In 1925 (says Wikipedia) The “pig cycle” was first coined as a term in agricultural economics by the colorful Mordecai Ezekiel. What he observed was that when pork prices were high, farmers prevented pigs from being slaughtered to increase their herds, which ultimately led to an oversupply in the following season and a collapse in prices that then led to a reduction in herds, which in turn pushed prices back. up again, and so on…
It may be almost 100 years old, but the pig cycle is alive and well in China.
In the graph above you can see how meat and poultry prices in China increased in 2022 – another outbreak of swine fever that took effect and reduced herds. Pork prices are now falling again as pork supplies have increased, dragging down the overall inflation rate. Excluding food and energy, inflation currently stands at 0.6% year-on-year and has only fallen very slightly in recent months.
0.6% is still a fairly low inflation rate if we take it as China’s underlying rate, and is indeed a reflection of what remains a fairly weak context for domestic demand.
Wholesale pork prices so far in November continue to fall, but the pace of decline appears to be slowing as pork prices approach their previous lows. Therefore, we may still see a negative drag coming from food and possibly energy next month (given what is also happening with crude oil prices), but the drag is likely to be less and from From then on, if there are no more supply shocks, it is likely that inflation will begin to rise. again.