Lunar New Year Begins After Food and Weather Challenges
China
Lunar New Year Begins After Food and Weather Challenges
The Lunar New Year holiday got underway this week after months of rising food prices, and the worst winter snowstorms in 50 years. The storms exacerbated the annual challenge of moving large volumes of food around the country at a time of peak demand. A break in the weather, however, and improved emergency response by the central and local governments suggest that a normal – albeit abnormally cold – Chinese New Year is in store for most of China’s 1.3 billion residents.
The Ministry of Agriculture reported about 4.777 million livestock (including poultry) died due to rain and snow, a direct economic loss of 190 million yuan ($26.43 million). More than 8.9 million acres of farmland – mostly vegetable, wheat and rapeseed acreage in eastern and central China – sustained major damage. Total losses to date are estimated at $3 billion, although economists suggest the storm’s impact on the overall economy this year will be small.
Despite the storm’s disruption of travel plans for tens of millions of urban migrants who return to their rural homes over the holidays, food supplies in major cities are ample, according to USMEF-China. Government price controls have prevented speculative retail movement in staples such as pork, although vegetable prices rose sharply in the last 10 days. Local and provincial officials appear to have mobilized increased supplies of local hogs for such major urban markets as Beijing, Hong Kong and Guangzhou.
Large volumes of U.S. pork purchased for the strategic reserve late last year have been released onto local markets. USMEF Northeast China Merchandiser Louisa Liu reports that a sizeable volume of U.S. pork has been purchased through recent pork reserve bidding for distribution into urban markets in northeast China.
According to USMEF Senior Representative North China Donald Song, China’s pork strategic reserve consists of live hogs and frozen pork. Under the live hog reserve system, national government entities make minimal annual payments to select hog farms who agree to sell live hogs to the government in time of need. In the past, China’s strategic pork reserve consisted mostly of frozen carcasses, but the government has incurred losses due to carcass deterioration when stored over long periods.
Despite international media focus on China’s food and pork inflation problems, better times may be ahead, at least for those raising hogs. According to Chinese livestock officials, the increase in breeding sows from December 2006 to December 2007 was 9.4 percent. China’s hog herd is expanding as producers take advantage of profits as high as $50-$60 per head. China has paid out per-head subsidies for 47 million sows and distributed hundreds of millions of doses of PRRS vaccine, and higher hog and pork prices from September 2007 have stimulated farmers to raise more hogs. Recent estimates by China’s Ministry of Agriculture suggest China’s hog herd may be up to 6 percent larger than year-ago levels. With some local exceptions, hog prices largely remained stable during the pre-holiday nationwide food shopping spree, an important sign of market stability.
Despite the Chinese government’s price controls and monitoring, food prices have risen. According to government figures, the average retail price of lean pork meat (high quality meat) increased by 4.53 percent over the previous month in 36 large and medium sized cities in China. The average retail price of boneless beef and lamb increased by 9.51 percent and 4.36 percent respectively, and the rate of increase was probably slowed by price controls). The average retail price of 15 vegetables increased by 5.21 percent. The price of cooking oil and peanut oil also climbed.
Feed prices remain high, with cash corn selling for the equivalent of $6.28 per bushel last week in Shandong Province, a major hog-raising area. Hog and pork prices remain at high levels as well. Live market hogs last week in the same province traded at $106 per cwt, 250 percent above current U.S. live hog prices. PRRS outbreaks are still being reported in several provinces, discouraging hog-raising despite high prices. The slow march of the Chinese currency appreciation – another record high against the U.S. dollar was recorded yesterday – has hurt pork exporting, which has become a major export activity for large processors. Chinese pork exports in 2007 declined 36 percent in volume from 2006 to approximately 270,000 metric tons. Pork supplies are expected to ease and prices to stay high till the latter part of 2008.
China
Lunar New Year Begins After Food and Weather Challenges
The Lunar New Year holiday got underway this week after months of rising food prices, and the worst winter snowstorms in 50 years. The storms exacerbated the annual challenge of moving large volumes of food around the country at a time of peak demand. A break in the weather, however, and improved emergency response by the central and local governments suggest that a normal – albeit abnormally cold – Chinese New Year is in store for most of China’s 1.3 billion residents.
The Ministry of Agriculture reported about 4.777 million livestock (including poultry) died due to rain and snow, a direct economic loss of 190 million yuan ($26.43 million). More than 8.9 million acres of farmland – mostly vegetable, wheat and rapeseed acreage in eastern and central China – sustained major damage. Total losses to date are estimated at $3 billion, although economists suggest the storm’s impact on the overall economy this year will be small.
Despite the storm’s disruption of travel plans for tens of millions of urban migrants who return to their rural homes over the holidays, food supplies in major cities are ample, according to USMEF-China. Government price controls have prevented speculative retail movement in staples such as pork, although vegetable prices rose sharply in the last 10 days. Local and provincial officials appear to have mobilized increased supplies of local hogs for such major urban markets as Beijing, Hong Kong and Guangzhou.
Large volumes of U.S. pork purchased for the strategic reserve late last year have been released onto local markets. USMEF Northeast China Merchandiser Louisa Liu reports that a sizeable volume of U.S. pork has been purchased through recent pork reserve bidding for distribution into urban markets in northeast China.
According to USMEF Senior Representative North China Donald Song, China’s pork strategic reserve consists of live hogs and frozen pork. Under the live hog reserve system, national government entities make minimal annual payments to select hog farms who agree to sell live hogs to the government in time of need. In the past, China’s strategic pork reserve consisted mostly of frozen carcasses, but the government has incurred losses due to carcass deterioration when stored over long periods.
Despite international media focus on China’s food and pork inflation problems, better times may be ahead, at least for those raising hogs. According to Chinese livestock officials, the increase in breeding sows from December 2006 to December 2007 was 9.4 percent. China’s hog herd is expanding as producers take advantage of profits as high as $50-$60 per head. China has paid out per-head subsidies for 47 million sows and distributed hundreds of millions of doses of PRRS vaccine, and higher hog and pork prices from September 2007 have stimulated farmers to raise more hogs. Recent estimates by China’s Ministry of Agriculture suggest China’s hog herd may be up to 6 percent larger than year-ago levels. With some local exceptions, hog prices largely remained stable during the pre-holiday nationwide food shopping spree, an important sign of market stability.
Despite the Chinese government’s price controls and monitoring, food prices have risen. According to government figures, the average retail price of lean pork meat (high quality meat) increased by 4.53 percent over the previous month in 36 large and medium sized cities in China. The average retail price of boneless beef and lamb increased by 9.51 percent and 4.36 percent respectively, and the rate of increase was probably slowed by price controls). The average retail price of 15 vegetables increased by 5.21 percent. The price of cooking oil and peanut oil also climbed.
Feed prices remain high, with cash corn selling for the equivalent of $6.28 per bushel last week in Shandong Province, a major hog-raising area. Hog and pork prices remain at high levels as well. Live market hogs last week in the same province traded at $106 per cwt, 250 percent above current U.S. live hog prices. PRRS outbreaks are still being reported in several provinces, discouraging hog-raising despite high prices. The slow march of the Chinese currency appreciation – another record high against the U.S. dollar was recorded yesterday – has hurt pork exporting, which has become a major export activity for large processors. Chinese pork exports in 2007 declined 36 percent in volume from 2006 to approximately 270,000 metric tons. Pork supplies are expected to ease and prices to stay high till the latter part of 2008.