Pork prices kept their bull run in the week ended June 26 with an increase of 4.5 per cent week-on-week, according to the Ministry of Commerce (MOC) on Tuesday.

Pork prices soared 40.4 per cent year-on-year and helped drive up the inflation rate to a 34-month high in May.

Since early May pork prices in China have continued rising mainly due to the cyclical live-pig supply shortage and higher costs for pig feed caused by rising grain prices.

Pork is the most widely consumed and affordable meat in China, and its price weighs heavily on the consumer price index (CPI).

The MOC data showed that during the week ended 26 June, meat prices rose from the previous week with pork up 4.5 per cent, beef up 0.9 per cent, chicken up 0.6 per cent and mutton up 0.4 per cent.

Heavy rains and floods in the south pushed up the average wholesale prices of 18 staple vegetables by 2.3 per cent as a whole, with the wholesale price of cabbage and Chinese cabbage up 20.3 per cent and 17.9 per cent from previous week.

Slide in pork producer's shares

China Yurun Food Group Ltd dropped in Hong Kong trading, extending the company stock's record 20 per cent plunge on Monday.

That came as short selling surged amid speculation that the research firm Muddy Waters LLC will issue a negative report on the pork producer.

Zhu Yicai, Yurun chairman, attributed the slump on Monday to "hedge funds and market rumors" and wasn't aware that any organization plans to issue a report on Yurun, according to Titus Wu, an analyst at the research firm DBS Vickers Hong Kong Ltd., who was on a 30-minute conference call with the company.

The briefing wasn't open to journalists and Yurun hasn't returned at least five calls and e-mailed requests for comment.

"We take pains to keep our research activities confidential, and a widespread market rumor would either represent a significant failure on our part or is false," Carson Block, a Muddy Waters founder, said in an e-mail.

Yurun fell as much as 8.7 per cent, declining for a fourth day in a row, after short-selling affected 21.8 million of its shares on Monday, four times as many as were affected on June 21, according to Bloomberg data.

"The concerns are still based on rumors - a lot has not even been verified," Renee Tai, a Hong Kong-based analyst for Samsung Securities Co, who recommends buying Yurun's stock, said in a phone interview on Wednesday.

"From the fundamental point of view, everything's chugging along nicely. We're not seeing any sort of surprises. Even the margin pressures are within expectations."

Mr Zhu, Yurun chairman, said he plans to buy back shares in the company, which is based in Nanjing, Jiangsu province, according to Tai, Nicholas Wang, an analyst with Daiwa Institute of Research Ltd, and notes to clients from Wu at DBS Vickers and CCB International Securities Ltd.

Mr Wu downgraded Yurun to "hold" from "buy" in a note to clients on Tuesday, citing bad publicity.

"We maintain our forecast of 35 per cent core earnings growth this year, excluding government grants and negative goodwill," Mr Wu said. Still, he said "the chairman was still unable to clarify and explain questions about the breakdown of government grants and the size of the pig farming belonging to Yurun Group".

Yurun said it has worked with reputable international firms since going public, and that Goldman Sachs Group Inc sponsored its 2005 initial offering and KPMG audited its accounts, analysts who attended the call on Monday, including those from DBS Vickers, CCB, Kim Eng Securities Ltd and Citigroup Inc, said in notes to clients.

Yurun's gross profit margin underwent a "slight decrease" in the first five months of the year, according to a filing to Hong Kong's stock exchange on Monday.

The company's sales meanwhile rose "significantly" in the period up to 31 May compared with 2010 largely because of higher hog prices and a greater slaughtering volume, it said.

The price of marbled pork in China rose as much as 4.3 per cent to 28.20 yuan ($4.35) a kilogram in the 10 days from 11 to 20 June compared with the previous 10 days, the National Bureau of Statistics said on Friday. Prices for pork thigh rose 4.1 per cent to 29.05 yuan a kilogram.