China-Demand for Pork.
CHINA-DEMAND FOR PORK.
Demand for meat and animal feed in China, the world’s biggest pork producer and consumer, has been cut by the financial crisis as rural residents reduce protein consumption to save money, said Sichuan New Hope Group.
"We thought agriculture products would be spared from the financial crisis: we were wrong," said Liu Yonghao, chairman of Sichuan New Hope, China’s biggest integrated livestock producer.
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. Such layoffs have sent about 20 million farmers-turned-workers back to the countryside, spurring government concerns about falling incomes and civil unrest.
"Declining income will definitely have an impact on food consumption, especially for meat and meat products," Takaki Shigemoto, an analyst at commodity broker Okachi & Co. in Tokyo. "This is a negative factor on grains and meat prices in the long term."
The number of rural residents affected by the financial crisis is more than 60 million, said Liu, who was ranked as China’s fourth richest man by Forbes Asia’s October rankings. These people will consume less meat, less dairy and fewer eggs, Liu said, adding his company had recommended the government issue food coupons to farmers.
"When we get any numbers to confirm this decline, it will be a significant blow to the market," Shigemoto said.
Chinese manufacturers shed jobs in January at the fastest pace since a survey of such activity began 2004, according to the CLSA China Purchasing Managers’ Index.
Unemployment Rises
To aid in easing unemployment, Sichuan New Hope is planning to hire 5,000 new workers, said Liu, who was speaking to reporters at the annual meeting of the Chinese legislature’s advisory body today.
Lower meat consumption may impact Chinese pork producers already suffering from falling prices, which have led the government to consider limiting imports, boosting exports, and providing subsidies to farmers and meat processors.
Chinese pork imports may fall as much as 25 percent this year to 360,000 metric tons as domestic production increases about 3 percent, the U.S. Foreign Agricultural Service said in January.
Still, Liu said sales in 2009 would rise 22 percent from last year to 55 billion yuan ($8 billion). Liu did not elaborate whether the forecast was for the group or the company. The company had revenue of 4.8 billion yuan in 2007, while the group has annual sales of about $6.5 billion, according to its Web site.
