China's Other Big Problem - Porkflation

Tyler Durden's picture

For those who believe that broad-based stimulus is coming to save the world from China (via RRR cuts or even pure QE) - as opposed to the hole-filling credit pump they just supported - think again. As we warned last year, this is 'western' thinking as the go to policy of the rest of the world's central banks has been - put on pants, print money, paper over cracks, proclaim victory. However, in China there is one big problem with this... stoking inflation... and most crucially the social unrest concerns when suddenly a nation of newly minted equity - and now bond - losers can no longer afford their pork - which is surging to record highs.

Amid slowing global production...as GlobalMeatNews.com reports,

According the latest pork outlook report from the USDA, the global production of pig meat is forecast to drop by 1% to 109.3 million tonnes (mt) in comparison to last year.

 

This, according to Stephen Howarth, market intelligence manager at UK levy board AHDB Pork, is around 2% lower than estimates from October 2015 on the production of pork internationally.

 

The slight decline in global pork production is largely the fault of several challenges facing the world’s largest pig meat producer, China. It’s economy has cooled and is now only growing at a rate of about 7% annually – causing widespread panic in global stock markets. But pressures on the profitability of domestic production, coupled with complex issues on environmental regulation, have caused China to ease off on its pork business.

The usually seasonally slow first quarter is seeing prices surge...

 

To recod highs for both retail...

 

and wholesale...

 

Pork’s “overly sensitive” role in CPI has also been felt this year, one anlyst noted, and broad-based China CPI is starting to creep up..


 

So a slowing Chinese supply - which in the new normal demands policy stimulus - is causing priecs to surge - which extinguishes hopes of policy stimulus.

Therefore, as SocGen warned, fiscal policy has to step up, and monetary policy is likely to play an assisting role by providing targeted liquidity. It seems that the focus at the moment is on the indirect channels of policy bank funding support to infrastructure investment... and even that is now slowing after a record trillion dollar pump in Q1.

In other words, do not expect some broad based liquidity infusion (RRR cuts or QE) - policy reaction, just as we have seen in the stock market manipulation, will be piecemeal and focused

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N0TaREALmerican's picture
N0TaREALmerican (not verified) Apr 21, 2016 5:35 PM

I remember the Farm Report "pork belly futures" at 6am on WGN radio in the 60's.   Anybody remember those?  

Supernova Born's picture

I'll trust Chinese data when pigs fly.

 

Zero_Ledge's picture

"this is 'western' thinking as the go to policy of the rest of the world's central banks has been - put on pants, print money, paper over cracks, proclaim victory."

I'm pretty sure these crooks don't put on their pants before printing money. (1) the printing presses are in the basement, and (2) it would make their boners uncomfortable.

 

old naughty's picture

Ha, ha, ha,

pork,

No, no, no.

 

GoldenGoosed's picture

Long lipstick! Makes 2015 prices look cheap.
Wow a real economy. Remember what it was like when we had a real economy?

GoldenGoosed's picture

Not that China's economy is all real but it is harder to stalk a zillion chinese out of their lives as a matter of national security.

Ham-bone's picture

China annual total population change and breakdown by age segments below.  It only gets worse every year from here for at least decades...pretty easy to understand as the growth of population turns to depopulation among all younger segments of population that consumption would start collapsing and CB'ers would try to offset this with cheaper credit to incent more debt.  Good luck with that.

http://econimica.blogspot.com/2016/03/chinas-economic-collapse-explained-in.html

http://econimica.blogspot.com/2016/02/population-growth-and-consumption.html

  • Total population growth peaked in 1969 @ +22m/yr...now +7m/yr in 2016, down 68% from peak
  • 0-24yr/old growth peaked in 1969 @ +14m/yr...now -8m/yrdown 157% from peak
  • 25-44yr/old growth peaked in 1993 @ +13m/yr...now -600k/yr, down 105% from peak
  • 45-54yr/old growth peaked in 2013 @ +8.4m/yr...now +5.6m/yr, down 33% from peak
  • 55-74yrs/old growth will peak in 2020 @ +11m/yr...now +8m/yr
  • 75+yrs/old growth will peak in 2041 @ +5.8m/yr...now +1.2m/yr
GoldenGoosed's picture

They're having a baby boom
as allowed baby number two now.

mary mary's picture

Declining population is a good thing.  The natural resources stay the same, so the fewer people there are, the more resources each person gets.  However, what's good for Big Socialism is the opposite of what's good for people, and also the opposite of what's good for planet Earth.

nmewn's picture

Now see?!

If central planners & regulators wouldn't have been fucking around with "price stawbility" all those pigs wouldn't have been dumped into the river.

It would have been Pork-a-Plenty! A veritable Swine Saturation!...keeping pork prices pounded down.

Sorry for the spray ;-)

theliberalliberal's picture

Now they need moar boar. They don't know how to get moar sow.

divingengineer's picture

I am perturbed by your pedantic porcine postulation.

 

CHoward's picture

I've been told to never get between a Chinaman and his pig.  Never thought much about that...until now. 

CHoward's picture

I've been told to never get between a Chinaman and his pig.  Never thought much about that...until now. 

Paul John Smith's picture

"You no take my pork ... my flied lice ... ok ... but no take sweet/sour pork."

ms8173's picture

I have some nice inflationary pork for Becky Quick!

roddy6667's picture

Pork is my favorite vegetable.

besnook's picture

the best pork is squealing pork.

brooklinite8's picture

355 people died of sun stroke today in south India. Its not even a full blown summer. May is supposed to be brutal. 2/3 rds of Indian population are facing water shortage as if today. I am sorry to say that a different level of crisis from shortage of food in the near horizon. 15 yrs ago we had water tankers transporting water to the tall buildings. Things are getting ugly.. Its called Kaliyug in Indian mythology where people will perish due to scarcity of food and water. Sun, Snow, Sea and Fire are other side effects that we need to watch for in the coming years. 

johnnycanuck's picture

Porkflation is a problem pretty much everywhere.  Take a story I found here from a ZH commenter about DOD / Pentagon actually wanting to close bases so they could save money and use the savings for things they consider higher priority.  Your Legislators went into Pork withdrawal mode and cried that it cost too much the last time they tried to determine where the Military should save money.  Because of course thay had to study everything including the ins and outs of a pigs ass and that costs a lot of money.  Truth is of course, they don't want to lose the pork for their constituency and the hidden hands of the 'Lobby'. ergo, Porkflation

Here in Canuckstan today, a Senate Porker was set free on 31 charges. He was a journalist who got appointed to the Senate because he had a high profile, was very personalable and a great fundraiser for der Party.  He pigged out at every turn, like many of the other Senators and because the good Judge decided pigging out appeared to the norm with a goodly number of his fellow Senators,  he shouldn't be held accountable.  Porkflation in Canuckistan survives another bit of grand theater rescued by a Judge appointed by the very politicians he found in favor of.   And the Porkflation will continue, they will merely have to pass a few new rules to make it more legitimate, and then such things never need to bother the simple minds of the Plebs again.   See the Porkers flashing the V .  Fergetabout China,  Party over at the local Porky's  Frat House tonight.