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Market Reports

June 10, 2011
 
China Feed Market Bi-Weekly Review: Low hog number, drought-stressed aquaculture curtail China feed production growth
 
An eFeedLink Exclusive
 
 
With hog inventory growth decimated by a lack of piglets and aquaculture hampered by droughts, the poultry sectors were the main drivers of feed production, which rose 12.19% on-month, and a moderate 4.39% on-year.
 
 
Market Analysis
 
Corn prices continued to rise gradually but steadily in May while soymeal market firmed up towards mid-month. Overall, feed production costs increased amid higher raw material prices and power tariff hikes.
 
Meanwhile, China Grain Reserves Corporation officially announced its purchase of 1 million tonnes of corn from the US, citing lower costs instead supply insufficiency as the reason for the decision. CGRC did not specify the use of the imported corn but rumours had it that it would be stocked in warehouses in eastern China.
 
The central and eastern regions of the country were troubled by severe droughts, which are poised to affect the upcoming wheat and rapeseed harvests. 
 

Table 1:Percentage change of China’s feed production and consumption in May 2011

 

Hog feed

Layer feed

Broiler feed

Aqua feed

Ruminant feed

Others

Total

Feed production, percentage change on-month 

4.32

12.03

13.33

49.15

7.76

9.50

12.19

Feed production, percentage change on-year

-0.35

1.48

14.28

1.95

6.12

15.13

4.39

 

 

Feed consumption, percentage change on-month

2.48

10.19

10.80

46.67

5.64

7.40

10.08

Feed consumption, percentage change on-year

-1.99

-0.56

11.08

0.30

4.96

13.09

2.31

eFeedLink’s statistics

 
Hog feed
 
Limited sow population kept piglet production low in China, decimating the inventory growth of hogs. In 2007, when the government implemented hog insurance policies in a bid to reduce the risk of hog farms, local governments in several regions excluded backyard farms from the programme. On hindsight, this resulted in the current low sow inventories, as backyard farms were discouraged from rearing sows, which involves higher risks and costs.
 
With consumption increasing by a marginal 2.48%, hog feed production fell below May 2010’s level despite a rise of 4.32% on-month.
 
Layer feed
 
Egg production rates improved prominently in May under the warm climates, stimulating feed consumption to grow by 10.19% together with inventory expansion encouraged by firm egg prices. Production volume was higher by 12% on-month, slightly surpassing last May's output.
 
Broiler feed
 
Of all livestock sectors, broiler farming performed best in May, as both replenishment and release rates were impressive. Broiler feed consumption increased by a substantial 10.80% on-month, driving production volume to rise 13.33%. Both figures registered double-digit increments compared with May 2010.
 
Aquaculture feed
 
Aquaculture prospered in southern and northern China under the warm weather. Nevertheless, severe droughts in central and eastern provinces including Hubei, Hunan, Jiangxi, Anhui, Jiangsu, Zhejiang and Shanghai brought down the aquatic inventories in these regions. Consequently, even though on-month aqua feed consumption and production rose prominently by 46.67% and 49.15% respectively, they registered only slight growths compared with the same period last year.
 
Ruminant feed

Cattle industry grew steadily, resulting from the keen expansion of large dairy companies over the past two years. Meanwhile, the feed intake of animals increased amid the warm climate. Ruminant feed demand therefore expanded by 7.40% on-month and a whopping 13.90% on-year. This stimulated feed production to rise 9.50% compared with last month, which was over 15% higher than May 2010.
 
 
Market forecast
 
Diminishing hog inventories together with the disrupted aquaculture in the central and eastern regions will limit the demand for animal feed and hence its production volumes, despite robust growths in the poultry sectors. As wheat and rapeseed production in China looks set to be affected by the drought, grain prices will remain firm, prompting feed millers to limit feed output.
 


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