Impact of price fluctuations in chinese garlic on livestock farming and analysis of market trends
In june, monitoring data from the ministry of agriculture and rural development showed that wholesale prices in the main garlic-producing areas of shandong village had fallen by 18. 7 per cent compared with the same period last year, while the cost of feed for livestock-raising districts such as henan win county and hebei young year increased by 12. 3 per cent over the same period. This price difference is reshaping the cost structure of the livestock industry, and this paper will explore the linkage between the price volatility of garlic and livestock farming, and predict the cost of animal feed, based on futures market data。
I. Analysis of the status and causes of the price volatility of garlic
(i) characteristics of price trends in main production areas
According to the chinese agricultural futures exchange, garlic prices show a "v" pattern:
1. January-march: average prices in shandong and henan-producing areas have stabilized at 6,000-6,500 yuan/tonne as a result of spring festival supplies and stock consumption
2. April-may: prices dropped sharply to 4800-5200 yuan/t (year - 27. 3 per cent) due to the concentration of fresh garlic on the market
3. June-august: upswing in the volume of purchases by processing firms, rebounding to $5,800/ton (+17. 3 per cent) of futures master contracts
(ii) core drivers of price volatility
1. Changes in supply and demand structure: domestic garlic production reached 210 million tons, compared to + 8. 2 per cent, but exports declined by 14. 5 per cent (mainly as a result of import shocks in south-east asia)
2. Surgical cost surge: 40 per cent increase in garlic storage costs, resulting in the concentration of 30 million tons of stocks library
3. Periodically adjusted: the price of garlic dropped sharply from $80 to $32 per kilogram (-60 per cent), forming a price transfer chain
Ii. Cost transfer mechanisms for livestock farming
(i) price correlation analysis of feed raw materials
1. Application of garlic as an additive to animal feed:
- standards for the addition of garlic to pig feed: 0. 3% for pig feed and 0. 5% for poultry feed
- garlic prices: $50/kg (year + 45%)
2. Analysis of alternative effects:
- cost advantages of garlic as an alternative to fish powder: the equivalent of garlic protein in june (16. 5%) to fish powder (65%) is 1:4
- cost of garlic added to chicken duck feed: from 1. 2% to 2. 8%
(ii) changes in the cost structure of livestock farming
1. Composition of the cost of pork farming ($/kg):
- 68% feed cost (45% beans)
- 72% feed cost (38% beans, 2% garlic additive)
Changes in egg breeding costs:
January-may: 9. 2 per cent increase in feed costs over the same period
- the use of garlic additives increases the cost of egg chickens by between $120 and $150 per ton
Iii. Paths to the impact of price volatility on livestock farming
(i) direct cost implications
1. Volatility of pig feed costs:
- 100 yuan per ton of soybean price, 3. 2 yuan per kilogram increase in the cost of raw pigs
- $10 per kilogram increase in garlic prices and 0. 8 per ton increase in egg chicken feed costs
2. Cultivation cycle risk:
- widening gap between the pig farming cycle (6 months) and the garlic price cycle (18 months)
- the low price in june coincided with the peak of the farm
(ii) indirect conductivity
1. Waste processing costs of farming:
- 12 per cent reduction in the cost of biogas generation in garlic-growing areas, which indirectly affects the disposal of animal waste
2. Farmer financing costs:
- interest rate of the rural credit union on garlic farming: q2 to 5. 8 per cent (+1. 2pct)
- raiser's asset liability ratio increased from 58 per cent to 67 per cent of q1
Iv. Market trend projections
(i) prejudication of the price of garlic
1. Futures market technical analysis:
- august contract over $5,800 per ton of critical resistance
- macd indicator for gold fork, rsi entering the super-purchase zone
2. Real demand and supply balance:
- production projection: 205 million tons (opposite 2. 4 per cent)
- demand projection: 198 million tons (exports + 8 per cent, domestic demand - 3 per cent)
(ii) trends in livestock feed costs
1. Inter-area price projections for beans (in united states dollars/ton):
- q4: 380-410 (affected by south american weather)
- q1:420-450 (central american trader repository)
2. Garlic price transfer:
- four quarters: $50-55 per kilogram
- q2:58-65/kg (increased start-up rate of processing firms)
(iii) farming for profit window period
1. Profit measurement for pig production (in dollar/head):
- q4: loss 8-12 (low price)
- q2: profit 25-30 (closure point)
2. Critical points for egg chicken farming:
- when egg price > $4. 8/kg and feed cost
Recommendations for coping strategies for farmers
Dynamic balancing methods:
- the replacement rate for beans is 35-40%
- add 10-15% cassava tarp
2. Garlic addition techniques:
- empty abdominal addition: 20 kg per ton of feed (required for fermentation)
- forage processing temperature control: up to 80°c to retain active ingredient
(ii) price risk management tools
Futures hedging:
- piggy farmers can buy wheat futures 12-18 months later for flush feed
- volatilizer-to-peaser price fluctuations (no more than 20 per cent recommended)
2. The option mix strategy:
- purchase of drop option lock feed cost floor
- combination of the risk of price volatility with the right to see-and-see options
(iii) industrial chain development
1. Cultivation-growing integration:
- establishment of a garlic-fouling resource cycling system (0. 3 m3 per ton of waste-producing biogas)
- promotion of the "breeding union" model: 1 ha of garlic cultivation serving 200 fat pigs
2. Regional synergistic procurement:
- establishment of a regional feed harvesting platform in east china (15 per cent reduction in logistics costs)
- physical delivery by midwest farmers through future delivery depots
Vi. Policy support and industry perspectives
(i) government support policies
1. The ministry of agriculture and rural development focuses on supporting:
- creation of a special grant of 1 billion yuan for animal feed (focusing on supporting the development of garlic additives)
- promotion of the futures+insurance model (covering more than 60% of farmers)
2. Local policy highlights:
- shandong established the garlic industry renewal fund (5 billion yuan for the first period)
- "indicated cost insurance for animal feed" in henan province (covering raw pigs, egg chickens)
(ii) trends in industry
1. Directions for technological innovation:
- technology for the extraction of secondary metabolites of garlic (cost reduced from $800 to $300/kg)
- feed micro-organisms fermentation technology (upgrading garlic bioavailability to 85%)
2. Evolution of market patterns:
- an estimated 3-5 national feed additive lead enterprises
- 30% elimination rate for small and medium-sized farms (up to 75% for scale farming)
(iii) analysis of investment opportunities
Priority areas of investment:
- garlic extraction equipment (market size $1. 2 billion, cagr 18%)
- feed micro-organisms fermentation formulation (demand exceeding 500,000 tons)
2. Potential merger subject matter:
- regional feed enterprises (market surplus pe)
- garlic growing co-operative (with priority for wage increases)
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