Home / News / Business news / China's Agriculture 'Waking Up'

China's Agriculture 'Waking Up'

Kevin Roepke 05/09/2014 @ 9:21am Director of Trade Development for the US Grains Council--Beijing

Perhaps China agriculture may be awakening from the doldrums it’s been slumbering through for the past year. Swine operators are frustrated as hog margins are significantly in the red, yet their access to cheaper, imported feedstuffs — namely corn and DDGS — continues to remain constrained, as the MIR situation has yet to achieve a resolution. 

That said, swine margins are historically as cyclical as the seasons and are due for a turnaround. Pig prices appear to have bottomed as the NDRC recently announced its second round of pork purchases to inject some life into the sluggish hog market. Additionally, according to one Chinese reporting agency — Boyar — swine and sow herds are at their lowest level in over three years. 

Nevertheless, pig slaughter numbers remain relatively high, given the economic conditions — leading one to conclude that the poor margin environment took its toll on thinning out more of China’s least efficient producers. This may have only further advanced China’s rapid swine modernization and may be the start of China’s swine comeback.    

Reports are coming in of pig sales of over an entire RMB per kilo more than before the government purchases. Interestingly enough, Chinese hog producers act almost exactly opposite U.S. producers.  In times of low prices, Chinese hog producers opt to carry their hogs to higher weights hoping for a turnaround in prices. 

At these higher weights, a pig is at the top of its growth curve and thusly a farmer’s FCR is greatly impacted.  As a result, losses are compounded and even more difficult to recover from. In the U.S., producers opt to carry hogs to heavier weights when the market is good.  

Rabobank recently issued a report stating that Chinese feed demand could be “dampened” in the medium-term due to efficiency gains in China’s FCR. Currently, the report claims, Chinese swine FCRs are around 3.2:1 vs. European farms of 2.5. With technology transfer and industrial modernization, one can expect China’s FCR to improve and the industry to improve its efficiency. Therefore, total feed demand will be suppressed despite an increase in demand for meat.    

Planting progress in the northeast part of the country appears to be about a month ahead of last year, which was around two weeks late all year, due to poor weather. This would be close to the pace set in 2012. The US Grains Council will conduct its yearly spring planting and emergence tour in northeast China later this month. This tour is expected to shed some light on the extent of the areas of rapidly expanding corn area — especially in soybean areas. 

CancelPost Comment

China Continues Importing U.S. DDGS By: 04/29/2014 @ 9:06am Despite erratic and hectic railcar availability and otherwise poor logistics reliability, DDGS…

U.S. Grains Council Defends GMO Corn to By: 03/31/2014 @ 10:24am This past week, almost 800 of China’s largest and most influential feedstuff traders, end users…

Recent Ag Shock Waves in China By: 03/14/2014 @ 10:45am This week’s WASDE wasn’t the only thing that sent shock waves throughout China.  For the past…

This container should display a .swf file. If not, you may need to upgrade your Flash player.
Successful Marketing Newsletter