April 12, 2022

 

Analysing China's rising feed prices from a cost perspective

 
An eFeedLink Hot Topic

Feed cost is the main component of hog farming in China.

 

Currently, the total cost of live pigs produced by farms with breeding units is ¥17.50 /kg (US$2.77) — 42% of which is feed cost. The cost of a piglet is ¥4.20/kg (US$0.66) and the costs of other aspects of production are ¥6.30/kg (US$1).

 

For poultry layers, feed accounts for ¥6.80-7.00/kg (US$1.08-1.11). Broilers have a production cost of ¥8.80/kg (US$1.39), covering more than 70% of total expenses.

 

Taking into consideration that the gross profit of feed production is low, the profit of broiler feed, for example, is only ¥20-50/tonne (US$3.17-7.91). Hence, with thin profit margins, feed producers are very susceptible to increases in raw ingredients prices.

 

One can understand this situation by knowing what goes into the costs of creating animal feed.

 

For example, a simple formula for fattening pig would consist of corn (65%), soybean meal (16%), bran (15%), and premix ingredients (4%). Thus, the cost of one tonne of feed is ¥240 (37.99) for a premix, ¥1,755 (US$277.80) for corn, ¥664 (US$105.11) for soybean meal, and ¥270 (US$42.74) for bran, adding up to ¥2,930 (US$463.79) for a tonne of self-produced pig feed for fattening. By proportion, the cost of a premix is 8%, corn at 60%, soybean meal at 23% and bran at 9%. Costs and formulas of individual feed mills vary, but to a limited extent.

 

eFeedLink statistics show that the price of corn in China has risen to ¥2,700/tonne (US$427.40) from ¥2,300 (US$364.09) in late 2020. The price of soybean meal has risen during this period to ¥4,100/tonne (US$649.16) from ¥3,200/tonne (US$506.66).

 

This year, soybean meal prices managed to stay at ¥3,600-3,700/tonne (US$570.02-585.86) before Chinese New Year. Following the Chinese holidays, the United States Department of Agriculture's report lowered the production projection for China. Within 20 days, soybean meal prices in the country soared to a high of ¥4,300/tonne (US$680.80). The price of common livestock and poultry feed increased ¥50-100/tonne (US$7.92-15.83); the price of concentrated feed surged ¥200-300/tonne (US$31.67-47.50) and the price of aqua feed rose by ¥200-500/tonne (US$31.62-79.13).

 

The transparency of feed costs has become the norm in China's feed industry. Whether prices of key feed ingredients soar or sink, farmers will expect feed prices to move in tandem. In today’s uncertain economy, this may be the new normal for livestock producers.

 

- Shi Tao, eFeedLink