUE.COM.CN, A COMMUNITY FOR PIG BREEDERS: Hog

prices reversed the decline since end-May, indicated higher pork prices.

     "There were a lot of overweight hogs surpassing 150 kilos arrived the

market in the past few months. Generally hog breeders sell them at around 100

kilos, but they had to withhold the trading until the virus restrictions eased,

so it took the market over two months to digest the excess supply."

     "There is less supply now as pork imports have reduced given the pandemic

overseas. The prices may stay relatively high until August or September when

more pigs are available for slaughter."

     The price of hog was CNY36.14 per kilo on June 30, a rise of 13.17% m/m and

103.93% y/y, according to Zeng, the biggest monthly gain since November 2019.

     WANG TAO, ANALYST AT ZHONGYU INFORMATION, COMMODITIES ADVISORY: Gasoline

consumption picked up fast after the Dragon Boat Festival. Many gas stations

increased inventory after the Chinese government raised fuel prices for the

first time this year on June 28, pushing up the costs.

     The average monthly wholesale price of gasoline for PetroChina and Sinopec

in 30 major provinces rose by CNY253 to CNY 5,736 per ton from May, while that

of diesel increased by CNY7 to CNY 5,467 per ton, Wang said, adding that both

reversed the respective CNY58 and CNY27 declines in the previous month.

     Though the government lifted the gasoline and diesel price by CNY120 and

CNY110 per ton, the impact on car owners will be limited.

     ANALYSTS FROM HUACHUANG SECURITIES: The average monthly price of pork and

vegetables rose by 3.84% and 3.34% respectively, both compared to a more than

10% m/m decline in the previous month, with a return of some pig infections

picking up.

     June CPI is expected to edge higher on May's read, or come in flat at best,

with an expectation for the rate to come in at 2.5% y/y versus 2.4% in May.

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

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