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Following is a question by the Hon Frederick Fung and a reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council today (June 20):
Question:
The study on the selling price of pork published by the Consumer Council (CC) in the middle of last month pointed out the inconsistency in the pace of adjustment in the average wholesale price and retail price of fresh pork in that the retail price was quick in going up and slow in coming down, and there was even the situation where the wholesale price had fallen, but the retail price had risen. For example, in October last year, the average wholesale price of live pigs dropped by 7.2% month on month, but the average retail price of lean pork, on the contrary, increased by 0.9%. Similarly, in February and March this year, the average wholesale price of live pigs dropped by 4.8% and 0.7% respectively, but the retail price still increased by 1.2% and 0.2% respectively, resulting in a widening difference between the retail price and the wholesale price. Some members of the pork retail trade had later refuted, stating that CC's data had focused too much on the average wholesale pork price and neglected factors such as the difference in price between high and low quality pork and increase in traders' costs, etc., and they even suspected that supermarkets had sold low-priced pork as high-priced pork. In this connection, will the Government inform this Council:
(a) of the average monthly wholesale, import and retail prices of fresh and chilled pork imported from the Mainland since October last year, and the respective monthly changes in such prices; the difference in the retail price of fresh and chilled pork and its changes; whether there is a trend of widening difference between the retail price and wholesale price or import price of fresh and chilled pork; whether it has looked into the reasons for that; if it has, of the results;
(b) whether the authorities have looked into and followed up the aforesaid CC's study and the response of the pork retail trade, including whether they have assessed if the conclusion of CC's study is reasonable, if the pork retail trade's comment is true and if there is no room for reduction in the retail pork price after considering factors such as the quality of pork and increase in costs, etc., and why supermarkets can offer discounts; if they have taken follow-up action and conducted such an assessment, of the results; and
(c) whether the authorities have conducted analysis and study on the wholesale and retail pork markets; if they have, whether anti-competitive conduct such as monopolisation and collusive pricing exists, and whether there is the practice of price-gouging for profiteering; what measures the authorities have to curb such anti-competitive conduct and urge pork retailers to expeditiously lower the retail price in response to the drop in the wholesale price, so as to enable consumers to buy pork at reasonable prices?
Reply:
President,
It is the policy objective of the Government to maintain a stable supply of various foodstuffs and to ensure food safety. Food price has always been determined by the free market. The Government is responsible for enhancing market transparency and market efficiency.
Live pigs for public consumption mainly come from the Mainland (the rest are supplied by local farms). To maintain stable supply, the Food and Health Bureau has all along been liaising closely with the relevant Mainland authorities and live pig import agents. In July 2007, the Food and Health Bureau and the State Ministry of Commerce agreed after discussion that the market for supplying live pigs to Hong Kong should be opened up for healthy competition. The number of agents for supplying Mainland live pigs to Hong Kong increased from one to three in October 2007.
Every year, the Hong Kong Special Administrative Region Government discusses with the Ministry of Commerce the total annual quota of livestock and live poultry (i.e. live pigs, cattle and chickens) to be supplied to Hong Kong in the following year so as to ensure stable market supply. In October last year, with the support from the Ministry of Commerce, we reached an agreement on the annual quota of live poultry and livestock (including live pigs) to be supplied to Hong Kong this year. Under the agreement, the quota is pitched at the same level as in last year and that for live pigs is 1.73 million heads, which would be sufficient to meet local demand in Hong Kong.
To maintain stable food supply and give consumers wider choices, the Government also encourages the trade to explore tapping different sources of food supply. In August 2006, the trade started importing chilled pork from the Mainland, thereby offering the public an added choice. The consumption of chilled pork increased from around 4 600 tonnes in 2006 to around 15 000 tonnes in 2011.
My reply to the various parts of the question is as follows:
(a) The wholesale price of live pigs (i.e. the price paid by live pig buyers to live pig import agents) and the retail price of fresh lean pork from October 2011 to May this year are shown in Annex 1. The wholesale price of live pigs is not equal to the wholesale price of fresh lean pork because the weight of a live pig includes not only the weight of pork, but also that of the head, bones, skin and offal. The auction price of live pigs is determined by competitive bidding. As could be seen from Annex 1, the average wholesale price of live pigs in May this year was about 10% lower relative to October last year, while the average retail price of fresh lean pork dropped by about 5%.
As regards chilled pork, the Government mainly relies on information on the import quantities and the value of chilled pork declared for customs purposes to work out the import price. This is not the wholesale price. The import and retail prices of chilled pork from October 2011 to the present are given in Annex 2. The information therein shows that the average import price of chilled pork went down by about 10% between October 2011 and April 2012, while the average retail price of chilled lean pork dropped by about 6%.
Annex 3 gives the difference in the retail prices of fresh and chilled pork. The information therein shows that the difference in prices remains stable, with the price of a catty of chilled pork being generally $4 to $6 lower than that of fresh lean pork.
(b) We understand that like other retail businesses, pork retailers, when determining the retail price of pork, have to consider relevant operational costs such as transport cost, wages of workers and rental, as well as other factors like the affordability of consumers, on top of the purchase price and product quality. When the wholesale price rises, retailers may not immediately pass on all of the increase to consumers. Likewise, when the wholesale price goes down, retailers having taken into account other factors including the operational costs may not make the same level of reduction at the same time. Such commercial considerations are no different from those in operation in other trades. Food price has always been determined by the free market. We have noted the study report of the Consumer Council and believe that it will serve as a good reference for consumers.
The pork retail trade earlier expressed suspicion that individual supermarkets have sold low-priced pork as high-priced pork. We understand that the Customs and Excise Department has investigated the case. No evidence has been found to support such an allegation.
(c) The Competition Ordinance just enacted seeks to tackle anti-competitive agreements or abuse of a substantial degree of market power that prevent, restrict or distort competition in Hong Kong. Price fixing agreements between undertakings and the abuse of market power by undertakings with a substantial degree of market power are both regulated under the Competition Ordinance. Under the Ordinance, the Competition Commission has the power to conduct investigations into such complaints and the Competition Tribunal may impose severe penalties on offenders.
As for allegations about suspected anti-competitive conduct in the pork market, the future Competition Commission shall have sufficient power to conduct investigations into such allegations. That includes the power to require the persons concerned to produce documents and information and to attend before the Competition Commission to answer questions.
Thank you, President.
Ends/Wednesday, June 20, 2012
Issued at HKT 14:57
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