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·         Reuters: China's new slaughterhouse rules keep lid on pork prices for now

… The prices leveled off in mid-March, however, and in many areas have declined in May, confounding anticipation of a rapid rise in pork prices after widespread culling…

 

·         Forbes: China Inflation Goes 'Hog Wild' Thanks To Revenge Tariffs

Pork price inflation rose 14.4% year-over-year in April after rising 5.1% in March.

 

 

China's new slaughterhouse rules keep lid on pork prices for now

 

Dominique Patton, Reuters 

May 14, 2019

 

BEIJING (Reuters) - China’s pork prices are being kept in check even as pig production continues to drop, with tough new rules on slaughterhouses crimping trade and pushing frozen pork stocks onto the market, according to analysts.

 

Hog prices in the world’s top producer rose sharply in early March as losses from an epidemic of incurable African swine fever started to impact supplies.

 

The prices leveled off in mid-March, however, and in many areas have declined in May, confounding anticipation of a rapid rise in pork prices after widespread culling.

 

That’s because Beijing has rolled out new rules requiring slaughterhouses and processing plants to test for the African swine fever virus, slowing down business at many facilities and denting demand.

 

“The government is checking slaughterhouses, cold storage warehouses and processing firms so nobody dares to buy pigs, kill pigs or sell meat. Live hog demand is fairly poor,” said Feng Yonghui, chief analyst with Soozhu.com.

 

African swine fever does not harm people but to help curb spread of the disease, the Ministry of Agriculture and Rural Affairs on March 15 ordered slaughterhouses to test each batch of hogs for the virus.

 

Larger facilities needed to install testing equipment by May 1, and all processors must comply by July 1. The ministry has said it will carry out inspections to check up on them.

 

Some slaughterhouses have been selling off frozen pork ahead of inspections, said Pan Chenjun, senior analyst at Rabobank.

 

There is always the risk that pigs slaughtered previously may have had the virus.

 

“Nobody can be very sure that their meat is 100% safe,” Pan said.

 

A follow-up order from the agriculture ministry in early April, outlining requirements on traceability and inspections in processors has further dampened trade, Feng said.

 

The overall impact on demand means pork prices are not rising much either, even though they are up sharply compared with last year’s low levels.

 

GRAPHIC: African Swine Fever stirs up China's hog markets & stokes food price inflation - tmsnrt.rs/2WwTliY

 

FROZEN PORK

 

Many processors took advantage of low hog prices after African swine fever first hit in August of last year, storing excess product in freezers. But frozen meat products can generally be stored only a maximum of one year, meaning producers need to start selling off their stock.

 

Some processors have also...

 

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https://www.reuters.com/article/us-china-swinefever-pork/chinas-new-slaughterhouse-rules-keep-lid-on-pork-prices-for-now-idUSKCN1SK0O0

 

 

China Inflation Goes 'Hog Wild' Thanks To Revenge Tariffs

 

·         Pork price inflation rose 14.4% year-over-year in April after rising 5.1% in March.

·         China’s ammo against tariffs is not limitless. A weaker yuan is bad for inflation, too.

 

Kenneth Rapoza, Senior Contributor, Forbes 

May 13, 2019

 

China is set to increase its inflation rate now that it is certain that retaliatory tariffs on numerous food items are going from 5% to 25%.

 

China’s core inflation rose to 2.5% annualized in April from 2.3% in March. Inflation remains low, despite tariffs, similar to the tariff war’s impact on U.S. inflation. In the first quarter, China’s inflation was just 1.8%, which is similar to the 2.1% in all of 2018. Most of the hike is due to higher imported food costs. Food prices were up 6.1% year over year in April, up again from March’s inflation rate of 4.1% annualized.

 

Monday’s announcement of higher tariffs on U.S. food will give rise to inflation concerns in China, turning investors bearish short-term. China markets are now becoming more beholden to the whims of government stimulus.

 

Extra tariffs were expected today. They go into effect June 1. Equity indexes fell worldwide. The China A-shares CSI-300 Index is down nearly 10% from its April 5 high. It would have been a pleasant upside surprise had China’s A-shares gone up at this point.

