Home / News / Livestock news / Bearish pork news floods China

Bearish pork news floods China

Kevin Roepke 02/28/2014 @ 9:04am Director of Trade Development for the US Grains Council--Beijing

BEIJING -- PRC, Bearish news continues to dominate the newswires in China.  Many pork producers continue to be constrained by negative margins as the industry grapples with oversupply.  Meanwhile, the poultry industry remains rocked by the H79N virus that has reportedly killed over 30 people.  This week, Huaying Agriculture, a large Chinese poultry integrator, reported a net loss of almost 1.3 million Yuan in 2014, citing consumer panic due to H7N9 as a major cause.  Likewise, Muyuan, a large swine integrator, reported an 8.6% reduction in profit for 2013 vs. 2012.  As a result, the company’s share price has fallen almost 20% in a week.  

Nevertheless, the market remains steadfast in monitoring the situation in China.  Will Chinese agriculture undergo the cliché hard landing? Or will it weather the storm and be cushioned by a soft landing that many pundits expect in a centrally controlled economy?

Many people will point to a flat or even decrease in total feed demand as a signal that producers are culling herds.  However, the same organizations concede that although complete feed demand is floundering, demand for concentrates is up, indicating that livestock producers are opting to mix their own feed in a bid to save costs anywhere possible.  That said, most end users admit the anticipated run-up in feed demand prior to Chinese New Year never came this year.

The NBS reports that despite overall food prices being up 3.7% YOY for the month of January, the retail price of pork — one of the mainstays in a Chinese diet — was down 4.3% indicating what many pork producers already are aware of: a poor operating environment.   According to New Monitoring, the national average live hog price is 12.24 Yuan/kg ($0.91 per pound).  Cheap palm oil will forever keep a cap on soyoil prices, which have remained stable at just over 11.2 RMB per liter for almost three months.

The seminal question that all of these figures imply: How will this ultimately translate to demand for feed products?  Despite all of this bearish news, China defies all logic and purchases over .5 million tons the final week of February.  A wall of soybeans was shipped this past week, amounting to over 1 million metric tons.  The market will eventually try to incentivize China to roll these purchases to new crop or arbitrage them out of South America.  Recent price quotes favor South American imports by 100-200 RMB per ton, but traders remain concerned with Brazilian logistic bottlenecks, reported to be around 50 days in Parana and 20 days in Santos.  Heavy rains are only expected to exacerbate the problems.  By now, everyone already knows the U.S. has sold over 100% of USDA’s projected soybean exports. Many market players are expecting Chinese buyers to chiefly switch over to Brazilian imports in mid March.


REFERENCE:  1 USD = 6.1 RMB

CancelPost Comment
MORE FROM KEVIN ROEPKE more +

China's Agriculture 'Waking… By: 05/09/2014 @ 9:03am Perhaps China agriculture may be awakening from the doldrums it’s been slumbering through for the…

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…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Confluence Project: Bioreactors