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March 24, 2017

 

China Feed Market Monthly Review: Poor February feed demand triggers sharper production fall in China

 

An eFeedLink Exclusive

 
 

Long Chinese New Year hiatus, together with slack post-festive demand and a beleaguered poultry sector, slashed February's feed output.

 
 
Market Analysis
 

TableChina's feed production in February 2017

Region

Hog feed

Layer feed

Broiler feed

Aqua feed

Ruminant feed

Others

Total

Feed production change compared with previous month (%)

-12.45

-10.08

-4.75

42.68

-20.26

-11.68

-9.74

eFeedLink's statistics

 

The operation rates of feed millers were exceptionally low during February, which have only 28 calendar days and was further shortened by the one week Chinese New Year break. Additionally, several feed producers extended the holidays and halted production for about half a month. Consequently, feed production was limited during February amid fewer working days and lacklustre post-festive feed sales.

 

Making matter worse, the bird flu epidemic showed no signs of subsiding over the month. China reported 61 fatalities and 160 cases of human infection from H7N9 bird flu in February. In the first two months of 2017, 140 human deaths due to the disease were reported, surpassing the annual totals for avian flu victims of recent years. Feed producers slashed output for the sector as poultry population plummeted amid high mortality losses.

 

Month-over-month. China's feed production tumbled 9.74% during February, which was greater than January's 8.87% slump.

 

Corn demand was sluggish as poultry feed, which uses a higher proportion of the ingredient, saw sales plummet. Moreover, most end-users have stocked inventories before the long holidays, hence decimating the sales of corn during February. As a result, prices of corn slid about 2.5% over the month.

 

Supplies of soymeal were ample, holding prices weak in conjunction with a soft global soy market. With domestic feed demand poor, soymeal prices dipped over 3% during February.

 

Aqua farming picked up early this year due to the warm climates. However, fishmeal demand was limited with aqua feed production staying at low levels. Moreover, with soymeal prices falling, feed millers increased usages of the protein ingredients and limited the inclusion rates of fishmeal to save cost. Hence, even as prices of Peruvian fishmeal strengthened over the month due to lower-than -projection fish catch in the southern seas, China's fishmeal price stayed flat.

 

Hog feed

 

Hog population shrank, albeit marginally, during February, the 18th consecutive month that the sector registered lower animal inventories. Demand for pork was poor after the Chinese New Year holidays, dragging prices down by almost 5%. Meanwhile, piglet reproduction remained dismal due to low sow number, which showed no signs of recovering.

 

With the outlook of the market unpromising hog feed producers, who were extremely cautious, cut production by a tremendous 12.45%.

 

Premixes for the sector registered the largest fall of 15.54%, followed by complete feed with a 13.11% slide. Concentrated feed output dropped by a more modest 8% over the month.

 

With demand slack and costs of ingredients dipping, prices of complete feed dropped 0.66% to RMB3,020/tonne.

 

Layer feed

 

The egg market was under tremendous pressure due to the bird flu outbreak. As consumers cut egg consumption, prices plunged a whopping 21% during February. With the confidence in the market shattered, layer farms slashed feed purchases, prompting feed millers to trim production by 10.08%.

 

The production of premixes plummeted in all major feed production regions, sharply lower by 16.25% on average. Concentrated feed production dipped 12.04% whereas that of complete feed dropped 9.19% over the month.

 

Despite significantly lower availability, prices of complete feed fell by 1.44% during February, averaging RMB2,730/tonne.

 

Broiler feed

 

As the bird flu epidemic worsened during February, China government shut down live poultry markets. This, coupled with tremendously poorer chicken demand, led to a prominent 19% fall in broiler releases. Meanwhile, AA broiler prices dived 17% while those of China breed broiler dipped 7%.

 

Demand for broiler feed sank, prompting feed producers to cut output further by 4.75% in February, following January's 15% slash.

 

Prices of complete feed dropped almost 1% to RMB3,090/tonne while output slid 4.84% amid sluggish sales. Production of premixes and concentrated feed fell by 14.28% and 0.41% respectively.

 

Aquaculture feed

 

Aquaculture enjoyed an early start of the farming season this year as the climates in China turned warm faster than expected. Feed producers manufactured 42.68% more aqua feed during February as a consequence.

 

However, overall production volume remained below 260,000 tonnes, accounting for only 2% of China's total output for the month.

 

Ruminant feed

 

Demand for ruminants feed was weak during February, resulting in prominently lower production of 20.26%. Complete feed output plunged 21.85% while that of concentrated feed and premixes dropped about 15% each.

 
 

Market forecast

 

February's feed production fall was greater than expected, partly due to the bird flu outbreak, which sent poultry feed demand diving, and partly due to poor confidence in the outlook of the livestock industry.

 

Feed producers' confidence should strengthen during March as the hog market stabilises while the prices of poultry products rebound from extremely low levels. Should the bird flu disease situation improve prominently, farmers will rebuild inventories, hence lending strong support to the feed market. Additionally, aqua farming will gain momentum as the weather temperatures become warmer, boosting the production of aqua feed strongly.

 

Overall, feed output should increase substantially although demand from the hog sector will be limited by low inventories.

 


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