The cost rising and unbalanced supply-and-demand are the basic reasons causing the meat and egg price to rise.

Pork and egg monthly wholesale price tendency (1996.1- 2007.5)

In the second half of 2006, the price of pork and egg beginning to raise recoverably, the breeding cost keeping increasing and relatively strained relation between supply and demand promoted the meat and egg price to go up steadily. Meanwhile, the outburst of the epidemic situation aggravated the unbalanced supply and demand. The meat and egg price went up fast.

(1) The increase of the year-on-year growth of meat and egg is because that the price of the same period of last year was relatively low. From the tendency of meat and egg price in the recent ten years, the growing up of pork price this time is a sudden acceleration during the recoverable rising period. The pork price fell back during 1996 and 1997 and began to rise since 2003. It was up to the highest point of 13.89 RMB per kilogram in October of 2004 and went down again. It reached the bottom of 9.36 RMB per kilogram in June of 2006. A whole period of price up and down finished. Since June of 2006, the pork price was in a steadily increasing stage. In May of 2007, the pork price rose sharply. Although the year-on-year growth was up to 49.4%, the main reason was that the pork price of the same period of last year was in a historical position. If it is compared with that of October, 2004, the pork price only increased by 4.5%.

(2) The corn price kept rising and the breeding cost increased obviously. According to the investigation carried by the People's Bank, the feed cost accounts for 70- 82% of the total pig breeding cost and 78% of the total egg cost. The proportion of corn in pannage is over 60%. Therefore, the vibration of corn price will lead the tendency of pork price directly. The corn price appears obvious periodicity. Since January of 2006, the corn price went up from the bottom and is still in the rising stage. In May of 2007, the corn price increased by 13.4% compared with that of the same period of last year and by 20% compared with that of January, 2006. The corn price kept increasing continuously. Considering four months is necessary from replenishment to delivering for sale, the corn price will affect the pork price of four months later actually. It is indicated by the studies that the corn price has close relation with the meat and egg price of four months later. From November of 2006 to February of 2007, the average growing breadth of corn price was more than 16%. The increase of feed cost is an important reason that meat and egg price keeps in high position since April of 2007.

(3) The epidemic situation aggravating unbalanced supply and demand is the direct reason causing the sudden increased of pork price. The epidemic situation leads to the supply decreasing and increase of pork price accelerating. In the first half year of 2006, the live pig breeding was deficit. The breeders reduced the quantity of sows. Therefore, the supply of grice and the amount of live pigs on hand decreased greatly. The deficient supply led to the pork price increasing from July. The replenishment began to increase and the relation between supply and demand became catabatic. It usually takes at least one year from sow cultivation and live pig breeding to deliver for sale. Thus, generally speaking, the pork price should go up step by step and reach the highest point in July instead of the sudden rising in May. However, the “Swine High Fever Disease” occurring in June of 2006 further reduced the supply of sows, grices and live pigs. The amount of live pigs on hand decreased greatly. According to the data provided by the State Statistics Bureau, in 2006, the number of pigs delivering for sale in the nationwide was 681 million, increasing by 3% compared with that of the same period of last year. The number of pigs on hand was 494 million, decreasing by 1.78%. In the first quarter of this year, the number of live pigs delivering for sale was 230 million, increasing by 2.5% compared with that of the same period of last year. The number of pigs on hand was 467 million, decreasing by 0.3%.

The demand on meat and egg appeared recovering rebound. In 2006, with the bird flue finishing and meat and egg price going low, the consumption of pork and eggs appeared recovering rebound. The year-on-year growth of per capita pork and egg consumption was 27.1% and 29.8% respectively, increasing by 45 and 52.5 percentage points compared with that of 2005. Since 2007, the consumption of meat and eggs remained rising. According to the data provided by relevant departments, during January and April of this year, the amount of pork consumed by rural residents increased by 15.1% compared with that of the same period of last year. The unbalanced supply and demand initiated the sudden rising of meat and egg price.

The export demand pulling and production cost promoting are the basic reasons causing the ferrous metal price to rise.

