March 16, 2010

 

 

Demand for soymeal in China is expected to increase in the second quarter, boosting consumption of the oilseed.

 

Government measures to support hog prices will spur farmers to increase pig inventory and warmer temperatures in the spring will boost fish and shrimp farming, animal husbandry analyst Helen Huang said.

 

China's soymeal prices have fallen to the lowest in almost a year on declining hog inventory, trimming margins earned by crushers and slowing imports of the oilseed. China last week said it may invoke stockpiling measures to bolster hog prices.

 

"I think in April to May we will see demand for soymeal picking up," Cao Hongrun, a feedstock buyer for Shunde Wanghai Feed Co., said by phone from Guangdong. "Government support does create a psychological support, and fish and shrimp farmers are preparing to seed their ponds."

 

Soymeal for September delivery declined 0.2% to RMB2,743 (US$402) a tonne on the Dalian Commodity Exchange. Futures have lost 8.9% this year.

 

Soymeal is added to animal feed for its high protein content and hogs are the biggest users after the poultry sector.

 

Inventories of hogs at the end of January declined to 455 million head from 469 million in December, Huang said citing government data. "It probably fell even more in February," she said, declining to provide an estimate before official data is released. The poultry sector so far has been stable, she said.

 

In January far too many hogs were slaughtered as people anticipated greater demand during the Lunar New Year in February, Huang said. An increase in the number of diseases, including the widespread Foot-and-Mouth disease (FMD) in south China, led to farmers slaughtering their animals prematurely, she said.

"Based on our research, the number of outbreaks in reality is far more than what were officially reported," she said.

 

Still, the hog industry is probably through the worst, Huang said. Last May, in a similar scenario, prices fell below breakeven mark for farmers, Huang said. Prices recovered after the government began to stockpile frozen pork, she said.

 

As warmer spring approaches, animal diseases, which tend to be more virulent in colder weather, will slowly wane, she said. Prices of pork in some regions have rebounded following the government announcement last week.