Coronavirus hits China’s farms and food supply chain, with further spike in meat prices ahead
- Many farmers in China’s are unable to access animal feed due to lockdowns across the country, leading to fears for the future of the meat supply chain
- China has been forced to loosen restrictions of agriculture market access, amid fears of a further spike in food prices
On his farm in China’s Guangdong province, a chicken farmer named Chen is facing a race against time.
Chen, who wished only to give his family name, keeps around 60,000 chickens, and before the Lunar New Year holiday in January, he could have sold the birds for 20 yuan each (US$2.8). Now he says he will be lucky to get 2 yuan.
“Have you ever seen a chicken sold for 0.5 yuan per kilogram? That is what we are suffering now. Most markets are closed in Guangdong now, we have nobody to sell to if the markets are closed. However, chickens must be sold when they are 70-days old,” said Chen.
In an effort to contain the virus, China’s central and local governments have placed huge areas on lockdown, meaning people cannot come or go, nor can vehicles freely pass between counties and provinces.
While animal feed production resumed on February 10, the Ministry of Agriculture said, the logistics network is understaffed and faced with travel restrictions. This means farmers are struggling to feed their livestock, while many of the live and wet markets where they sell their animals or the slaughtered meat remain shut.
On Wednesday, the Ministry of Commerce warned that China’s agriculture and food industries will be “heavily impacted” if the coronavirus crisis persists. On the same day, Premier Li Keqiang told local governments to make sure farmers do not miss the grain planting season, despite the virus, because it “will have an impact on the economic foundation and social stability for the whole year”.
“Animal farms have big problems,” said Rosa Wang, an analyst at Shanghai-based agricultural data provider JCI China. “There has been a shortage of feed getting to regions due to transport and logistics issues. Farmers are feeding their animals cheaper corn and [distiller grains] just to keep them alive as they cannot get soybean meal. They also cannot sell their produce at the markets.”
“Even if a company can restart [trading], they’re dealing with upstream and downstream logistics,” said Darin Friedrichs, a grain and oilseed analyst in Beijing. “[Imports] are happening, but there's a shortage of drivers.”
It was reported earlier this week that thousands of containers of frozen meat are piling up at Chinese ports because the trucking network has effectively collapsed. Ports are running out of power points to keep the meat frozen, further stoking fears of damage to the food supply chain.
“This is obviously not good for our business, but I am more concerned about some of our customers, who appear to be in real trouble,” said the company director, who because of the sensitivity of the situation, preferred not to be named.
In the poultry sector, it is these hatcheries – where layer birds and eggs are cultivated – that could be at most risk, said Chenjun Pan, protein analyst at Rabobank.
“I believe hatcheries are threatened. If farms want to slow down, they could destroy eggs instead of destroying breeders,” she said, with the impact being that the population of chickens in China could be reduced over the coming months.
Pan said that food prices in China will probably spike again during the first quarter and possibly into next, following an eight-year high consumer inflation reading in January of 5.4 per cent.
Wang at JCI China, meanwhile, predicts a 2 million to 3 million metric tonne supply gap of soybeans in March, with crushers in the country slowly returning to operation, but still suffering from logistical problems.
“According to our contacts within the Chinese government, the likelihood of success on granting a request under this new process would be very high. We understand this is the basic approach adopted by China to meet its purchase commitment without formally repealing the retaliatory tariffs,” said Frank Pan, partner at Xin Bai Law in Shanghai.
Already, Bloomberg reported that Chinese buyers have bought at least two cargoes of sorghum and inquired about soybean purchases.
US food giant Tyson Foods said recently that its pork exports had been disrupted due to the virus, but said that its chicken exports remain on target.
“We have not redirected any of our current export chicken products from their intended destinations. We’re closely monitoring news of the coronavirus,” said Tyson spokeswoman Yang Hli. “In China, we have been working with the government and we have successfully restarted all of our operations.”
Additional reporting by Cissy Zhou
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