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

01 October 2021

China's huge livestock sector is facing a hike in feed costs as the country's worst power outages in years forces soybean crushing plants to close, diving down supplies and sending prices higher, analysts and industry participants said.

Reuters reports that the rise in feed costs comes at a bad time for China's farmers, many of whom are struggling with losses and weak margins due to low prices for hogs in particular.

At least half the soybean crushing plants in northern and northeastern China have been shut since last week and will stay closed until at least after the National Day holiday on 1 October, a plant manager and a feed purchase manager told Reuters, on condition of anonymity as they were not authorized to speak to media.

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

The volume of soybeans crushed nationwide this month fell by 9.4% from August to 7.68 million tonnes, said consultancy MySteel in a report on 30 September.

Soymeal prices in Tianjin, a major northern production hub, jumped by 220 yuan ($34) to 3,800 yuan per tonne in the last week, though prices have edged down slightly ahead of the National Day holiday.

Feed prices are already 10% up from a year ago, according to the Ministry of Agriculture and Rural Affairs.

Power generators were forced to limit supply to end users including oilseed crushers across large swathes of China because of tight coal supplies and soaring prices.

The electricity curbs have hurt production across a range of sectors, 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 supplies, pushing up prices.

Feed prices would likely go up further, said Friedrichs, adding an ongoing power shortage could also impact drying of the corn crop that has just begun harvesting.

Feed mills may have limited room to put up prices however, with many already facing declining sales volumes and struggling to get paid, said a manager at a manufacturer of livestock feed.

"We don't want to kill our customers. We'll wait until after the holiday to decide," he said.

($1=6.46 Chinese yuan renminbi)

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Source: Reuters



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