Attention: Feed price hikes are likely to become the new normal, and sentiment around restocking in Q4 is unlikely to improve significantly. So, how will the frozen product market perform?

Release date:

2021-10-09

In 2021, the poultry industry faced mounting challenges due to rising feed原料 prices. Domestically, factors such as flood disasters, ongoing pandemics, and power restrictions limiting production capacity further exacerbated the situation. Meanwhile, globally, disruptions in raw material supplies—caused by adverse weather conditions, health crises, and logistical issues—continued to drive up feed costs, placing additional pressure on poultry producers during the third quarter. During the third quarter, broiler chicken prices remained relatively stable, showing slight upward momentum from July to August, hovering between 3.9 and 4.2 yuan per kilogram. However, starting in late August, broiler prices experienced a sharp decline, while downstream product prices failed to follow suit despite the typically strong seasonal demand period. On one hand, the resurgence of COVID-19 cases in regions like Jiangsu and Fujian once again dampened dining-out activities, leading to weaker-than-expected consumption during back-to-school season and major holidays. This resulted in subdued demand across the entire foodservice sector. On the other hand, the unexpectedly rapid drop in hog prices also curbed the substitution demand for chicken meat over pork, further weighing on chicken consumption. As of September 24, live hog prices had plummeted from 16 yuan/kg to around 11.2 yuan/kg, severely impacting consumer spending on alternative meats—and chicken was among the first to feel the pinch. Currently, multiple segments of the white-feathered broiler supply chain are struggling financially, with many operators reporting losses. For instance, slaughterhouses are grappling with sluggish sales, resulting in an inventory utilization rate as high as 83%, the highest level recorded in nearly four years. Some facilities have already reached full capacity, leaving little room for additional stock. Notably, the significant expansion of slaughterhouse capacity earlier this year initially helped support broiler prices—but now, with terminal demand failing to keep pace, the industry is facing an oversupply situation. Feed price hikes are expected to become the new normal. Recently, several feed manufacturers announced price increases ranging from 50 to 150 yuan per ton, driven by the latest surge in feed原料 costs. Moreover, widespread power restrictions in 12 provinces—including Guangdong, Jiangsu, and Shandong—have further pushed up production costs for feed companies. A few days ago, more than ten leading feed firms, including Tongwei, New Hope, Sichuan Zhengpeng, Jingzhou Oriental Hope, and others, announced price hikes of 50–150 yuan per ton for pig, chicken, duck, and aquaculture feeds, citing the need to maintain product quality amid soaring raw material costs. Adding to these pressures, some slaughterhouses have been forced to halt operations or reduce electricity usage under the "dual control of energy consumption" policy, intensifying financial strain on the industry. In the short term, power cuts and plant shutdowns have reduced demand for live chickens, putting downward pressure on broiler prices. However, in the long run, this early release of price lows could accelerate the industry’s natural consolidation process, weeding out less competitive players. It’s worth noting that currently, 12 provinces across China have been forced to implement rolling blackouts and power rationing due to energy consumption targets, insufficient power supply, and stringent environmental regulations aimed at curbing industrial output. According to the National Development and Reform Commission’s “First-Half 2021 Regional Energy Consumption Dual Control Performance Report,” nine provinces—namely Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi, and Jiangsu—experienced an increase in energy intensity rather than a reduction, triggering a Level 1 alert. Additionally, ten provinces—Zhejiang, Henan, Gansu, Sichuan, Anhui, Guizhou, Shanxi, Heilongjiang, Liaoning, and Jiangxi—failed to meet their energy intensity reduction targets, earning them a Level 2 warning. Key Power Restriction Announcements in Major Aquaculture Provinces: Guangdong: On September 16, Guangdong Power Grid announced the implementation of a “two-on, five-off” power usage schedule starting September 16. Under this plan, power would be staggered every Sunday, Monday, Tuesday, Wednesday, and Thursday, with only essential security loads maintained on off-peak days. Security loads were capped at below 15% of total consumption. Shandong: Due to coal shortages and severe electricity shortages across the province, Shandong has initiated mandatory power rationing measures. Jiangsu: At the beginning of September, the Jiangsu Provincial Department of Industry and Information Technology issued directives mandating comprehensive energy audits for enterprises consuming more than 50,000 tons of standard coal annually. These audits, covering 323 large-scale energy users and 29 high-energy-consuming projects across the province, have now fully kicked off. Guangxi: Guangxi recently introduced stricter dual-control policies, requiring all high-energy-consuming industries—such as electrolytic aluminum, alumina, steel, and cement—to cut production starting in September. The province has also set specific reduction targets for each sector. Sichuan: Non-essential production, lighting, and office operations have been temporarily suspended to conserve energy. Fourth Quarter Outlook for Poultry Meat Overall, considering the seasonal decline in chicken meat demand following the National Day holiday, coupled with the recent impact of slaughterhouse shutdowns and power restrictions on broiler prices, market volatility is expected to intensify in the near term. Broiler prices are likely to hit a temporary low in October before gradually rebounding during November and December. However, given persistently weak downstream demand and elevated supply levels, the overall price range for broilers in the fourth quarter is anticipated to trend lower compared to previous quarters. As for chick prices, high feed costs are likely to keep farmers cautious about expanding their flocks in the fourth quarter. Consequently, chick supply is expected to remain volatile and relatively weak. Meanwhile, with increased supply entering the market but tepid consumer demand, prices for finished poultry products are unlikely to improve significantly.

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