 

Beijing’s revenge move comes after the U.S. hiked tariffs to 25% from 10% on $200 billion worth of goods, a move that was supposed to occur on March 1 but was deferred on good faith that trade negotiations were going somewhere. Apparently they are going nowhere as President Trump ordered his trade representative to prepare for tariffs on everything China sells to the U.S.

 

Perhaps the most readily available evidence that tariffs are impacting inflation in China is the whopping 62% tariff on U.S. pork. While China also has an animal health crisis on its hands, adding to higher pork costs, new food tariff schedules are not helping.

 

African Swine Fever outbreaks in China have been reported less frequently by the Ministry of Agriculture & Rural Affairs (MARA) in 2019, but the damage has increased as some big farms have reportedly lost thousands of animals.

 

According to MARA, China’s pig stock fell 18.8% in March after a 16.6% fall in February and a 5% drop last year. Health issues have also cut into new piglet births in China, boding poorly for hog and pork supply in coming years. Nomura Securities analysts say they expect pork prices in China to go up by 30% this year.

 

MARA press officer Wang Junxun said there was a risk of a more severe shortage in hog supply in coming quarters. In an ideal world, this would be a bonanza for the U.S.

 

As of Monday, it is unclear if China is going to impose other restrictions on U.S. pork. It is hard to imagine tariffs going up further. They were 12% before tariffs began last year.

 

Smithfield Foods, one of the largest U.S. pork producers and owned by WH Group, the largest pork producer in the world, did not want to comment on pork exports to China. According to the National Pork Producers Council (NPPC), all U.S. companies were seeing declines from the tariffs. No companies were getting special treatment from Beijing, the pork industry group said.

 

NPPC estimates the industry lost around $1 billion last year. The industry supports roughly 110,000 jobs.

 

China Inflation Goes Hog Wild

 

China’s inflation is hog wild, but only insofar as pork meat is a huge headwind to headline CPI there. The 2.5% inflation rate of April was still in line with consensus forecasts.

 

What’s gone up is pork meat, a staple of the Chinese diet. Pork price inflation rose 14.4% year-over-year in April after rising 5.1% in March. In monthly terms, pork price inflation rose 1.6% after rising 1.2% in March. That’s a monthly rate, not a rolling 12-month rate.

 

Then there vegetable prices. China is set to hike prices on U.S. vegetables, though this requires a deeper dive as China may have easily available sources elsewhere.

 

For pork, China also has other avenues for supply, even tough the U.S. is the world’s leading exporter. Tariffs make the U.S. less competitive to rival exporters like Brazil and Canada.

 

Vegetable price inflation rose to 17.4% annualized in April after rising 16.2% annualized in March. The first quarter saw prices up nearly 7% for China veggies, a little less than the 7.1% last year. Monthly prices for vegetables are in decline, however.

 

What is amazing about this trade war is that so far neither country has seen overall increases in core CPI. Certain products, including major ones like pork meat, have surely been impacted by tariffs. The same is likely to happen in the U.S., especially if Trump makes good on his promise to tariff all Chinese goods at American ports of entry. But to date, no one can say that tariffs have caused a marked increase in inflation.

 

U.S. companies pay the tariffs when they receive their orders at a port. Companies can either convince their Chinese suppliers to lower the price to make up for the tariff increase or they’ll have to look to cheaper markets. When that option is not readily available, companies may have to start transfering these higher tariff charges to end-users.

 

Inflation hikes will test the patience of the Federal Reserve and the People’s Bank of China, both in relative easing mode.

 

China’s exchange rate could be manipulated to take the heat off tariffs. The yuan has gone from 6.77 to the dollar to 6.87 in the last three trading sessions. Last year, Beijing allowed the yuan to depreciate against the dollar right after the first shot of the trade war.

 

But in the past six months, in order to appease Washington and to stabilize domestic financial markets, Beijing pretty much pegged the yuan to around 6.70.

 

Ting Lu, a China analyst for Nomura, says he expects the yuan to weaken further. It nearly 4% against the dollar between November and April, helping convince Washington that China would not pump yuan into the market in order to weaken it and make tariff hikes moot.

 

China’s ammo against tariffs is not limitless...

 

more

https://www.forbes.com/sites/kenrapoza/2019/05/13/china-inflation-goes-hog-wild-thanks-to-revenge-tariffs/