December 15, 2003

Analysis of China's Recent Egg Price Trend (December 15, 2003)

An eFeedLink Exclusive Report
 

China's egg prices generally increased this year. In September, egg prices rose from RMB4.60 per kg early in the month to RMB4.76 per kg by mid month, before returning to the month's early price of RMB4.60 per kg.

Moving into October, egg prices in various regions across China rose steadily, peaking in mid November at RMB5.20 per kg. After staying at a high for 50 days, egg prices fell slightly, although still remaining over RMB5.0 per kg. In recent weeks, egg prices have shown a modest rebound due in part to the peak consumption season prior to the forthcoming Chinese New Year holidays.

Analyzing the aforementioned egg price trend, the rising egg prices in early September was chiefly due to the outbreak of SARS earlier this year which has reduced the number of layers on hand across China. After the SARS epidemic, the demand for eggs began to rise continually and this led to a short-term supply shortage in the China market. Subsequently, unlike the past, the anticipated substantial price increase during the China's National Day holidays did not take place in early October this year, due mainly to a less than brisk tourism industry during the holidays, which have weakened market demand.

Moving into October, China's egg market began to show signs of improvement. Price hikes of agricultural products across the country have led to an increase in the prices of complete feed and raw materials for feed production, such as soymeal and corn. This increase in production costs of feed have in turn resulted in a corresponding rise in the cost of egg production, therefore driving up egg prices.

However, it should be noted that it was not the rising price of feed ingredients and complete feed that primarily caused the sustained increase in egg prices over 50 days from October to November. Instead it was due to the fact that demand for layers only picked up in June after the SARS outbreak was brought under control. This has influenced egg supply in the market. Since November, soymeal and corn prices have slipped while egg prices have continued rising. This evidently shows that market demand is the fundamental factor for the recent increase in egg prices.

With the Chinese New Year holidays approaching in late January, market demand for eggs will continue to increase. Based on an analysis of past years' market trends, there should be little fluctuation in price between December 2003 and January 2004. Taking a cue from present market conditions, China's egg prices should hover around the level of RMB5.0 per kg in the next two months. Overall, the egg market outlook in China remains favorable during the period.