April 16, 2018
China's feed prices increase in light of potential US-China tariffs
Since March this year, wholesale prices for animal feed in China have increased, as big producers begin reflecting higher costs in their prices, the Nikkei Asian Review reported.
China's intention to launch retaliatory tariffs on US soybeans and corn has prompted the rise of commodity prices, with worries that consumer prices would also spike. The Chinese tariffs are in response to US tariffs, which has generated concerns of a potential trade war.
In early April, top feed producer Shuangbaotai Group raised feed prices by CNY250 (US$39.80) per tonne, attributing the increase to higher prices for raw materials.
New Hope Group, along with other major feed producers, also follow suit, prompting wholesaler Liaoning HuaDa Husbandry to raise the price of New Hope.
The price of soybean meal began rising in February due to speculation of a poor soybean harvest in South America this year.
Also, futures prices for soybean meal were hovering in the CNY2,700/tonne range in January. By April 9, they were up more than 20% to CNY3,400. It was only a matter of time before the higher input prices carried over into the price of feed.
Climbing feed prices, in turn, are leading to concerns about the direction of consumer prices as a whole.
China's retail pork prices have been volatile in the past. The most recent peak came in May 2016, with prices jumping 33% on the year that month. In one earlier peak, in June 2011, the price soared 57%, pushing up broader consumer prices by 6%.
The pork market is currently in a trough. Retail prices fell 7% on the year in February, a smaller decline than the 16% slide posted in June 2017, mainly due to meat producers cutting supplies.
As China's livestock industry shifts to larger scale operations, the price peaks and valleys have become shallower, according to Mihoko Hosokowa, an analyst at Tokyo-based Mizuho Bank. Still, the fluctuations in pork prices could affect consumer prices overall.
Retail sales growth in China has fallen below 10%, hinting at slower consumer spending. An uptick in inflation would put a tighter squeeze on wallets. If the US and China engage in a full-scale trade war, Chinese households and the broader economy could be early casualties.
- Nikkei Asian Review