December 1, 2008
China Livestock Market Weekly Review: Near-term prices of feed raw materials and livestock unlikely to pick up in China


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Market analysis


Hog prices rose during the week in review while prices of broilers and eggs fell.


Corn prices remained weak - prices in southern China and in the provinces to the east of Sichuan registered significant falls.


Prices of soymeal, cottonseed meal and rapeseed meal fell further while fishmeal prices climbed with higher import prices. 


Market forecast: Prices of feed and livestock will fall further


Feed prices


Prices of feed raw materials will weaken further.


A gloomy outlook for the feed and starch industries will limit corn demand and would drive corn prices lower.


Trade for soymeal, cottonseed meal and rapeseed meal is expected to be weak, therefore affecting the prices for these protein meals.


Fishmeal prices will likely increase amid higher import prices.


Livestock prices 


Hog prices improved in the past week.


Demand for pork increased in the southern provinces as the locals started to prepare wax meat with the arrival of winter.


At the same time, many workers have left Guangdong and many coastal regions to return to their home villages with the closure of many factories amid weakened economic activity in the region. Hence, while pork demand fell in Guangdong and the coastal regions, demand for pork was higher in the main hog rearing provinces.


This situation is similar to the scenarios in the Lunar New Year period in previous years whereby factory workers returned home to the villages to celebrate the festival with their families. This time round however, the return of the factory workers to the villages may not be a good thing in the long run.


These workers earned more in the cities and were therefore able to afford to consume more meat in the cities. This had enabled China's meat consumption to increase in the past few years. However, should the current economic situation led these workers to stay in the villages for a prolonged period of time, they would not be able to afford to consume as much meat products as they could when they were working in the cities. This will affect the nation's meat consumption and dent China's livestock and feed sectors.


Hence, despite higher hog prices in the past week, hog farmers remained pessimistic about the market outlook and held back on piglet replenishment. Lower demand for piglets placed pressure on commericla sow farms. These farms thus resorted to eliminating a bigger volume of sows so as to avoid potential losses. This trend will likely persist for the next few weeks.


Broiler prices fell further during the past week. The poor sale of broiler meat products led slaughterhouses to ask for lower prices for their supplies, therefore causing broiler prices to fall.


In addition, despite lower wholesale prices for broiler products, retail prices stayed high. Retailers had maintained firm prices for broiler products in a bid to maintain a certain level of profitability. However, as it is currently the lull period for broiler consumption, high retail prices had impacted broiler sales further.


The early return of factory workers to their home villages had also affected the overall broiler consumption in China.


Lacklustre demand for broiler products and lower broiler prices have caused broiler farmers to incur losses during the past week. Broiler replenishment is therefore seen weaker in the near-term.
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