China Announces Price Guidance On Meat, Other Commodities
Market Insight
China Announces Price Guidance On Meat, Other Commodities
Facing escalating meat, food and overall commodity inflation, China’s macroeconomic administrators have announced novel measures to slow the continued advance in prices. The new measures, announced last week by the National Development & Reform Commission (NDRC), stipulate that producers and wholesalers of grain, meat, edible oil, eggs, milk, and liquefied petroleum gas notify the NDRC ten days in advance of planned price hikes. Large retailers and wholesalers would be required to notify the NDRC of single price hikes exceeding 4 percent within 24 hours, price increases over 6 percent within 10 days, and incremental price increases exceeding 10 percent within 30 days. Under this temporary policy, the NDRC would have the right to direct enterprises to lower or remove the price increases based on “reasonableness”; the NDRC reiterated that its new measures were not price freezes.
Concurrent with last Wednesday’s announcement, the NDRC released a list of 12 major food companies, including two of China’s largest pork processors, which will be required to obtain official approval of any price increases. Stock prices of the two processors, Yurun Food Group, and Henan Shuanghui Investment and Development fell late last week in Hong Kong and Chinese equity markets after the announcement.
The measures follow a string of other official actions taken over the past six months to tame price increases, which appear to have had little or no success. China’s inflation rate continues to accelerate, reaching 6.9 percent in November 2007, the highest in a decade. According to official sources, pork prices in November of 2007 were 43 percent above those of a year ago. USMEF notes that live hog, piglet and pork prices continued to inch up from December into January. More reported cases of “blue ear” and high grain and fuel costs is dampening farmer enthusiasm for hog raising, despite high slaughter hog prices and localized market shortages. National retail pork prices last week, calculated from surveys undertaken in more than 35 mainland cities, reached $1.77/lb., a one percent increase from the previous week. China also announced last week that it would release more pork from its strategic reserve in the weeks before the lunar New Year (Feb. 6), the peak pork consumption period for most households.
Current Chinese pork market dislocations were evident last week in Hong Kong, which depends entirely for its fresh meat supply on the importation of live hogs from the mainland. Live slaughter hog auction prices breached $196/cwt. when fear set in that China could not supply the required 4,000 head of live market hogs per day necessary to sustain normal levels of consumption. Lean cuts of pork produced from fresh half carcasses were last week retailing for more than $4 per pound in Hong Kong’s wet markets.
“USMEF has received a number of calls over the last month from large retailers and restaurants interested in exploring supply alternatives to fresh Chinese pork, ” according to John Lam, USMEF’s regional operations manager. USMEF plans to work with several prominent importers and retailers in the near future to expand the presence of U.S. pork on menus and supermarket shelves. Lam cautioned that “the U.S. is not a perfect substitute for freshly slaughtered pork due to the difficulty of competitively transporting U.S. chilled pork to Hong Kong,” a 20-25 day journey from the United States. The United States, however, still faces challenges with shipments to China due to the continued “zero tolerance’ policy of the Chinese government for ractopamine hydrochloride and pathogens such as Salmonella and Listeria monocytogenes.”
Nevertheless, U.S. pork exports to Hong Kong have surged this year, with most products shipped frozen. Through November, U.S. pork (including variety meat) exports to Hong Kong and China combined reached 152,469 mt, worth $244.29 million.
“We are working aggressively on retail and foodservice positioning of U.S. pork in Hong Kong and China,” said USMEF Senior VP Joel Haggard. “With the appreciation of the Chinese currency, and continued strong demand, we may be entering a new era of competitiveness and demand for U.S. pork.”
Market Insight
China Announces Price Guidance On Meat, Other Commodities
Facing escalating meat, food and overall commodity inflation, China’s macroeconomic administrators have announced novel measures to slow the continued advance in prices. The new measures, announced last week by the National Development & Reform Commission (NDRC), stipulate that producers and wholesalers of grain, meat, edible oil, eggs, milk, and liquefied petroleum gas notify the NDRC ten days in advance of planned price hikes. Large retailers and wholesalers would be required to notify the NDRC of single price hikes exceeding 4 percent within 24 hours, price increases over 6 percent within 10 days, and incremental price increases exceeding 10 percent within 30 days. Under this temporary policy, the NDRC would have the right to direct enterprises to lower or remove the price increases based on “reasonableness”; the NDRC reiterated that its new measures were not price freezes.
Concurrent with last Wednesday’s announcement, the NDRC released a list of 12 major food companies, including two of China’s largest pork processors, which will be required to obtain official approval of any price increases. Stock prices of the two processors, Yurun Food Group, and Henan Shuanghui Investment and Development fell late last week in Hong Kong and Chinese equity markets after the announcement.
The measures follow a string of other official actions taken over the past six months to tame price increases, which appear to have had little or no success. China’s inflation rate continues to accelerate, reaching 6.9 percent in November 2007, the highest in a decade. According to official sources, pork prices in November of 2007 were 43 percent above those of a year ago. USMEF notes that live hog, piglet and pork prices continued to inch up from December into January. More reported cases of “blue ear” and high grain and fuel costs is dampening farmer enthusiasm for hog raising, despite high slaughter hog prices and localized market shortages. National retail pork prices last week, calculated from surveys undertaken in more than 35 mainland cities, reached $1.77/lb., a one percent increase from the previous week. China also announced last week that it would release more pork from its strategic reserve in the weeks before the lunar New Year (Feb. 6), the peak pork consumption period for most households.
Current Chinese pork market dislocations were evident last week in Hong Kong, which depends entirely for its fresh meat supply on the importation of live hogs from the mainland. Live slaughter hog auction prices breached $196/cwt. when fear set in that China could not supply the required 4,000 head of live market hogs per day necessary to sustain normal levels of consumption. Lean cuts of pork produced from fresh half carcasses were last week retailing for more than $4 per pound in Hong Kong’s wet markets.
“USMEF has received a number of calls over the last month from large retailers and restaurants interested in exploring supply alternatives to fresh Chinese pork, ” according to John Lam, USMEF’s regional operations manager. USMEF plans to work with several prominent importers and retailers in the near future to expand the presence of U.S. pork on menus and supermarket shelves. Lam cautioned that “the U.S. is not a perfect substitute for freshly slaughtered pork due to the difficulty of competitively transporting U.S. chilled pork to Hong Kong,” a 20-25 day journey from the United States. The United States, however, still faces challenges with shipments to China due to the continued “zero tolerance’ policy of the Chinese government for ractopamine hydrochloride and pathogens such as Salmonella and Listeria monocytogenes.”
Nevertheless, U.S. pork exports to Hong Kong have surged this year, with most products shipped frozen. Through November, U.S. pork (including variety meat) exports to Hong Kong and China combined reached 152,469 mt, worth $244.29 million.
“We are working aggressively on retail and foodservice positioning of U.S. pork in Hong Kong and China,” said USMEF Senior VP Joel Haggard. “With the appreciation of the Chinese currency, and continued strong demand, we may be entering a new era of competitiveness and demand for U.S. pork.”