Global recession cuts China feed, meat demand

The global financial crisis has already taken its toll in China''s meat and feed demand as consumers reduce their protein intake, according to Sichuan New Hope Group.

The economy of China--the world''s largest pork producer and consumer--was at its slowest 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.

According to Takaki Shigemoto, an analyst at commodity broker Okachi & Co. in Tokyo, declining income will "definitely have an impact on food consumption, especially for meat and meat products" which will become a negative factor on grains and meat prices in the long term."

Liu- ranked as China''s fourth richest man by Forbes Asia''s October rankings--assessed that about 60 million rural residents will be affected by the financial woes. These people will consume less meat, less dairy and fewer eggs and New Hope had recommended the government to issue food coupons to farmers, he said.

Mass layoffs in January were at its fastest pace since a survey of such activity began 2004, according to the CLSA China Purchasing Managers'' Index.

Liu said Sichuan New Hope is planning to hire 5,000 new workers to ease massive unemployment.

China''s pork industry, which is already suffering from falling prices, will be dealing another blow from lower meat consumption. This had 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 tonnes as domestic production increases about 3 percent, the US Foreign Agricultural Service said in January.

Still, Liu said sales in 2009 would rise 22 percent from last year to 55 billion yuan (US$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 US$6.5 billion, according to its Web site.