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Swine Disease Crisis in China
Pork crisis sparks China inflation fears
— by Richard McGregor in Beijing & Jamil Anderlini in Hong Kong

A disease killing millions of pigs in China has sharply lifted the price of pork, the country´s staple meat, fuelling fears about inflation and prompting calls from Beijing´s top leadership for increased production of the meat.

Wen Jiabao, the premier, provided confirmation of the seriousness of the crisis with a weekend visit to a market in Shaanxi, where he said farmers should help "resolve the problem" of providing meat for China´s 1.3bn people.

Pork prices have risen as much as 30% in Chinese cities over the last week. According to the agriculture ministry, wholesale prices for pigs have gone up even more, rising 71.3 per cent since April.

China´s 500m-odd pigs are the country´s most important source of affordable meat, and any sustained interruption in supply would be a big political problem for the government.

While the price of feed, such as corn, has risen, the main culprit is an epidemic of a mysterious illness known as "blue ear" disease, as well as the more common foot-and-mouth affliction.

"I have heard it has killed as many as 20m hogs," an industry executive said.

The government has not issued any estimate of how many pigs have been struck by the disease and China´s size and the number of small producers make it difficult quickly to obtain reliable figures.

But the impact of the shortage of pork is apparent in many areas, from sausage makers switching meats, to rising offal prices, and attempts by Hong Kong to import meat from South America.

China cannot easily find competitively priced pork to replace the shortfall at home, because of itsown health-related restrictions on imports from South America, where pricesare relatively low. US and European pork is more expensive.

The government has a "strategic pork reserve", established in the late 1990s, including both frozen stocks and access to pig farms, which could provide abuffer.

"We are considering releasing some of these reserves into the market in certain targeted areas in order to reduce soaring prices," said Li Xizhen, of the Ministry of Commerce.

"We will not be giving free meat to people, but will sell pork and use market mechanisms to bring down volatility."

Soaring pork prices are also expected to add to inflation, already under pressure from rising food prices in other areas.

"The surge in pork prices will likely push year-on-year CPI inflation to above 4 per cent very soon," said Hong Liang, of Goldman Sachs in Hong Kong, in a research note.