November 3, 2008
China Livestock Market Weekly Review: Melamine scandal affects livestock demand
An eFeedLink Exclusive
The detection of melamine in the eggs produced by Dalian Hanwei Enterprise Group revealed the fact that China's feed production industry has been adding melamine to animal feed for a long time.
This incident not only affected egg sales, but also impacted the prices of broilers and hogs. Consumers reduced consumption of meat products as they were unsure if melamine is present in other meat sources. Animal farmers also held back on replenishment amid a pessimistic market outlook.
Corn prices continued to fall, but at a smaller margin due to high corn growing costs and increased price support measures taken by the government.
Soymeal prices were higher as compared to the previous week due to higher crude oil and CBOT soy prices.
Prices of cottonseed meal, rapeseed meal and fishmeal continued to descend.
Market forecast: Widespread effects of the melamine scandal
Prices of feed raw materials will fall further.
Corn prices will fall due to abundant supplies of new corn crops in northeast China.
Soy import prices will likely fall below RMB4,000/tonne in November. Low import prices will influence China's soymeal prices to fall.
Prices of cottonseed meal, rapeseed meal and fishmeal are seen weaker on sluggish demand.
China's livestock market is in for more bad news in November.
Hog prices will fall as supply will likely exceed demand.
The rise of broiler prices will be limited as broiler release volume will start to increase.
Egg prices will fall as egg supplies increase with the arrival of the peak egg laying season.
Livestock prices will also be very much affected by the melamine scandal.
Dalian Hanwei Enterprise Group is China's largest layer breeding corporation. Yet, despite its operating scale, it has failed to uphold food safety standards. Consumers are thus worried about the quality of eggs produced by other farms that have limited financial resources to focus on food quality. The decline of egg demand has caused China's egg prices to fall from RMB6/kg to RMB5/kg during the week.
Apart from eggs, consumers are also worried about other livestock products. This is because chickens are very sensitive to melamine. If melamine can be found in chicken eggs, who can be sure that other livestock products like hogs and aquaculture have not consumed feed laced with melamine?
At the same time, widespread media coverage about the detection of melamine in China's egg products, be it factual or exaggerated, has further impacted consumers' confidence in China's livestock products.
The China government has announced that it will not conduct a country-wide check on the quality of eggs. In Hong Kong however, the authorities have stated that they will conduct stringent checks on all livestock products imported from China. Such checks will either provide assurance on China's food safety standards or reveal new breaches of food safety standards that would add more negativity to the already shaken livestock production industry in China.
In order to avoid potential losses should more bad news surface, more livestock farmers will likely increase releases and cut back on replenishment in the near-term. Animal prices will therefore fall on increased supplies while feed demand will decline with lower animal inventories.
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