(1) The high speed increase of export pulled the ferrous metal price up. Since 2006, the international price of steel has been higher than domestic price, which enhanced the power of domestic steel enterprises to export. In 2006, the growing rate of steel export was up to 187.7%. Since 2007, the policies of limitation on export of high energy-consuming, high pollution and resource products have been established gradually. On April 15th, the export rebate of some steels was abolished. On June 1st, 5-10% of the export duties was added to more than 80 steel products including straight carbon steel wires, boards and shaped products. The export duties of steel primary products such as steel billet, steel ingot and pig iron was increased from 10% to 15%. Time difference exists between policy issuing and coming into effect, which accelerated the export of relevant products based on the high speed growth of last year. Take steel for example. During January and May of 2007, the accumulated steel export was up to 27.44 million tons, increasing by 116.7% compared with that of the same period of last year. The accumulated import was 7.28 million tons, decreasing by 6% compared with that of the same period of last year. The large amount of export led to the relatively deficient supply in the domestic market and pulled the steel price up with relative great breadth.

(2) The increase of production and transportation cost promoted the ferrous metal price to rise. Since the beginning of 2007, the international price of iron ore increased about 30% on average, which increased the purchasing cost of raw materials of domestic steel enterprises. The ocean shipping price of iron ore also increased greatly even far higher than the cost price of iron ore, which was the important factor to increase the cost, insurance and freight (CIF) of iron ore in the first quarter of 2007. In 2007, the average ocean freight of iron ore from Brazil to China was 41.89 dollars per ton, increasing by 51.62% compared with the average value of 2006. The average ocean freight of iron ore from Australia to China was 17.82 dollars per ton, increasing by 50.16% compared with the average value of 2006. In addition, the requirements of energy-saving and discharge-reducing policy also increased the cost of enterprise technical reform and environment protection. The increase of production and transportation cost was the important reason to promote ferrous metal price rising.

The supply-demand relation of commercial house becoming strained was the main reason causing the year-on-year growth and linked relative ratio of house price to expand.

National accumulated balance and year-on-year growth of house consumption loans (2006.1- 2007.5)

(1) The growing rate of commercial house supply fell back relatively great. Since 2006, more than ten policies aiming at readjustment of real estate market have been issued by relevant national departments in order to regulate the real estate market, avoid overheated investment and attack speculating behaviors in real estate. In the second half year of 2006, with the adjusting and controlling strength of the government to real estate market enhancing, the year-on-year growth of starting areas, constructing areas and finishing areas of national commercial house kept running in low position. During February and April of 2007, the year-on-year growth of starting areas, constructing areas and finishing areas of national commercial house was -1.1%, 9.5% and 10.4% respectively, decreasing by 45.4, 26.5 and 21.1 percentage points compared with that of the same period of last year. The supply capacity of commercial house was relatively weak.

(2) The demand on commercial house was still strong. With the residents’ income increasing fast and the process of urbanization accelerating, the demand on house kept increasing. Since 2006, the stock market kept rising. The wealth effect appeared progressively. It is possible for large amount of capitals to return the real estate market, which increased the demand on house. Since May of 2006, the house consumption loans have been raising steadily. The accumulated year-on-year growth accelerated continuously. During January and May of 2007, the accumulated year-on-year growth of national house consumption loans was 8.8%, 11.3%, 12%, 13.2% and 21.7% respectively. The growing breadth of May increased by 16.1 percentage points compared with that of the same period of last year. The demand increased powerfully.

(3) The contradiction between supply and demand was relatively obvious. The ratio of sales and finishing of commercial house kept rising. During January and April of 2007, the ratio of sales and finishing of commercial house was up to 1.82. The sales areas of newly-built commercial house was 2.02 times of the finishing areas, which was obviously 1.55 times higher than that of the same period of last year. The growing breadth of sales areas of commercial house was 6.7 percentage points higher than that of the finishing areas. Among them, the sales of completed house increased by 6.8 percentage points compared with that of the same period of last year. The sales of forward delivery house increased by 6.4 percentage points compared with that of the same period of last year. Meanwhile, the idle areas of commercial house decreased by 0.8% compared with that of the same period of last year. The ratio of sales and finishing increasing and idle areas decreasing indicated that the market demand was still strong and the supply-demand relation turned strained.