Food and beverage income; Strong fertilizer profits; Feed price update

Food and beverage income remains below pre-lockdown peak

In a recent article in People’s Daily, a state media outlet, a restaurant owner noted that his sales were up by 61% m/m and 170% compared to the first week of June.

As the economy slows, many news articles have cited month-on-month changes or changes relative to the bottom of the recent economic downturn to show growth and recovery. However, most longer-term metrics show a sharp decline in restaurant spending and consumer confidence which weighs on demand for imported meat.

Some restaurant owners in Beijing and Shanghai, cities which had lengthy Covid restrictions, reported customer volumes around 80% of what they saw before the lockdowns. But other group dining venues, such as hot pot restaurants, report that the customer is about 30% of pre-lockdown volume.

An interview by a restaurant publication noted that a waitress said there were three days of ‘revenge spending’ after the lockdown ended in Shanghai but the restaurant’s volumes are 30% of pre-lockdown volume. They also noted that the restaurant had to limit capacity and many customers would cancel reservations if new cases appeared in Shanghai.

While some restaurants can supplement their income through takeaway orders, high-end restaurants, which typically serve expensive imported meat, have not been able to adapt their business model.

Strong profits as domestic fertilizer producer benefits from disruptions

Fertilizer producer, Zangge Mining, reported strong net profits as prices increased.

From January to June 2022, the company reported net profits increased 438% to 2.4 billion yuan ($355 million USD).

The company has mines in the western Chinese province of Qinghai which contain large deposits of potash. As supplies of the fertilizer were disrupted due to the Russian invasion of Ukraine, and the subsequent sanctions, the company saw the prices of its products rise.

Even though China has its own sources of potash fertilizer, domestic prices rose by 32.3% y/y. China imported 9.2 million tons of potash in 2020 with around 3 million tons coming from Canada but 3.6 coming from Russia and Belarus.

Livestock and feed prices update