In response to the sluggish demand, producers of various feed additives cut output.Thisperked up prices of products as supplies ran low. Taking the lead was calcium pantothenic acid, climbing as early as last October and surging by 150% by the time it stabilised during March. Although prices showed signs of weakening of late, they remained at record high levels.

 

Even as sluggish demand held down prices in the domestic market, export prices of vitamin A began to soar last December after major producers including BASF, DSM and Zhejiang NHU slashed production. By January, vitamin A prices in the local marketcaught up despite flat demand.Stabilising during early May, prices of vitamin A have surged over 60% cumulatively.

 

Meanwhile, other products that registered substantial, albeit lower, increments during the first four months this year due to limited availability included vitamin B1, vitaminB6, vitamin E and folic acid.

 

Feed additives with prominent price hikes
Product	Period	Price change
Calcium pantothenate	Oct-Mar	150%
Vitamin A	Jan-May	60%
Folic acid	Jan-Feb	13%
Vitamin E	Mar-Apr	20%
Vitamin B6	Mar-Apr	13%
Vitamin B1	Mar-May	26%

 

As the hog-to feed price ratio breached the limit of 6:1, China's government launched the state pork procurement programme during late March. Starting late April, the hog sector has recovered at a more assured pace with pork prices surging strongly amid dwindling hog supply. Broiler and egg markets remained upbeat over the past three months with supplies low amid dwindling poultry inventories. While the strengthening livestock markets boost the confidence of farmers, which will in turn expedite animal population growth, aqua production is heading towards is seasonal peak in summer. Inevitably, feed demand is poised to expand, stimulating sales of feed additives.

 

There are signs that the lack of supply in conjunction with recovering demand is working to perk up prices of feed additives. As of mid-May, methionine prices havegained 10% within weeks. While ChongqingUnisplendour, the only local methionine producer so far, halted operation since last October, China's feed and livestock market has become totally reliant on imports, as it did just a couple of years ago before the country's first methionine plant was built.

 

During Q1 this year, subdued demand from the livestock sector had dragged down prices, which surged 20% during Q4 amid supply shortages. Now that the demand from the poultry sector is recovering, the insufficiency of methionine in the Chinese market will catapult prices to new yearly high levels unless Unisplendourresumes operation.

 

Similarly, lysine prices have also surged 9% over the past few weeks as feed sales gained traction whilelysine producers limited output since several months agoto ease inventory pressure. Moreover, lysine exports jumped a tremendous 28% on-month during April on the back of a weak renminbi, serving to further tighten the availability of the product. 

 

And more recently, folic acid market has regained its momentum with supply staying limited and demand catching up, registering a 20%price jump within the first two weeks of May.

 

All in all, with a sound foundation,the feed additives markets is set to perform better in the second half of the year than it did during the first. Prices of several products are expected to strengthen in the coming months, particularly methionine, folic acid, vitamin B12 and choline chloride, which production may be hampered by environmental issues. For some, excess industry capacity will limit the upward potential of the products but support for prices will be strong nevertheless.