September 22, 2003

 

 

Rebound Seen in China's Livestock and Egg Prices for 3rd Quarter 2003

 

An eFeedLink Exclusive Report

 

China's livestock and poultry production in the second quarter saw a modest increase as a result of sluggish supply, barriers to livestock and poultry exports, as well as slow growth in meat consumption following the SARS outbreak. As such, prices of livestock and poultry products also remained correspondingly depressed.

 

Since the beginning of the third quarter, prices of key Chinese local livestock and poultry products have increased significantly. Likewise, according to the relevant authority, the month of August has seen a substantial increase in the prices of key livestock products. The quick rebound in the prices of livestock products greatly improves the profitability of the livestock breeding sector in the animal husbandry industry.

 

China's live hog prices continued its brisk climb in August. Compared to July, prices of piglets and live hogs have risen 2.9% and 3.8% respectively, returning to the ratio of 5.5 for prices of live hogs against the prices of corn. This signifies the increasing profitability of live hog breeding. Accordingly, China's live hog prices are expected to rise continually in the third quarter.

 

In Hunan province, prices of live hogs have risen to RMB6.40-6.50/kg, indicating an increase of 10%, while prices of piglets promptly rose to RMB8.3-8.4/kg, an increase of 8%. In Sichuan province, live hog prices have increased to RMB5.40-5.50/kg, registering an increase of 9%; prices of piglets have rose to RMB6.1-6.2/kg, an increase of 3%.

 

With the temperatures remaining high in the key production regions, the number of live hogs marketed has declined.  The upcoming weeklong China's National Day holidays, which fall on the first week of October, has resulted in higher Chinese demand for pork, and this has thereby caused pork prices to rise slightly. The unprecedented increase in the demand by the breeders also contributed to the price hikes for live hogs and piglets. Furthermore, the increasingly standardization of live hog slaughtering processes across the various regions, which systematically put a stop to indiscriminate illegal slaughtering, also helped to drive up the live hog prices, albeit modestly.

 

China's Live Hogs Versus Corn Price Ratio Chart - 2001 - 2003 

 

 

In August, China's chicken egg prices finally turned around after a year-long decline. With the upcoming holidays, chicken egg prices in the northern regions have increased significantly, while remaining constant in the South, due to the escalating temperatures. In Hebei province, chicken eggs cost RMB3.60-3.65/kg, which is an increase of 19% versus prices in July. In Henan and Shandong, chicken egg prices rose to RMB4.50-4.60/kg, showing an increase of 18% compared to prices in July.

 

The chief reasons for the rebound in chicken prices are:

 

Firstly, the continuous rains in the northern regions made the conditions very unfavorable for the hatching, storage and transport of chicken eggs, even to the extent of undermining the quality of some of the eggs of backyard chickens;

 

Secondly, the demand for chicken eggs hit a seasonal peak due to the upcoming weeklong China's National Day holidays;

 

Thirdly, given the general high costs for raw ingredients like corn and soymeal, feed and breeding costs have risen. For the month of September, chicken egg prices will continue to pick up. The prices of layer day-old-chicks in August are basically unchanged since July. Given that the demand for layer chicks is likely to fall after October, layer day-old-chicks supply as such has already reached its peak.

                         

Prices of broilers in China continued to increase modestly in August. Broiler prices in the key producing region of Guangdong ranged between RMB11.00-11.50/kg, which is an increase of 4% over the prices in July. In Shandong, broiler prices averaged between RMB6.30-6.40/kg, showing a 2% increase versus prices in July.

 

Outlook for China's broiler market has improved after Japan lifted its import ban. However, till date broiler exports from the Shandong area have yet to show signs of a significant growth. At the same time, the big release of broilers into the market following the SARS outbreak also curtailed the increase in broiler prices.

 

Following the improvement in the market for broiler exports, domestic broiler prices in the third quarter will also continue to increase. At present, breeding enterprises are actively replenishing their inventories of broiler day-old-chicks in preparation for the seasonal peak demand for broiler, thus leading to the tight supply in broiler chicks market. As a result, prices of broiler day-old-chicks are expected to rise continually for some time.