Pre-made meal mania; Hog-corn ratio spikes; Soybean subsidy cap

Pre-made meal sector heats up over holiday as people avoid travelling

Hema, Alibaba’s grocery delivery service, reported that during the May 1st holiday in Beijing that grocery deliveries sales rose by 30% compared with average sales volume before the holiday as many people were stuck at home and restaurants were closed for in-person dining.

They also noted that sales of pre-made dishes rose by 500% month on month.

Food delivery volumes also rose with delivery service reporting an increase of 20-30% in Beijing, while competitor Meituan reported holidays sales up 30% y/y and 40% m/m.

Restaurants in Beijing are rapidly trying to shift to online delivery amid restrictions, and May 1st saw a 338% spike in restaurants registering on online platforms to provide their dishes through the services.

The pre-made food sector has already been gaining more popularity before the current round of lockdowns as consumers increasingly value time-savings and convenience and the current lockdowns should provide further tailwinds to the industry.

Currently there are 68,000 companies registered in the pre-made dishes space, with nearly 60% established in the past five years.

Hog-corn ratio at highest in two months

The main indicator for the world’s largest hog market continued to rise last week to reach the highest point since the end of the recent peak-demand season during the Lunar New Year holiday in February.

The hog-corn ratio bounced over 7% higher week on week to 5.25:1 last week, the highest level since the last week of February, according to latest government data.

The ratio has ticked higher in the past month against the backdrop of a stronger hog price in China that jumped 15% during the same period to 15.22 yuan/kg ($2,306/ton).

Hog price in China spiked more than 7% on the week as the government announced that the state-backed pork buying efforts could end after the fifth round of national reserve restocking.

The traded volume at the latest round of state buying slumped to zero, reflecting a bullish sentiment in the market as prices have already rebounded.

The government generally steps in and buy pork from the market to support prices when the hog-corn ratio falls below a critical level. When the ratio is below 5:1, it triggers a level-one alert for the government.

Meanwhile, sow herd in the country shrank further in March this year to 41.85 million heads according to the ministry of agriculture, and the total live hog herd also fell 6% from the previous quarter to 422.53 million heads.

Both data are showing a trend of companies shedding capacities in the past six months. But as prices further climb, hog herd could stabilize this quarter as companies aim to maintain market share.

Liaoning government caps soybean planting subsidy

The local government of Liaoning province in northeastern China has set a ceiling for subsidies to soybean farmers this year even though farmers are encouraged to boost plantings of the oilseed this year.

Government subsidies to farmers who plant soybeans cannot exceed 250 yuan/mu ($568/ha) above corn subsidies. In general, soybean subsidies are expected to be 200 yuan/mu ($455/ha) above those for corn this year.

The policy could be implemented to avoid an excessive shift from corn to soybeans.

Back in 2018, the government offered subsidies to soybean at nearly 300 yuan/mu above corn, leading to lower corn output in the following two years.

The premium of soybean subsidies to corn was slashed to 180 yuan/mu last year as China aimed to increase corn output.

Chinese farmers prefer planting corn to soybeans as the former crop has a higher yield than the latter, meaning more income for farmers.

The Chinese government often adjust the level of farmer subsidies to balance the planting of the two crops.