China's poultry, egg prices dip under inventory pressure

SHANGHAI, May 27 (Reuters) - China’s poultry and egg prices have come under pressure in recent weeks, with egg prices falling to multi-year lows, as inventories rise amid slow demand.

Egg futures prices on the Dalian Commodity Exchange have slumped in recent weeks to trade at historic lows, a sharp fall from its three-year high in October.

Futures were on course for their sharpest monthly loss, with the June delivery contract down 14% so far this month. On Wednesday, it was last down 2.3% at 2,641 yuan ($368.92) per tonne.

“Because of African swine fever, poultry and egg inventories rose significantly last year... Many producers entered the market. However, now consumption is affected by the coronavirus since Chinese New Year,” said Lin Qing, an agriculture analyst at Junrui Futures.

“Egg inventories will be high throughout the year, so prices will be on the low side. Upcoming holidays like the Dragon Boat Festival (in June) and the Mid-Autumn Festival (in October) will boost prices, but not significantly.”

China’s poultry production expanded by 12% last year to 22.39 million tonnes, as farmers sought to plug the gap from the pork shortage caused by African swine fever that ravaged the domestic hog herd.

Retail and wholesale prices for eggs in May also fell to its lowest since July-August 2017, while chicken retail and wholesale prices dipped to its lowest since July-August 2019, according to data from China’s agriculture ministry.

While poultry and egg demand has picked up, consumption has yet to return to levels seen before the coronavirus outbreak despite China’s easing measures to contain the virus, as many cafeterias, catering services or public events aren’t back yet, said Darin Friedrichs, senior Asia commodity analyst at brokerage INTL FCStone.

“There’s also been swings in pork and hog prices recently, and those cycles are spilling over into the poultry market. Pork (prices) have been weak lately due to high imports, weaker demand, and also farmers selling because they’re nervous about price declines.”

Pork prices in China PORK-CN-TOT-D have fallen 26% since February. ($1 = 7.1588 Chinese yuan renminbi)

Reporting by Emily Chow; Editing by Simon Cameron-Moore