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May 24, 2017
 
China Feed Market Monthly Review: Tepid China feed growth in April due to sluggish livestock sector
 
An eFeedLink Exclusive
 
 
Hog feed production shrank while poultry feed output increased marginally, resulting in weak expansion of monthly feed growth in April.
 
 
Market Analysis
 

Table 1China's feed production in April 2017

Region

Hog feed

Layer feed

Broiler feed

Aqua feed

Ruminant feed

Others

Total

Feed production change compared with previous month (%)

-3.27

1.47

2.00

130.24

-1.32

1.02

3.38

eFeedLink’s statistics

Livestock prices weakened during April, squeezing the returns of farmers. Hog prices were down by 24% compared with a year ago; although large-scale commercial farms continued to make a profit, backyard farms incurred a substantial deficit of RMB0.53/kg. In the poultry sector, layer feed sales were unimpressive while layer farms fell from making ends meet into a loss of RMB0.47 for each kilogramme of egg sold. Only broiler farming enjoyed a greater profit margin during April as prices continued to recover from extremely low levels.
 
Hence, hog feed production volume was down by 3.27% whereas layer feed production registered a marginal growth of 1.47%. Even broiler farms, which were seeing higher profitability, were cautious with feed purchases as the outlook of the market was highly uncertain. This limited broiler feed production volume to expand only a modest 2%.
 
On the whole, China's feed production increased 3.38%, basically due to a robust 130% surge in aqua feed manufacturing as the aquaculture sector climbed towards its summer seasonal peak.
 
Feed producers faced lower soymeal costs during April, which dropped 3%. As global soy futures markets softened amid high projection of upcoming harvests in the US and South America, import costs slid in tandem. This, in conjunction with decimated demand from the feed industry, exerted pressure on China's soymeal market.
 
Despite growing production of aqua feed, fishmeal prices slid 3% due to lower import costs. Moreover, aqua feed producers stayed prudent and kept fishmeal stocks low to minimize expenses.
 
Corn was the only main feed ingredient that saw prices soaring, gaining almost 5% on the back of tight availability and expanding poultry feed output.
 
Feed additives prices were mostly weaker due to slack demand. Only a handful of vitamin products that was tight in availability, namely vitamin C and vitamin B6, rose in prices over the month. Amino acids markets stayed stable in April, with prices of lysine, tryptophan and threonine up by 1% to 3%. Nonetheless, methionine prices dropped 5% due to tough industry competition.
 
Hog feed
 
Hog inventory actually managed to stabilise during April, growing slightly for the second consecutive month. However, as the outlook of the market was bleak with prices down by over 5% over the month and showing no indication of bottoming, hog feed producers cut production by 3.27%.
 
Complete feed output slid 1.77% while that of premixes fell by 1.29%. Production of concentrated feed plunged a whopping 11.15% as backyard farms trimmed inventories.
 
Prices of complete feed stayed unchanged at RMB2,950/tonne during April.
 
Layer feed
 
Egg prices gave up all gains in March and plummeted to new record lows amid poor demand. Layer farmers were therefore reluctant to build inventories, resulting in flat layer numbers. Under such circumstances, the overall 1.47% growth in feed production was a consolation to the sector.
 
The manufacturing of complete feed increased less than 1% as production shrank significantly in the central and northern regions. Prices slid 0.37% to RMB2,680/tonne.
 
Meanwhile, concentrated feed and premixes recorded much stronger growths of 7% and 5% respectively.
 
Broiler feed
 
As April broiler numbers increased sharply while farmers rebuilt inventories, broiler sector recovered fully from the bird flu epidemic, which strangled the demand for chicken between October and February. Additionally, China breed broiler prices rebounded strongly while those of AA broiler rose further, hence strengthening market confidence.
 
Overall, feed production rose by 2%, and was a mere 1.12% below last April's level. Premixes output showed the greatest increment of 12% while complete feed production expanded a modest 2.26%. Only concentrated feed output shrank during April, sliding 6.20% compared with the previous month.
 
Meanwhile, prices of complete feed were cheaper by 0.34% averaging RMB2,950/tonne.
 
Aquaculture feed
 
Warm spring weather helped to boost the production volumes of aquaculture. Aqua feed output jumped 130% over the month as feed manufacturers increased stockpile in anticipation of expanding demand. However, compared with a year ago, China's aqua feed output was lower by 3%, a sign that the sector might not be as robust as previous year due to the country's weak economy.
 
Complete feed volume surged 131% while concentrated feed production, which was almost non-existent in March, jumped by a tremendous 5,800%.
 
Ruminant feed
 
Ruminant feed production lost momentum in April, shrinking 1.32%. Overall feed output for the sector totalled 705,447 tonnes, which was 11% lower on-year.
 
Month-on-month, complete feed volume decreased 2.79%, whereas the production of concentrated feed and premixes expanded 2.24% and 5.23% respectively.
 
 
Market forecast
 
Pork demand should increase during May, particularly after middle of the month due to the approaching of Dragon Boat Festival. However, hog prices may slide further under China's deflationary economy. This will limit the sales of feed and hence production. Similarly, prices of egg and chicken are expected to drop amid lacklustre demand. Poultry feed output will therefore expand at a slow pace at best.
 
On the bright side, aqua farming is set to expand robustly, fuelling strong feed production growth for the sector. However, it should be noted that stormy climates in the southern region of China is likely to hamper the expansion of feed output.
 
On the whole, China's feed production is expected to increase at a moderate rate in May, most likely stronger than in April but unlikely to register double digit increment.
 


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