Meat prices surged 26.5% in May from a year earlier because of a pig shortage linked to increased grain prices.

Premier Wen Jiabao has pledged incentives to farmers to boost the supply of pork, a staple food for the nation of 1.3 billion people, in the Year of the Pig. “The clear beneficiaries of price increases are China’s farmers, particularly those growing grain or producing meats that consumers are switching to as alternatives to pork,” said Mark Williams, Asia economist at Capital Economics Ltd in London. “This is welcome news.”

An increase in rural incomes may boost spending on imports and cut the size of the country’s record trade surplus, easing tensions with the US and Europe. A reduced dependence on exports and investment may lead to more stable growth in the world’s fourth-biggest economy.

Pork prices soared in the world’s biggest consumer of the meat after the number of live hogs fell 1.8% last year to 494 million. The May hog inventory was down 7.1% from a year earlier, the government said on Tuesday. Pig farmers cut production as higher prices for corn for feed eroded profits. Global grain prices surged last year because of increased demand for making alternative fuels, including ethanol and bio-diesel.

Source: The Financial Express