December 16, 2011
China Feed Market Bi-Weekly Review: Low animal replenishment dampens feed consumption
An eFeedLink Exclusive
China's livestock and feed markets remained weak in early December, as low replenishment by farmers dampened animal inventory growth, limiting demand for feed despite falling feed ingredient costs.
Market Analysis
Hog inventory was mostly stable in the first half of December, with lower hog releases offsetting a decline in restocking interest.  Chilling weather spurred pork consumption in northern China, causing hog prices there to pick up first. By mid-December, southern hog prices in Guangdong, Guangxi, Fujian and Sichuan started to reverse earlier declines as food manufacturers ramped up cured meat production to cater for the upcoming Lunar New Year demand. Piglet prices began to stabilise by mid-December amid signs of a hog market rebound.
Layer inventory edged down over the month due to falling replenishment and higher culling rate. A sharp drop in temperatures hit layer productivity, causing total egg production to shrink. By mid-December, egg prices stabilised from early month's decline as consumption gradually recovered.
December broiler stocks remained large despite a rapid pace of releases. Slaughter plants and food processors stepped up broiler purchases in preparation for the upcoming festive season, sending broiler prices higher. Demand, however, slipped by mid-December but tightening broiler supplies prevented prices from falling. Meanwhile, hatcheries suffered huge losses due to plunging chick prices after restocking activities ended since early December.
Most aquaculture farms in southern region had ceased production amid frigid weather except in parts of Fujian, Yunnan, Guangdong and Hainan. Prices of aqua products started to rebound over the month due to dwindling market supplies.
In the ruminant sector, China's dairy production had entered its seasonal lull, leading to a drop in raw milk output. Supply of liquid milk slightly tightened while that of reconstituted milk climbed. In recent months, China's milk powder imports from New Zealand dipped as importers were holding off purchases in anticipation of a removal of import tariff agreed under a trade deal with New Zealand starting January. Meanwhile, winter demand for beef and mutton continued to rise, shoring up their prices in December.
Market forecast
In the near term, food processors and slaughterhouses are expected to rev up operations ahead of the Lunar New Year holiday, driving demand for various livestock products. On the other hand, feed millers are likely to begin new round of restocking soon, rendering support to feed grains and feed additives markets in the coming weeks.

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