(Yicai Global) July 6 -- As China’s macroeconomic planner intervenes in the price of pigs for the third time in two days, market insiders expect the surging price of live hogs together with the rebound in services and consumption to drive up the country’s consumer inflation by 2.3 percent in June, more than in May.

As the world’s biggest producer and consumer of pork, swings in the pork price have a direct effect on how people spend and hence on the nation’s Consumer Price Index, a gauge of inflation. In May the CPI advanced 2.1 percent from the same period a year earlier, the second month in a row that inflation was higher than 2 percent. That month, the price of pork plunged 21.1 percent year on year, a narrowing of 12.2 percentage points from April’s slump.

But the trend reversed in June, with the price of live pigs shooting up from mid-month. The price of a three-way rotational cross pig, that maintains heterozygosity, surged 70 percent on July 4 from March to CNY21.48 (USD3.20), according to pig-breeding data hub Zhuwang.

The same day, the dominant hog futures contract jumped by the daily limit to CNY22,755 (USD3,399) per ton, the highest level since May 2021. Last September, the contract had been as low as CNY13,500 per ton.

And the price of live pigs soared 11.6 percent at the end of June from the middle of the month to CNY18.30 (USD2.70) per kilogram, according to the latest data from the National Bureau of Statistics.

Alarmed by the leap in prices, the Price Department of the National Development and Reform Commission convened a meeting of industry players on July 4 to inform them that it is closely monitoring the live pig market and will take action against those companies that inflate prices.

The next morning, the country’s top planner said it might start to release central and local government pork reserves to halt the surge in prices. And that afternoon it said it had met with the Dalian Commodity Exchange and other parties to crack down on any illicit activities such as hoarding stock, price gouging, spreading malicious rumors and colluding to raise prices.

There is no basis for a sustained rise in prices as there is sufficient supply and consumption is not strong, the Price Department said. One of the main reasons is due to unjustified hoarding of hogs and a reluctance to sell. Some media reports have fabricated price increases and spread false information, intensifying the market’s hesitance to offload stock, it added.

The CPI will gain further in June and will continue its mild and ascending trend in the second half, as live hog, cooking oil and other prices spur it upward, said Lian Ping, chief economist at Zhixin Investment Research Institute.

The price increases should slack off in the future as more measures are brought in to guarantee supply and stabilize prices, market insiders said.

China has sufficient supplies of grains, oil, meat, eggs, milk, fruits and vegetables and as inter-regional logistics improve after a spate of Covid-19 outbreaks, there is a solid foundation for the stabilizing of consumer prices, Meng Wei said last month. The country's consumer prices will remain within a reasonable range this year and will not exceed the annual goal of no more than 3 percent growth.

Editors: Xu Wei, Kim Taylor