CHINA - Looking at the size of the breakdown of the inventory for August 2013, breeding stock was around 50.73 million sows and total on farm inventory was around 451.94 million (as compared to July 2013-breeding stock was around 50.58 million and total on farm inventory was around 447.91 million (August is up 0.9 per cent from July, writes Ron Lane, Senior Consultant for Genesus China.
The 451.94 million head for August is up 0.5 per cent from last year while the August sow inventory of 50.73 million is up 0.90 per cent from last year (year over year). Although the sow number is stable (up 0.3 per cent from July but July was down 0.2 per cent from June, 2013), the actual farm inventory is not increasing through improved management. 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 positive returns. Recently, it was reported that profits for a farrow to finish operation was in the range from 71 RMB to 117 RMB/market pig ($ 11.60 USD to $19.12 USD/market pig). At the end of April, the estimated national losses were around 139 RMB/market pig ($ 22.72 USD/market pig) (as compared to the end of March when losses were 260 RMB/head ($ 42.49 USD/head). As of January 9th, 2013, the profit margin was approaching 360 RMB/head-$58.84 USD/head marketed from a farrow to finish production unit. Average profit for 2012 was estimated at 177 RMB/ pig-$ 28.93 USD/market pig.
What to watch for over the next few months!
At the end of September, the pig to grain price ratio was 6.53:1. This compares to the June monthly average of 5.76:1 and to the May monthly average of 5.28:1. (Other dates for comparison were: for 10 April, 2013 with a 5.24:1 and with 3 March with a 5.97:1 as compared to 13 January, when the ratio was at 7.52:1). From mid-November (2012) to mid-January (2013), there was reasonable profitable returns and the ratio increased by a factor of 1 (6.53:1 versus 7.52:1). Only in the past few months has the ratio of 6.00:1 considered breakeven been surpassed.
On 30 September, the average national corn price was 2.35 RMB/kg or $0.38 US/kg or 0.17US/lb. and the average national wheat bran price was 2.01RMB/kg or $0.33 US/kg or $0.15US/lb. The retail price to farmers for soybean meal would be 4.50 RMB/kg or $0.74 US/kg or $0.33US/lb. The national average feed price for a market pig was 3.31 RMB/kg ($ 0.54US/kg or $ 0.25 US/lb.).
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. CPI for China in July was 2.7 per cent and was 2.6 per cent in August.
China’s summer grain output has been estimated to be 131.89 million tons (1.96 million tons more than last year, an increase of 1.5 per cent). Summer rapeseed production was 13.48 million tons, 450,000 tons more than last year with an increase of 3.4 per cent over last year.
In the first half of 2013; pigs, sheep and poultry production yielded 39.16 million tons of meat, down 0.2 per cent from last year. Pork counted for 26.14 million tons of meat produced (an increase of 1.0 per cent and 66.75 per cent of the total supply). Total market pig slaughtered is about 342,110,000, an increase of 1.1 per cent from last year. It is estimated that in the third quarter, the national pig slaughter reached 173 million head, an increase of 0.6 per cent from last year. With this estimate, total pig slaughter for the first 9 months of 2013, would be around 515 million head.
In early September, the large private feed mills had used up their annual import permits for feed corn (2.88 million tonnes corn import quotas) and are now switching to US sorghum as an alternative. The current demand for US sorghum is pushing the prices to about 122.37 RMB ($ 20.00USD)/tonne higher than US corn prices. Currently, the Chinese feed mills have purchased about 800,000 tonnes of sorghum during the 2013/2014 crop year with a further estimate of a total of 1 million tonnes of sorghum being purchased and shipped from the USA during the next crop year.
Shuanghui International Holdings has become the world's largest pork supplier. Shuanghui will invest $ 4.7 USD billion in cash and with the assumption of Smithfield’s $ 2.4 USD billion debt load, the acquisition is worth a total of $ 7.1 billion USD. Reports indicate that Shuanghui International Holdings has plans to list the combined company in Hong Kong. It is speculated that a Hong Kong IPO, valued at around $4 billion, would allow the merged group to trade in a market that would place a higher valuation on the stock (Shuanghui is mainly listed on the Shenzhen exchange). Shuanghui could use the IPO to pay down its’ own debt.
The Henan Bureau of Statistics (Henan is a large pig production province in China) released a report that, during the first half of the current year, the Province had 42.094 million pigs on farm and that 30.299 million pigs had been slaughtered by June 30th. Interesting notes from their survey indicate that during the first half of 2013 and for the province's growing pig sold by large scale farms (about 50Kgs (110 lbs.), the selling price for this type of pig was 658.26 RMB ($ 107.58 USD), representing a decrease of 65.68 RMB ($10.73 USD), a decrease of 9.07 per cent from last year. The total cost of pig production to produce a market pig (about 100kgs.-220.4lbs.) that includes feed, services costs, labor and land costs compared to last year has significantly increased. Large scale farms show a total cost per head of 1605.03 RMB ($ 262.32 USD), up 72.33 RMB ($11.82 USD) more than last year, an increase of 4.72 per cent. (A county indicated some interesting cost changes from 2012. For example: the newborn animal feed cost was 611.89 RMB ($ 100.00USD- an increase of 76.7 per cent); electricity and coal (for heating) costs increased - resulting in increased fuel and power costs of 24.54 per cent); labor costs per pig increased to 105.22 RMB ($ 17.20USD/pig marketed, an increase of 4.87 per cent. During the first half of 2013, the daily wages of pig farm workers averaged 72.17 RMB ($ 11.80 USD), up 13.08 percent. In addition, the land lease prices show rising land costs of about 2.44 RMB ($0.40 USD), an increase of 39.43 per cent.
With notes from: the pigsite.com; feedtrade.com.cn; China Daily; Asian-agribiz.com; MOA; NBS; Bloomberg; soozhu.com and various Chinese Ministries.
|Genesus Global Market Report|
Prices for the week of September 23, 2013
(Liveweight a lb)
|USA (Iowa-Minnesota)||89.8 USD/lb carcass||66.45¢|
|Canada (Ontario)||181.84 CAD/kg carcass||61.48¢|
|Mexico (DF)||22.97 MXN/kg liveweight||79.14¢|
|Brazil (South Region)||3.6 BRL/kg liveweight||73.42¢|
|Russia||77 RUB/kg liveweight||$1.08|
|China||15.99 RMB/kg liveweight||$1.19|
|Spain||1.432 EUR/kg liveweight||87.85¢|
|Viet Nam||44000 VND/kg liveweight||94.65¢|
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