July 1, 2004

Good Outlook For China's Hog Market As Prices of Raw Materials for Feed Fall

According to statistics, the previous high prices of raw materials for feed production are now reflected in the higher prices of downstream products in the industry chain. The increase in pork prices in various regions of China has been obvious since May.  With the decline in prices of raw materials for feed production in recent weeks and the rising prices of final products in the industry supply chain, the profitability of hog production has risen substantially.

Soymeal prices have registered steep falls in the past month, while corn prices have risen amid stability. In particular, corn prices in Guangdong province had recovered to the range of RMB 1,450 - 1,470/ton, the highest price level seen during last year.

Meanwhile, corn prices in Shandong province reached a new record of RMB 1,350 - 1,380/ton. The two provinces are the main livestock producing regions in China. These market indicators point to the fact that the livestock and animal husbandry industry in China is in a recovery stage rather than still in a depression as some analysts believe. If not, the corn markets would not have performed as it has been.

Presently, demand continues to outstrip supply in China's live hog market. The low output of live hogs is mainly attributed to the high mortality rate of piglets, as well as the low reproduction rate of sows. From birth, it takes 9 to 12 months before a hog is ready for sale. Analysts do not expect any major fluctuation in China's live hog market in the medium to long-term period.