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Ag Companies Being Squeezed

by 5m Editor
10 February 2009, at 9:56am

CHINA - A poultry company executive explains how the global economic crisis and consequent weakening of the chicken price is leading to a steep drop in his company's revenue.

The deepening financial crisis has taken a toll on local agri-products processing companies, as orders slow to a trickle due to sluggish domestic and abroad market demand, according to official sources in China.

A steep drop in the number of orders and plunging prices have affected the revenue of Jilin Deda Co Ltd, a poultry processing company in Jilin province, Chen Yuhe, its vice-executive said.

The average price of chicken meat was 9,395 yuan (CNY; $1,400) per ton in the first nine months last year, but the price fell to CNY 8,000 per ton in October and slid another 500 yuan in November.

The price drop could inflict a revenue loss of CNY 150 million, he said.

Wang Wei, deputy manager of COFCO Bio-Chemical Energy (Yushu) Co Ltd, said falling starch prices and corn price hike have put his company "on the brink of bankruptcy".

"The downstream industries like beer and paper making are all suffering amid the economic crisis," he said. "Thus, the low demand for starch has led to a sharp price drop."

The plant, which has an annual production capability of 400,000 tons of starch, has seen a deficit since October and registered a loss of about CNY 20 million during the fourth quarter, he said.

The plight of Mr Wang's plant is just a miniature of the agri-processing companies in the province.

Statistics from the Jilin agricultural committee show most corn processing firms in the province suffered losses last year.

The operating rate of major process plants is only 70 per cent, the committee said.

Chen Yuhe from Jilin Deda said the only way out is to further tap potential. "We are hoping to develop more added value for our products and will explore the domestic market," he said.