September 5, 2023

 

Chinese broiler market tussles for profitability with fluctuating prices

 

Following Chinese New Year last February, the price of white-feather broilers climbed to a high of ¥10.00/kg, with the rally ending in May.

 

Additionally, the average price of white-feather broiler chickens in the first five months of 2023 reached ¥9.90/kg, a level unseen in the past decade.

 

Most broiler integrators in China purchase parent stock breeders from grandparent stock farms (this article will look at parent stocks as it is more representative of the Chinese broiler market). According to statistics from the General Administration of Customs, the country's white-feather breeder broiler population plunged 34.17% in 2022 to 762,800 sets. This drove up the price of parent stock breeders from ¥40/set in November 2022 to ¥80/set by the end of 2022. Entering 2023, the price stayed at a high of ¥70-75/set in January-April.

 

However, broiler breeder farms were suffering losses for most of 2022. Then, entering 2023, feed costs dropped and the prices of breeders decreased. Still, the price of broiler chicks rose to ¥4.00-6.00/bird, particularly after Chinese New Year. Nevertheless, the average monthly profit of breeder farming surged to as high as ¥1.77/bird, well above 2022 levels.

 

In the first five months of 2023, the price of white-feather broiler chickens was at a 10-year high. But, as the price of chicks soared above ¥4.00/bird after Chinese New Year, the profit margins of commercial broiler farming were later eroded by the high costs of broiler chicks.

 

Prices of white-feather broilers and chicks fell by May 2023. The consumption of chicken failed to pick up after the Chinese government lifted COVID lockdown measures.

 

In February-March 2023, as the purchase price of white-feather broiler chickens exceeded ¥10/kg, the losses of Shandong slaughtering enterprises were at ¥1-2.20 per chicken. As broiler prices soared in the first few months of 2023, slaughterhouses suffered even heavier losses as the prices of chicken products failed to strengthen in time.

 

While some segments of the Chinese industry chain for white-feather broilers are incurring losses, integrators are in a relatively stable position as other segments remain profitable. For example, the high profitability of food processing and cold chain sales helps keep white-feather broiler producers afloat.

 

Cost control is a key factor for these producers. When managed well, they can avoid the undesirable outcome of liquidating assets and exiting the market.

- Shi Tao, eFeedLink