China's farmers face more pain as power crunch drives up feed costs

[BEIJING] China's huge livestock sector is facing a hike in feed costs, just as they grapple with crippling farming losses, said analysts and industry participants, after the country's worst power outages in years hit production of key ingredients.

Crushers turn soybeans into soymeal, a critical protein in feed for pigs, chickens and fish.

At least half the soybean crushing plants in northern and north-eastern China have been shut since last week and will stay closed until at least after the National Day holiday, a plant manager and a feed purchase manager told Reuters, on condition of anonymity as they were not authorised to speak to media.

Soymeal prices in Tianjin, a major northern production hub, jumped by 220 yuan (S$46.30) to 3,800 yuan per tonne in the last week, though prices have edged down slightly ahead of the holiday, which starts on Oct 1.

The increase comes as farmers are already struggling with falling hog prices, already under pressure from higher production as stocks are rebuilt after the deadly African swine fever disease decimated the massive pig herd.

"Right now, pig farmers are being squeezed on each end. The price for hogs is incredibly low and demand is weak, at the same time the price for soybean meal and feed is rising," said Darin Friedrichs, senior Asia commodity analyst at StoneX.

The plant closures come after power generators limited supply to end users across large swathes of China, because of tight coal supplies and soaring prices.

The electricity curbs have hurt production, prompting many analysts to downgrade the outlook for growth in the world's second-largest economy.

With so many plants closed, feed makers who combine the soymeal with corn and other ingredients have rushed to source sufficient supplies, pushing up prices.

A dozen major feed producers lifted feed prices in several regions this week, media said.

Feed prices are already 10 per cent up from a year ago, according to the Ministry of Agriculture and Rural Affairs, while live hog prices are at their lowest in more than two years.

Pig farmers lost more than 500 yuan per hog last month, the ministry said, and margins have dropped further since.

REUTERS