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Market Reports
 
September 19, 2014
 
China Feed Market Monthly Review: Strong rise in China feed output amid high livestock releases   
 
An eFeedLink Exclusive
 
 
China's feed production enjoyed a robust growth of 9% during August amid buoyant livestock demand.
 
 
Market Analysis
 
China's feed production enjoyed a robust growth of 9% during August amid buoyant livestock demand. However, compared with one year ago, feed output was still lower by 2.59%.
 
Hog demand was strong during August as slaughterhouses stock inventories in the period prior to Mid-Autumn Festival, driving up feed consumption. As the market maintained July's uptrend, with prices climbing a robust 9% over the month, feed sales expanded steadily and producers confidently stepped up production by almost 10%.
 
The poultry sectors thrived, too, during August. Egg prices surged to new historic highs while prices of both AA broiler and China breed broiler recorded double-digit gains amid tight supplies. Nonetheless, feed producers were more prudent in expanding the production of poultry feed as breeder farms have eliminated grandparent stocks in a bid to deal with the excess supplies of chicks. Hence, the output of layer feed and broiler feed increased by smaller margins of 4.82% and 4.41% respectively.
 
For the aquaculture sector, August feed production maintained a steady growth of 15.76%, similar to the increment of 15.39% in July. At close to 3 million tonnes, aqua feed output accounted for over 20% of China's total feed production. Although aquaculture production was at its annual peak, feed manufacturers limited output in view of dwindling demand in the months ahead with the climates turning cold.
 
Feed prices rose in August amid higher corn costs, which was pushed higher by more than 2% amid short supplies. Although the government's auctions of corn reserves and the early harvests in some regions helped to ease the supply crunch, it was insufficient to meet the strong demand in the period leading to Mid-Autumn Festival.
 
Contrary to the robust corn market, protein meal markets were weak due to excess supplies. Soymeal prices were under pressure as the planting regions in the US enjoyed favourable climates, preparing the country for a bumper autumn harvest. CBOT soy futures plunged to record low territory, dragging China's soymeal prices down by 1.5% over the month. Since May, Chinese soymeal prices have dropped 9% while CBOT soy prices tumbled a whopping 25%.
 
Partly responsible for the weak soymeal market was the abundant availability of rapeseed meal, whose prices softened amid slack demand due to a weaker-than-expected aquaculture market. Hence, fishmeal prices failed to rally even though Peru's fish catch was prominently lower than last year's. Instead, fishmeal prices dipped 2.6% over the month as traders were eager to clear inventories.
 
For feed additives, prices of products with tight availability strengthened during August, Folic acid, which had more than doubled in prices, jumped another 38% in August. Prices of vitamin D3 surged 29%, whereas those of biotin and vitamin B1 rose by 16% and 7% respectively.
 
Amino acids prices increased considerably as well, with both methionine and threonine jumping 21% amid dwindling supplies while lysine prices gained 8-15%. Nonetheless, tryptophan prices slid 3.6% over the month.
 

Table 1China's feed production in August 2014 

Region

Hog feed

Layer feed

Broiler feed

Aqua feed

Ruminant feed

Others

Total

Feed production change compared with previous month (%) 

9.97

4.82

4.41

15.68

6.75

11.67

9.00

eFeedLink's statistics

 
Hog feed
 
Pork demand stayed buoyant during August as the country prepared for the Mid-Autumn Festival celebration in early September, sending prices of pork carcass steadily higher by 6.7%. However, the supply of hog was inconsistent, surging during early and late August, but contracting during middle of the month. Hog prices were up 9% on-month as result, despite showing some signs of softening towards end of the month.
 
During July and August, hog prices have increased over 14%, boosting the confidence of feed millers tremendously. Anticipating demand to stay robust through September producers increased feed output by a prominent 9.97% to restock inventories which were running low due to limited production volumes over past months.
 
The output of complete feed jumped 11.24% on average, with the growth in the northwest region's leading with a 35% surge. Average price of complete feed increased 0.30% over the month to reach RMB3,350/tonne.
 
Meanwhile, the output of concentrated feed increased a modest 4.08% whereas that of premixes inched down 1.15%.
 
Layer feed
 
China's egg market was exceptionally strong during August, as the mooncake industry stepped up production with Mid-Autumn Festival approaching. However, as layer population was limited and egg production rates were low amid the hot climates, insufficient supply fuelled another round of price rally for the year, catapulting prices to surpass the historic records set in May and July. On average, eggs were selling at RMB10.55/kg, above July's and May's prices by 10% and 12% respectively.
 
Consequently, feed producers confidently expanded layer feed production in August. However, they were also aware that the population of layer hens was not relatively low, while the proportion of small layers were high as a sizeable quantity of older layers were discarded in August. The production growth was therefore capped at 4.82% amid cautious mood.
 
Production of complete feed rose by 4.09% on average, substantially slower than the 8% output expansion of both concentrated feed and premixes.
 
Prices of complete feed increased 0.64% to RMB3,130/tonnes.
 
Broiler feed
 
Broiler population shrank, albeit marginally during August, partly due to limited chick production as breeder farms culled stocks to cut chick supplies, and partly due to high releases in August. Nevertheless, the fattening of broilers before releases perked up the demand for feed over the month. Confident that sales would stay strong through September, producers stepped up production by 4.41%.
 
The output of complete feed and concentrated feed increased 4.49% and 4.88% respectively, whereas premixes production shrank 3.97% over the month.
 
Aquaculture feed
 
The sales of aqua feed disappointed producers in August as Typhoon Rammasun's disruption to the coastal regions impacted aquaculture production substantially. Meanwhile, falling weather temperatures in the north dragged down the feed demand in the northeast and northwest regions. The growth of aqua feed production was therefore curbed at 15.68%, similar to the expansion rate in July. Total aqua feed production was, however, at its yearly high of 2.84 million tonnes.
 
Complete feed production was higher by 16.01% whereas concentrated feed output inched up a mere 1%. The volume of premixes produced was negligible as several producers have halted production of the product.
 
Ruminant feed
 
After shrinking for the past several months, ruminant feed output rebounded during August, registering a healthy growth rate of 6.75%. The feed intake of cattle improved as the summer heat resided, helping to lift the demand for ruminant feed.
 
Complete feed, which increased by 11%, was the sole contributor to the rise in ruminant feed production, for the output of concentrated feed and premixes had contracted by 16.67% and 0.59% respective during August.
 
 
Market forecast
 
Feed consumption will remain buoyant as livestock releases are high amid strong meat demand while China prepares for the long holidays during early October.
 
On the supply side, feed millers will stockpile inventories for October's use as the industry halts production for the first couple of weeks due to the long holidays. The supply crunch of corn over the past few months will ease as availability increases due to the state's corn auctions and the recent harvests in some parts of the country.
 
These factors will support the overall feed output to continue growing in September. Nonetheless, the rise will be limited as aqua feed production, which accounts for more than 20% of overall output, will likely see single-digit growth at best due to the swifter falls in the weather temperatures.
 
Entering October, feed consumption will shrink considerably with the animal population diminished following September's high releases. The demand for hog feed, which accounts for about 40% of the country's feed output, will be weaker than usual due to slow piglet production, the result of sharp a sharp 5 million fall in sow population since last September. To be on the safe side, feed millers will be extremely prudent with production.
 


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