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12 Jan 2022

Econ Digest

Higher pork prices set to drive up food costs by 8-10%, hurting consumer purchasing power

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        Since the end of 2021, the Thai economy has begun to show signs of rising inflation, reflected in rising prices for consumer goods and commodities including energy and fresh food, especially pork prices that have hit their highest level in 10 years. KResearch is of the view that the increase in pork prices have been driven by a number of factors. Among these are post-lockdown pent-up demand, stronger demand for pork during the year-end festivals, and a shortage of pork supplies due mainly to the swine diseases and rising production costs, including logistics expenses in line with higher oil and animal feed prices, plus the costs for controlling and preventing diseases in farms, as well as the declining number of small swine farmers, prompting many pork retailer and restaurant operators to gradually raise prices, slow down or even suspend sales.
        Due to the disequilibrium in pork supply and demand, plus the fact that warm weather may cause pigs to grow at a slower rate, we at KResearch expect that pork prices will remain at an elevated level during 1H22, particularly prior to the Chinese New Year and Songkran festivals, while various government measures help mitigate the situation somewhat. However, pork prices will not drop until a new round of pork products gradually enter the market in the second half of the year. It is expected that pork prices will average within a range of THB190-220/kg throughout 2022, an increase of roughly 30%YoY. Higher pork prices may cause prices of other meat products, particularly chicken to rise, as well. Additionally, prices of food ingredients such as vegetables and edible oils are set to increase, and this may hurt retailers, especially small ones, and restaurant owners. Moreover, consumers are bound to incur additional food costs of 8-10%/person amid anticipated rises in other expenses such as utilities (electricity and cooking gas) and transportation.

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Econ Digest