Despite China’s poultry demand being in decline due to the coronavirus outbreak, the sector itself is expanding their operations further, effectively reducing imports, which long had food security doubts due to the amount of foreign meat products coming in.
China is considered as the second biggest poultry producer in the world, and is expected to produce a record 14.85 million tonnes of chicken meat in 2020, according to the United States Department of Agriculture (USDA). This is a significant increase over last year’s 18% climb to 13.75 million tonnes, however this expansion only means that primary raw materials such as key feed grains (corn and soybeans), will be in higher demands, while poultry prices go on the decline.
According to Pan Chenjun, a senior analyst at Rabobank, the lowering of the prices had more to do with availability of supplies, more so than a decrease in demand. The expansion of the poultry sector will directly impact small-time poultry importers, as well as impact consumer confidence in imported goods. In fact; only a week ago, it was reported that chicken wings imported from Brazil to China was tested positive for Covid-19.
Industry giants such as Liaoning Wellhope Agri-Tech , Yum China KFC-supplier Fujian Sunner Development and C.P. from Thailand, already laid out expansion strategies to meet Beijing’s goal for more integrated food production. For example, Wellhope had already increased production by 36% last year, and continued on with that same pace up until the first half of 2020, as per the company filings.
German poultry equipment giant Big Dutchman is already at the helm of a massive expansion project, which will see the foundation of facilities that can house up to 1 billion more chickens. The project includes a 100 million-bird farm and slaughter complex for Shandong Xiantan and two 100 million-bird projects by top Chinese pork processor, the WH Group-owned Henan Shuanghui Investment and Development Co Ltd, due for completion by the end of 2021 and June 2022 respectively.
Shandong Fengxiang Co raised funds in a public share offering last month to finance a doubling of output from 101 million birds.
Unfortunately, the timing couldn’t have been any worse with corona outbreak, and a significant decline in poultry demand was observed, considering foodservice establishments, hotels and schools had to shut down a while back. Even after reopening, demands didn’t pick up by the desired pace of the companies
Wellhope noted that nationwide, chicken slaughter only increased by 4% in the first half of 2020, which is 8% lower than their pre-pandemic projections. “Now with the downward economic pressure and large imports, supplies are quite big, which is not very optimistic for demand and meat prices,” said Qiu Jiahui, Wellhope deputy president. Meanwhile, China’s pork production is getting back on track, faster than expected.
But Wellhope is playing the long game. They are banking on diet behaviours to switch more towards poultry on the long-term, due to the fact that there is greater awareness of what’s healthier and convenient. “Poultry (production and consumption) will increase very fast, as the young generation grows up with new consumption habits,” said Qiu.
A sustained period of elevated pork prices will be an added incentive for people to make a significant shift towards poultry consumption, said Pan, the Rabobank analyst. In the meantime, producers are working hard to trim production costs. Those not already using cages are returning to them, to maximise space and reduce labour cost and disease risk according to Walter Benz, president and managing director of China at Big Dutchman Group.
Source: https://www.devdiscourse.com/article/international/1172930-chinas-chicken-production-continues-to-surge-reducing-appetite-for-imports