Broiler market 2016: demand grows at year-end but heavy earlier stockpiles make a reversal hard

How will broiler prices move at the end of 2016? In November, chicken prices in Zhejiang were like an arrow at the end of its flight. Prices rebounded in early November, sales stayed insufficient through mid-month, prices spiked and then fell back, and in late November they dropped below cost, with the full-month average price running below the cost line. By variety, Bamboo Silkie chicken prices stood out with a sudden surge, rebounding to 6.8 yuan/jin in early November and staying largely high through mid- and late November, only pulling back about 0.4 yuan/jin at month-end; while fast-growing varieties, medium-quality varieties and high-quality varieties all swung by more than 0.8 yuan/jin over the month.

The following factors mainly shaped the broiler market trend in November:

First, consumption was weak. Under the impact of rain and snow in mid- and late November, wholesale and terminal transaction volumes continued to slow, demand in the broiler consumption segment stayed sluggish, and continued rearing stalled in the rainy weather; integrated farming companies achieved only 85-95 percent of their sales plans in weeks 47 and 48.

Second, pressure on the supply side kept piling up, crushing the price tolerance limit. On one hand, broilers grew faster in autumn and winter, prices kept running below the cost line, and all parties mainly marketed their birds early; on the other hand, low- and medium-grade varieties were not effectively cleared at the end of October, and all parties kept cutting prices in mid- and late November to take the initiative in moving volume. The concentrated marketing caused by these two factors combined was the main reason for the continuous price decline.

Third, the trend was already lost and panic spread. In early November, rural continued rearing drove sales, market volumes were stable, and most varieties traded around the cost line, so a consensus on holding prices steady existed, though it was also uneasy. In mid- and late November, most of East China was affected by rain and snow; in northern Anhui, northern Jiangsu and other areas, farmers' fast-growing varieties saw both volume and price fall sharply, and integrated farming companies, with the market outlook unclear, focused their sales strategy on cutting weight and reducing bird age, showing little enthusiasm for stabilizing prices or trying to raise them, and the overall market thus entered a rapid decline channel.

Fourth, chicken prices fell nationwide, and no one could stay unaffected. Prices had remained profitable for more than 10 months; compared with the same period last year, all parties chose moderate expansion in both inventories and marketings, but the current circulation speed or absorption capacity of the live chicken segment could not match or keep pace with the current farming scale, and the price pain brought by disorderly increases in volume may only just be beginning.

Overall marketings in the Zhejiang region increased month-on-month in December, with high-grade varieties rising noticeably, while low-grade and medium-grade varieties fell by a larger margin.

I. Favorable factors: 1. Around the Start of Winter, demand for sun-dried and salted chicken in rural areas increases. 2. Banquet-type consumption rises in the winter months. 3. Consumption gets a boost at month-end from the New Year's Day holiday.

II. Unfavorable factors: 1. Risk of epidemics in winter and spring. 2. It will still take time to fully clear the earlier stockpiles, and a short-term market reversal faces great pressure. 3. The impact of rainy weather.

Judging from the nationwide broiler price decline at the end of November and regional inventories, broiler prices are quite likely to keep running in the low price range in early December; fast-growing varieties have now fallen below the price line at which slaughterhouses buy for storage, slaughterhouses in various places have shown signs of gradually starting to stock up, and overall chicken prices are expected to return rationally in early December; if the weather is favorable, prices of fast-growing varieties and medium-quality male birds are expected to recover steadily in early and mid-December; around the Winter Solstice, rural and township markets in the Zhejiang region have a customary habit of sun-drying and salting chicken, which will support the volume and price of medium- and high-grade roosters to some extent, and the consumption base for stronger chicken prices in late December is relatively solid. In terms of operations, it is recommended to put volume first and actively raise prices in early December while ensuring sales; in mid-December, hold prices steady and move volume, focusing on capturing returns; considering that consumption may decline after the Winter Solstice, keep prices steady in late December through the transition to New Year's Day.