China Pork Consumption Drives World Prices

Not only is China raising half of the world’s 1 billion pigs, it’s also driving up global prices of pigs and the grains used to feed them. Those rising pork prices are responsible for nearly a quarter of the 6.5 percent jump in China’s consumer price index.

China’s rising living standards has boosted the number of people who eat pork. Pork production has increased more than 10 percent in the past five years to 52.5 million tons. That’s about four times poultry production and eight times beef production. Still demand is outstripping production, raising the price of a pig from 600 yuan ($94) to 2,100 yuan ($330) due to a tripling of the cost of feed since 2007 and a doubling of wages of migrant workers to 2,200 yuan ($345) per month.

The 60 percent year-on-year rise in pork prices has accounted for 1.5 percent of the 6.5 percent jump in China’s July CPI over the same month of 2010, the biggest since 2008. Pork prices have become such a big component of CPI that it is now jokingly referred to as “China Pig Index”.

The popular discontent fueled by rising pork prices has caused the central government to budget 2.5 billion yuan ($400 mil.) to boost pork production. It is also releasing stockpiled frozen pork and will also import limited quantities of pork from the U.S. Its policy of maintaining food security prevents it from importing a significant share of pork consumption.

Even so China’s pork consumption is having a big impact on grain prices as China has increased imports of corn used for pig feed from 50,000 tons in 2008 to 1.57 million tons in 2010. The amount is likely to treble to 5 million tons in 2011 and double again to 10 million tons in 2015. While the volume is modest compared to China’s annual domestic production of 177 mil. tons, it’s enough to pump up Chicago corn futures for 25 kg. of corn rose from less than $4 in the first half of 2010 to a record $8 in June.

The anticipation of continuing growth in pork consumption has also prompted companies from Japan, Singapore and other nations to invest in China’s pork-related industries. And recently the import of pigs from Holland has caused pig prices in that nation to jump 60 percent since last year.