| BEIJING, March 3
BEIJING, March 3 A fresh outbreak of bird flu
and tumbling pork prices are undermining China's demand for
animal feed, adding to a glut of corn and potentially prolonging
a dispute over GMO material that has curbed U.S. imports.
A crackdown by China on an unapproved strain of genetically
modified corn detected in some U.S. shipments has led to the
rejection of up to 1 million tonnes and weighed on prices.
China says the shipments were rejected because of the yet
unapproved GMO strain, but trade sources say the clampdown is
being used to shield farmers from the supply glut and weak
prices, raising concerns Chinese authorities may drag out the
A new bird flu outbreak in southern Guangdong province in
January forced chicken farms to scale back on restocking,
following huge losses last year after the culling of millions of
"Broilers, ducks and egg layers, these three businesses have
kept losing money in the past year. It hasn't recovered and it
is getting worse," said Jin Weidong, Chairman of Wellhope
Agri-Tech Co. Ltd, one of China's top ten feed companies.
"We're not so optimistic about this year. It will be very
difficult to grow volumes, it will be a very challenging year."
Animal feed makes up about 60 percent of China's corn usage,
and half of that is for poultry feed, output of which fell 8
percent in 2013. Overall corn use fell to 186 million tonnes,
the first decline in four years.
The agriculture ministry has said outbreaks of bird flu have
caused 20 billion yuan ($3.3 billion) of losses to poultry
breeders so far this year, compared with 60 billion yuan of
losses in the first half of last year.
"The situation is definitely worse than last year. Many
chicken farms are having cash-flow problems. Restocking is very
bad," said Wang Xiaoyue, an analyst at Beijing Orient
Agri-business Consultant Co. Ltd.
At the same time, falling pork prices are pushing many small
household pig breeders - also major consumers of animal feed -
out of business.
China's hog stocks hit a 10-month low in January, said the
China National Grain and Oils Information Centre.
Beijing has begun to stockpile local pork after prices fell
to an eight-month low, but analysts say the amount being
stockpiled is too small to lift prices.
"Demand from pig breeding may be weakening in coming months
if farmers begin a large-scale cull of breeding sows because of
negative margins," said an industry analyst.
For the 2013/14 crop year, China's corn demand may grow only
moderately or hold flat, said an analyst with an official
think-tank, who declined to be identified. He pointed not just
to the impact of bird flu but also a sluggish processing
industry, which makes products such as corn starch, alcohol and
Weak domestic demand has led farmers to sell more of their
corn to the government, which is expected to add more than 50
million tonnes to existing stockpiles by end-April from 2013's
record 217.7 million tonne harvest.
Along with 30 million tonnes already in storage, the
government's total stocks would be more than the combined output
of the European Union, accounting for 43 percent of annual
"The government is facing huge pressure to deal with these
large stocks, which can take a year, or even two to three years,
for the market to digest," said the analyst with the think-tank.
Chinese buyers flocked last year to fill the country's quota
for low-tariff imports of cheap U.S. corn following a bumper
harvest, sparking forecasts of higher imports in 2014.
But the official rejection of 887,000 tonnes of U.S. corn
since November last year after the discovery of Syngenta AG's
MIR-162 strain - not yet approved in China - led to
other shipments being cancelled or diverted as exporters
scrambled to avoid having cargoes caught up by the row. The
total volume rejected to date may have reached a million tonnes,
industry sources said.
Analysts expecting more cancellations have revised down
forecasts for China's imports in the current marketing year to
just 4 million tonnes, from 5 million tonnes estimated by the
U.S. Department of Agriculture.
($1 = 6.0984 yuan)
(Additional reporting by Dominique Patton; Editing by Richard