December 15, 2008
China Livestock Market Weekly Review: Livestock industry weighed down by uncertainties


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Market analysis


Hog prices continued to climb during the week in review. Broiler prices fluctuated in northern China and fell in southern China.


Weakened corn demand and farmers' haste to release their corn led to lower corn prices. Soymeal prices fell before rising towards the end of the week. Prices of rapeseed meal and cottonseed meal continued to fall while the ascent of fishmeal prices was restricted.



Market forecast: Volatile situations to affect feed and livestock prices


Feed prices


Prices of feed raw materials are seen to fall further.

As corn demand has entered into its traditional off peak season, supplies will exceed demand and lead to lower prices.

Tight soymeal supplies will enable prices to stabilize or fall at lower pace.

Prices of rapeseed meal and cottonseed meal will weaken further while fishmeal trade will decline.


Livestock prices 


The average hog price rose during the week, but some regions reported price falls. This is because, while some farmers were holding back on releases in anticipation of a price leap prior to the Lunar New Year in January next year, other farmers were eager to release even their underweight hogs in order to take profits soonest.

As Guangdong has ceased to be the price leader for hog prices, it would be difficult for us to assess the price trend in the near-term as hog prices in different regions will be influenced by the unique situations in each region.

These situations include hog releases, spending propensity, consumption of factory workers who returned to their home villages after losing their jobs in the cities and cross-province trade.

However, as these factors are extremely volatile, any price change will not persist for a long period of time.

Hence, despite the rise of hog prices for the 4th consecutive week, backyard farmers and commercial sow farms were still reluctant to replenish actively as they were unsure of the market situation in the near-term.

Broiler prices in northern China started to fluctuate again after recovering slightly during the previous week. Meanwhile, broiler prices in southern China maintained its downward descent amid weak replenishment.

Broiler inventories are not especially high at present and slaughtering volume is much lower compared to what was attained during the peak slaughtering period. These indicate that lower broiler prices are indeed caused by weaker consumption.

Some reasons for the dip in broiler consumption include high broiler retail prices, lower pork prices and the traditional off-peak period for broiler consumption during the cold winter months. In addition, weaken economic activity in China that led to the collapse of factories and the early return of factory workers to their home villages may have also contributed to lower broiler consumption.

On December 10, China Premier Wen Jiabao announced the increase of subsidies for farming equipments. The government will support labour-intensive industries, stabilise the employment of farmers and to provide aid to former factory workers who wish to have a career change now that they have lost their jobs in the cities. These measures indicate that the Chinese government is acknowledging the fact that many factory workers have been badly hit in the on-going global economic crisis.

However, the measures above will not enable former factory workers to earn as much income as before. Coupled with low animal rearing profits for the past few months, many former factory workers are reluctant to take up farming activity.  

There could be an increase of farmers attracted into livestock rearing should animal rearing profits improve next year. However, even this may not be a piece of good news for China's livestock industry.

Like with other economic sectors, the livestock industry is gripped by uncertainties and it is difficult to make an accurate assessment of its direction.

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