March 4, 2014

Undermined by the recent outbreak of bird flu and tumbling pork prices, China's feed demand is waning while corn market faces a supply glut, Reuters reported.

Inventory expansion or replenishment of chicks at Chinese chicken farms are coming to a halt, as a spate of bird flu cases in Guangdong province in January stirred fears among farmers. In 2013, millions of birds were culled as a result of the bird flu outbreak, causing huge losses to farmers.

"Broilers, ducks and egg layers, these three businesses have kept losing money in the past year. It hasn't recovered and it is getting worse," said Jin Weidong, Chairman of Wellhope Agri-Tech Co. Ltd, one of China's leading feed companies.

According to China's agriculture ministry, outbreaks of bird flu have caused RMB20 billion (US$3.25 billion) of losses to poultry farmers so far this year, compared to RMB60 billion (US$9.76 billion) during the first half of 2013.

At the same time, China National Grain and Oils Information Centre's data shows that the country's hog inventory hit a 10-month low in January. Many backyard pig farmers, who are major buyers of feed, are forced out of business as pork prices have stayed on a downward track for months.

China already rejected about one million tonnes of US corn shipments, citing worries over an unapproved GMO strain. The move was believed by some traders that the Chinese government was trying to protect local farmers from the weakening corn market, which was under pressure from a supply glut.

Thanks to China's state reserve policy, farmers are selling more of their crops to the government, which is expected to take in more than 50 million tonnes on top of existing stockpiles by the end of April.

About 60% of China's corn is used for feed, half of which is for poultry. In 2013, output of poultry feed dropped by 8% in China.