CHINA - Looking at the size of the breakdown of the inventory for April, 2013 - breeding stock was around 50.73 million sows, writes Ron Lane, Senior Consultant for Genesus China.
Total on farm inventory was around 437.40 million (as compared to March 2013-breeding stock was around 50.93 million (April is an decrease of 0.4 per cent from March) and total on farm inventory was around 434.36 million (April is up 0.7 per cent from March). The 437.40 million head for April is down 1.4 per cent from last year while the April sow inventory of 50.73 million is up 2.20 per cent from last year (year over year). Since October, 2012, there has been about a 7.2 per cent drop in total on farm inventory ( October 2012-total on farm inventory of 471.41 million head versus April, 2013 total on farm inventory of 437.40 million head), yet the sow inventory has remained quite flat ( 50.94 million sows in October, 2012 versus 50.73 million in April 2013). October 2012 born pigs should have come to market by now. The question becomes why is there still such a large drop of 34.01 million head for on farm inventory with almost the same number of sows? Some answers may lie in calculation errors for actual inventory, but the large difference is more likely caused by actual situations such as a large effect of some diseases (FMD, PRRS, PED and/or PCV2) or the replacement of backyard farms with modern farms has not improved overall pig performance. (Estimated annual market pig slaughter for 2012 is at 714.27 million head divided by about 50 million sows and we get about 14.29 pigs marketed/sow/year). Not very good reproductive, weaning and marketing performance. Other reasons and analyses may enlighten the readers of this report.
Profit margins are now showing negative returns, but have improved since our last report. At the end of April, the estimated national losses were around 139 RMB/market pig ($ 22.67 USD/market pig) (as compared to the end of March when losses were 260 RMB/head ($ 42.40 USD/head). As of January 9th, 2013, the profit margin was approaching 360 RMB/head-$58.71 USD/head marketed from a farrow to finish production unit. Average profit for 2012 was estimated at 177 RMB/ pig-$ 28.87 US.
What to watch for over the next few months!!!
This week, the pig to grain price ratio is 5.44:1 as compared to last Global Market Report (April 10th, 2013 with a 5.24:1 and with March 3rd with a 5.97:1) and as compared to (January 13th), when the ratio was at 7.52:1. From mid-November to mid-January, there was reasonable profitable returns and the ratio increased by a factor of 1 (6.53:1 versus 7.52:1). Since mid-January to current date, the pig to grain ratio has dropped from 7.52:1 to 5.44:1—even below 5.00:1 in April (a ratio of 6.00:1 is considered breakeven).
Market pig prices have continued to fall since the Spring Festival (early February). On 7 April, as the pig prices continued to stay low, the National Development and Reform Commission (NDRC) announced that they would purchase and store pork to help decrease supply and to stabilize the price of pork. More than 20 provinces are to buy pork to be frozen to assist farmers in reducing the cost of production losses. The NDRC on May 22nd, announced that national plans to control the market is gradually “emerging”, as the national hog prices have risen for 3 weeks and the downward trend has been curbed. (On April 30th, it was the lowest point in market pig prices since January 2011 and since Spring Festival in this year, the market price is down 18 per cent). With warmer temperature, consumers will eat less meat and the current price will either remain or dip slightly based on summer consumption patterns, well into August. Part of the NDRC plan includes an early warning of the market price of live pigs that will provide timely information to farmers so that they can adjust pig production during the cyclical price and production movements. As well, the NDRC will continue to purchase and store frozen pork into reserve to help control price fluctuations.
On May 24th, the average national corn price was 2.33 RMB/kg or $ 0.17US/lb. (compared to 2.27 RMB/kg ($0.168 USD/lb. in mid-April) and the average national wheat bran price was 2.09 or $0.15US/lb. (compared to 1.96 RMB/kg ($0.145 USD/lb. in April.). The retail price to farmers for soybean meal would be 4.18 RMB/kg or $0.682US/lb. as compared to 4.27 RMB/kg ($0 .316 USD/lb.) a month ago. The national average feed price for a market pig was 3.22 RMB/kg ($ 0.238 US/lb.) down from3.29 RMB/kg ($ 0.243 USD/lb.) in April. This is an increase of 5.9 per cent from last year. Corn price is up down 2.33 per cent, soybean meal is up 13.9 per cent and wheat bran is up 18.75 per cent from last year (year over year).
