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Cofco Says China Feed Demand May Slump on Economy (Update2) - Bloomberg.com
Cofco Says China Feed Demand May Slump on Economy (Update2)
By Helen Yuan and William Bi
March 10 (Bloomberg) --
China?s demand for corn and livestock feed, the world?s biggest, may decline this year as a slowing economy reduces meat consumption and outbreaks of animal disease crimp livestock production, Cofco Ltd. said.
Industrial demand for corn-based starch would also drop as paper-making plants close down, Yue Guojun, assistant president at the Beijing-based company, told reporters today. Cofco is the nation?s biggest producer of starch.
China?s economy expanded at the slowest pace in seven years in the fourth quarter as the financial crisis hurt exports and left millions unemployed. A slump in China?s animal feed consumption will slow its growth in soybeans imports and reduce its need to buy corn from overseas.
?Consumption will definitely fall,? said Wang Chen, manager of research at Wanda Futures Co. in Beijing. ?Our study shows the downstream demand for this year is pretty bad.? Corn and soybeans are the main ingredients used to make animal feed.
Increased outbreaks of animal diseases may prompt farmers to reduce their livestock and poultry inventory, Cofco?s Yue said. The risk of animal disease outbreaks, including bird flu and foot-and-mouth disease, is ?grave? this year, Chief Veterinarian Jia Youling said March 6.
To boost prices of agricultural products and rural incomes, the government is buying as much as 40 million metric tons of corn and 6 million tons of soybeans in the main growing region, China Grain Reserves Corp. said March 6.
The higher prices the reserve pays have helped maintain imports of soybeans at the same level as a year ago, which otherwise would have fallen, Wanda?s Wang said.
Market Impact
If the government decides to sell, it?ll have a big impact on the market, he said. Corn futures on the Dalian Commodity Exchange have lost 6.5 percent over the past year. The contract for September delivery fell 0.3 percent to close at 1,691 yuan ($247) a ton today. September-delivery soybeans fell 0.2 percent to 3,463 yuan a ton. The most active soybean contract has declined 22 percent in the past year.
China will raise minimum purchases prices of wheat and rice to benefit farmers and protect planting interest, Premier Wen Jiabao said last week.
Rather than setting floor prices, the government should boost direct subsidies, Cofco?s Yue said. Minimum prices have failed to help farming incomes and stockpiling is costly, he said.
Cofco, China?s biggest producer of citric acid and ethanol, processes about 5 million tons of corn annually, Yue said. Of that, about 3 million tons are made into starch and citric acid, while about 1.8 million tons are turned into ethanol, he said.
The company will focus on making ethanol and cellulose from its corn-processing business this year, Yue said. Cofco is in talks with overseas companies about technology development, he said.
To contact the reporters on this story:
Helen Yuan in Beijing at hyuan@bloomberg.net; William Bi in Beijing at wbi@bloomberg.net
Last Updated: March 10, 2009 06:09 EDT
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<cite cite="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aX0YAjoLiwq0">Cofco Says China Feed Demand May Slump on Economy (Update2) - Bloomberg.com</cite>By Helen Yuan and William Bi
March 10 (Bloomberg) --
China?s demand for corn and livestock feed, the world?s biggest, may decline this year as a slowing economy reduces meat consumption and outbreaks of animal disease crimp livestock production, Cofco Ltd. said.
Industrial demand for corn-based starch would also drop as paper-making plants close down, Yue Guojun, assistant president at the Beijing-based company, told reporters today. Cofco is the nation?s biggest producer of starch.
China?s economy expanded at the slowest pace in seven years in the fourth quarter as the financial crisis hurt exports and left millions unemployed. A slump in China?s animal feed consumption will slow its growth in soybeans imports and reduce its need to buy corn from overseas.
?Consumption will definitely fall,? said Wang Chen, manager of research at Wanda Futures Co. in Beijing. ?Our study shows the downstream demand for this year is pretty bad.? Corn and soybeans are the main ingredients used to make animal feed.
Increased outbreaks of animal diseases may prompt farmers to reduce their livestock and poultry inventory, Cofco?s Yue said. The risk of animal disease outbreaks, including bird flu and foot-and-mouth disease, is ?grave? this year, Chief Veterinarian Jia Youling said March 6.
To boost prices of agricultural products and rural incomes, the government is buying as much as 40 million metric tons of corn and 6 million tons of soybeans in the main growing region, China Grain Reserves Corp. said March 6.
The higher prices the reserve pays have helped maintain imports of soybeans at the same level as a year ago, which otherwise would have fallen, Wanda?s Wang said.
Market Impact
If the government decides to sell, it?ll have a big impact on the market, he said. Corn futures on the Dalian Commodity Exchange have lost 6.5 percent over the past year. The contract for September delivery fell 0.3 percent to close at 1,691 yuan ($247) a ton today. September-delivery soybeans fell 0.2 percent to 3,463 yuan a ton. The most active soybean contract has declined 22 percent in the past year.
China will raise minimum purchases prices of wheat and rice to benefit farmers and protect planting interest, Premier Wen Jiabao said last week.
Rather than setting floor prices, the government should boost direct subsidies, Cofco?s Yue said. Minimum prices have failed to help farming incomes and stockpiling is costly, he said.
Cofco, China?s biggest producer of citric acid and ethanol, processes about 5 million tons of corn annually, Yue said. Of that, about 3 million tons are made into starch and citric acid, while about 1.8 million tons are turned into ethanol, he said.
The company will focus on making ethanol and cellulose from its corn-processing business this year, Yue said. Cofco is in talks with overseas companies about technology development, he said.
To contact the reporters on this story:
Helen Yuan in Beijing at hyuan@bloomberg.net; William Bi in Beijing at wbi@bloomberg.net
Last Updated: March 10, 2009 06:09 EDT
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