Prices exhibit upward trend - CHINA - Since the beginning of this autumn season, prices of pork, poultry meat and eggs across China have exhibited a steady upbeat trend, essentially putting an end to the depressed market that had been in place for the past few years.

In the northern regions, live hog prices have risen from the RMB3/half kg in the earlier half of the year, to the current RMB4/half kg. Meanwhile, egg prices have also stabilized at over RMB2.5/half kg.

In southern China, the gross profit from rearing a hog has reached as high as RMB100. Both the sales and retail prices of the yellow-feathered broilers have shown a positive trend, and prices of local broilers have also hit RMB6.8/half kg. Losses incurred by the poultry industry due to the SARS outbreak have basically been made good.

In terms of feed supply, despite the substantial hike in prices of raw materials for feed production such as corn and soymeal, there remains a surplus of feed products - a result of an over productive feed industry - such that the rising prices of raw materials for feed production fail to translate into a corresponding increase in the prices of feed products. This, in turn, improves the profit margin of the poultry and livestock industry substantially, encouraging greater production and relatively higher prices for piglets and young birds. According to the Wen Shi Group situated in Guangdong province, prices of yellow-feathered broiler day-old chicks have already hit RMB2.5 per chick.

The recent massive rebound in livestock prices is primarily due to the slowdown in the expansion efforts of the livestock industry in the recent years. The SARS outbreak provided the turning point. By further shrinking the livestock production, a fundamental correctiion in the supply-demand relationship has been initiated within the Chinese meat and egg market. As a result, it is forecast that the ongoing high prices of livestock products will remain for some time after the forthcoming Chinese New Year holidays in end January.

With regards to the price trend for livestock products next year, the rapid expansion of livestock production is likely to bring about another round of surplus in supply, and thus a fall in livestock prices. The current rising feed production cost, however, will on the one hand limit the capability of the breeders to expand production, and on the other hand, mitigate the fall in overall prices of livestock products.

Nevertheless, it is noteworthy that the rise in corn and soymeal prices is not merely a random market fluctuation, but has more long-term implications. Take grain production for instance. Since 2000, the sustained and progressive increase in annual grain production has slowed down considerably, although the consumption of grain has continued to maintain an upward trend. As such, domestic grain stockpiles have fallen greatly, and the relationship between the supply and demand for grain is currently undergoing a major change.

If there is no significant increase in the sown acreage of grain next year, prices of grain then are likely to see even greater fluctuations, putting more pressures on the management efficiency of the breeding industry next year. To rearers using premix or concentrated feed, or those with grain holding resources, the outlook for rearing efficiency is likely to be bright for next year.

But for rearers who rely on finished feed supply, the escalating costs of feed would pose a severe threat to their rearing efficiency. Especially in the case of live hog farmers, the ongoing price of pig feed has already exceeded RMB100/ton. Accordingly, a fall in live hog prices is likely to reduce the current profit margin by a great extent.

Given that the breeding industry in China is predominantly based on disseminated scale of breeding, the prospects for China's breeding industry in terms of rearing efficiency for the next year are on the whole favorable. As for regions such as Guangdong province which are dependent on imported grains for feed ingredients, they should do some good preparation, in case of the likely rebound in grain prices next year.

Source: eFeedLink - 1st December 2003