{"id":43300,"date":"2023-11-07T02:36:48","date_gmt":"2023-11-07T02:36:48","guid":{"rendered":"https:\/\/prosfunds.com\/business\/falling-pork-prices-threaten-to-push-china-back-into-deflation\/"},"modified":"2023-11-07T02:36:48","modified_gmt":"2023-11-07T02:36:48","slug":"falling-pork-prices-threaten-to-push-china-back-into-deflation","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=43300","title":{"rendered":"Falling pork prices threaten to push China back into deflation"},"content":{"rendered":"<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=058df2fe-ae7a-4be8-93c6-ca9cb46d3184\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Tumbling pork prices could push China back into deflation this week, as the largest listed hog farmers flood the domestic market and complicate Beijing\u2019s efforts to bolster confidence in the world\u2019s second-largest economy.<\/p>\n<p>Live hog futures traded on China\u2019s Dalian Commodity Exchange have dropped about 15 per cent since the start of October, reflecting a sharp deterioration in expectations for nationwide pork prices. Wholesale pork prices in China are down more than 40 per cent from a year ago.<\/p>\n<p>Economists said the falling cost of pork, with its heavy weighting in China\u2019s official consumer price index, is likely to tip the country back into deflation when October data is released on Thursday.<\/p>\n<p>\u201cIt looks like [consumer inflation] will turn negative again in October, and the main reason for that looks to have been a decline in food inflation caused by the fall in pork prices,\u201d said Julian Evans-Pritchard, senior China economist at Capital Economics.<\/p>\n<p>A return to deflation \u2014 after anaemic growth in August and a flat CPI reading in September \u2014 would undercut officials\u2019 efforts to restore confidence in China\u2019s economy, which remains in a fragile state due to weak consumer confidence and a liquidity crisis in the country\u2019s property sector.<\/p>\n<p>The price of pork in China, which is the world\u2019s largest producer and consumer, has long followed a boom-and-bust cycle as smaller farmers pile into the market in response to rising demand. That leads to oversupply and triggers sharp price falls, forcing the same farmers to retreat.<\/p>\n<figure class=\"n-content-image n-content-image--full\"><picture><source media=\"(min-width: 700px)\"  width=\"1259\" height=\"899\"><\/source><source media=\"(max-width: 490px)\"  width=\"539\" height=\"719\"><\/source><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/prosfunds.com\/wp-content\/uploads\/2023\/11\/https:\/\/d6c748xw2pzm8.cloudfront.net\/prod\/fd107680-7c70-11ee-8a29-e1dffbff08ee-standard.png\" alt=\"Line chart of Average wholesale pork price (Rmb\/kg) showing Pork price falls could push China back into deflation\" data-image-type=\"graphic\" width=\"1259\" height=\"899\"><\/picture><\/figure>\n<p>Beijing has sought to exert greater control over this cycle by concentrating more production in a handful of large-scale farming outfits. However, this year, those same producers have exacerbated price falls.<\/p>\n<p>Pork prices began to rebound in July \u2014 partly in response to government-led buying \u2014 only to fall back again as large listed hog farmers, including Muyuan and New Hope, opted not to cut capacity despite broader weakness in demand.<\/p>\n<p>Large producers typically lower output by selling off breeding sows and buying fewer piglets to raise until demand pushes up prices again. But Chinese piglet prices are down just 10 per cent from a year ago, suggesting demand for young pigs remains relatively strong despite pork prices dropping by far more.<\/p>\n<p>Analysts said this strategy paid off last year when a recovery for pork prices in the fourth quarter \u2014 as China ended its harsh zero-Covid restrictions \u2014 ultimately helped top producers boost revenues at the expense of smaller farmers, who were forced out of the market.<\/p>\n<p>Darin Friedrichs, director of market research at Sitonia Consulting in Shanghai, said large Chinese pork producers were running the same strategy this year, but there were no signs of an imminent fourth-quarter rebound in demand.<\/p>\n<p>\u201cIt looks like they\u2019re trying to just stick it out again,\u201d Friedrichs said. \u201cBut some [pork producers] are selling subsidiaries or making executives buy back stock. That indicates there\u2019s more financial pressure on them.\u201d<\/p>\n<p>Muyuan, the world\u2019s largest hog farmer, is down more than 20 per cent this year, even after executives announced a share buyback worth about Rmb1bn ($137mn) last month. The company was recently forced to cancel a planned share sale in Zurich, blaming unspecified \u201cobjective factors\u201d, in a filing to Shenzhen\u2019s stock exchange.<\/p>\n<p>\u201cPart of the problem is that a lot of these big companies have on some level accepted the boom-and-bust cycle,\u201d Friedrichs said. \u201cAnd they think they\u2019re better at playing it than their competitors.\u201d<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/058df2fe-ae7a-4be8-93c6-ca9cb46d3184\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Tumbling pork prices could push China back into deflation this week, as the largest listed hog farmers flood the domestic market and complicate Beijing\u2019s efforts to bolster confidence in the world\u2019s second-largest economy. Live hog [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[23],"tags":[],"class_list":{"0":"post-43300","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Falling pork prices threaten to push China back into deflation | Prosfunds<\/title>\n<meta name=\"description\" content=\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Tumbling pork prices could push\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/prosfunds.com\/?p=43300\" \/>\n<meta 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