The Consumer Price Index (CPI) is quite interesting for the National Government. Rising food prices and especially increasing pork prices greatly affects the CPI. The CPI is made up of 30.49 per cent food found in the consumers’ basket. Pork is estimated to be about 1/3 of the food portion of the basket or in other words, about 8 to 10 per cent of CPI as a whole. Thus, with these calculations in mind, the price of pork in the entire CPI weighs between 2.5 per cent to 3 per cent. This level is much larger than the world's major pork producing and consuming countries, such as Japan (0.66 per centfactor), United States (0.34 per cent factor) and in Germany (0.71 per cent factor) on CPI. Currently, inflation was around 2.0 per cent for January, 3.2 per cent for February (a 10 month high), 2.1 per cent for March (March had been estimated to be around 2.5 per cent) and 2.4 per cent for April, 2013. The rising cost of vegetables was the main increase for CPI. Pork was further down in price (fell more than 5.5 per cent in March from a year ago). Lower consumption is mainly due to the reaction and fear of dead pigs floating in the Huangpu River and due to the bird flu risk and its effect on all meat consumption. These factors will lower the CPI.
China’s grain growing area will grow by 0.61 per cent from last year, according to survey of farmers conducted by MOA. Growing area for rice will increase by 0.8 per cent, corn by 1.22 per cent and wheat by 0.05 per cent. Soybean area will fall by 0.05 per cent. This area will increase by 46,667 hectares to 27.6 million hectares.
The import of soybeans for the first 4 months of 2013 into China has been lowered by 2.6 million tons to a level of 15.5 million tons. However, it is estimated that China’s imports will jump 19 per cent in May and June to 13 million tons from 10.9 million tons compared to last year.
Recently, reports have indicated another food safety issue concerning fake beef and mutton. Both beef and mutton wholesale prices were recently at 51 RMB/kg or $ 3.77US/lb. Wholesale poultry meat price from large chickens is at 13.7RMB/kg or $ 1.01 US/lb. and wholesale pork is 19 RMB/kg or $ 1.41US/lb. This means that even if the buyers purchase pork to make "fake" beef and mutton, they can instantly make the product more than doubled in price.
We have all heard about the recent purchase of Smithfield by the Shuanghui Group. The Shuanghui Group (Shineway products is common product name), one of the larger processing groups in China, plans to spend about 6 billion RMB (about 970 million USD) to construct new projects mainly in the North-east provinces (Heilongjiang, Jilin and Liaoning) and in Guangxi and Yunnan in the south region. The Chairman, Wan Long indicated that the Henan based company could slaughter 15.5 million market pigs this year (for a value of 62.5 billion RMB-10.1 billion USD) as compared to 10.3 million hogs in 2012. Will these domestic growth plans continue or be scaled down with the recent purchase? The sale of Smithfield was the number one topic of discussion at the World Pork Expo just held in Des Moines, Iowa.
|Genesus Global Market Report|
Prices for the week of June 3, 2013
(Liveweight a lb)
|USA (Iowa-Minnesota)||98.41 USD/lb carcass||72.82¢|
|Canada (Ontario)||1.79 CAD/kg carcass||63.96¢|
|Mexico (DF)||22.15 MXN/kg liveweight||78.63¢|
|Brazil (South Region)||2.59 BRL/kg liveweight||54.98¢|
|Russia||76 RUB/kg liveweight||$1.07|
|China||13.37 RMB/kg liveweight||98.90¢|
|Spain||1.36 EUR/kg liveweight||81.83¢|
|Viet Nam||40,000 VND/kg liveweight||86.37¢|
|South Korea||4,507 KRW/kg liveweight||$1.80|
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