The year 1995 has been a bad one for China’s chickens.
Poultry farmers, unable to completely pass on soaring feed prices to consumers, have slaughtered as many as 30% of their billions of egg layers this year.
“The high feed prices have really disrupted the poultry business,” said Scott Reynolds, director of the U.S. Department of Agriculture’s Beijing trade office.
Reynolds wrote a recent USDA report on China’s poultry business.
Corn, which makes up some 65% of chicken feed, is the main price culprit. Changchun United Commodities Exchange recently quoted corn for September delivery at 1,600 to 1,700 yuan, about twice the price of a year ago.
Shanghai-listed poultry and livestock company Shanghai Dajiang (Group) Stock Co. Ltd. may be a corporate victim of rising grain prices.
Wu Jing, an official in the general manager’s office at Dajiang, expects 1995 profits to be just 10% higher than the 221.2 million yuan pre-tax profit earned last year, or less than the expected annual inflation rate of about 15%.
The fate of day-old chicks is one barometer of the crisis in China’s chicken coops. Reynolds’ report says the price of day-old chicks dropped from 5 to 7 yuan each a year ago for egg layers and broiler to about half a yuan at the end of last June.
“The bottom’s really dropped out of the market,” Reynolds said.
The fate of pigs is hardly brighter. The government has warned repeatedly in recent months that the price-easing flood of pork on the markets this year had more to do with the slaughter of non-viable pig stocks than an expansion of production.
The official People’s Daily recently reported that meat production in the first half of the year surged 18% to 22.3 million metric tons. Pork output was up 15.3% to 16.5 million tons.
Beijing does not want a shortage of livestock and poultry to translate into rises in food prices. Food items account for about half the basket of consumer goods used to track inflation.
China’s consumer price inflation was 21.5% in June, down from 24.1% at the start of the year.
The fate of many more chickens, pigs and other grain-feed livestock is likely to hinge on this year’s harvest. China is aiming to produce 455 million tons of grain, up from 444.6 million tons in 1994.
Reports in so far point to a good wheat and corn crop in central and northeastern China despite the usual localized floods and droughts. Rice output may also be higher than last year.
Even so, foreign and domestic grain traders doubt the corn price will fall far by the end of the year from current levels. At 1600 yuan per ton, China’s corn price is already 17% higher than U.S. corn per ton shipped to Chinese ports, USDA officials say.
According to USDA estimates, China has purchased 3.5 million tons of foreign corn for delivery this marketing year ending in September. That total excludes 100,000 tons China bought in the United States last year.
The USDA also expects wheat sales to rise from 10 million metric tons in the marketing year ending in July to 12 million tons this year.
U.S. experts say Chinese demand for grain imports--and therefore, domestic feed prices--will hinge on the weather proving favorable for the remaining grain growing months of the year.
Remaining livestock and poultry at companies such as Dajiang will hope that it’s rain that falls from the sky--and in the right places and the right time.