May 11, 2018

Kemin, US Embassy in China host agri-food forum in Beijing

Kemin Industries and the US Embassy in China jointly held the forum "30 Years of Experience: Vertical Integration and the Transformation of US Agrifood Businesses" to discuss changes in the agri-food industry.

Entrepreneurs and experts from Tyson, Smithfield, American Agricultural Statistics Corporation and Kansas State University spoke at the conference. They talked about their experiences over the past three decades during the transformation of the industry's vertical integration in the US, its history and trends. More than 60 top producers from China's feed and animal production businesses participated in the conference.

Dr. Chris Nelson, president and CEO of Kemin Industries, delivered the conference's opening remarks, which included a summary of animal husbandry in the US.

"China's feed and animal production industry is facing unprecedented challenges today. These challenges not only come from increased government and consumer concerns on environmental protection and food safety, but also from the strategic choices businesses have to make today to survive and prosper in the future," said Dr. Zhilin Gan, president of Kemin Animal Nutrition and Health (China), in his welcome speech.

"Businesses in Europe and the United States faced similar challenges some 30 years ago. We are very excited to have experts from Smithfield, Tyson, Agri Stats Corporation and Kansas State University to share their experiences and stories with us."  

Dr. Charles Stark, professor at Kansas State University, shared with his Chinese audience how commercial feed mills changed from selling feed for profit to delivering nutrients to animals for optimal meat/milk/egg production.

"Today, as part of integrated businesses, the focus of feed mills has changed from emphasising quality based on customer perceptions to quality based on animal performance," said Dr. Stark.

Dr. Terry Coffey, chief science and technology officer of Smithfield, reviewed the development of the US hog industry and showed participants the innovations Smithfield has made over the past three decades. The company now operates across the entire food value chain, starting from genetic breeding to end-user consumption.

In his lecture, Dr. Coffey shared major challenges and solutions Smithfield faced during and after the integration process.

"Integration helps us deliver the quality and consistency demanded by today's consumer. It helped Smithfield establish a dominant position from production to value-added products. It also allowed Smithfield to better utilise feedback links to focus on system refinement and enhanced product value that cannot be achieved anywhere else in the pork chain."

Dr. Bill Hewat from Tyson led the poultry section discussion.

"Today, approximately 35 USDA-inspected 'vertically integrated' companies raise, process and market chickens. About 95% of broilers are produced on 25,000 contract family farms. Tyson accounted for 20% of total broilers produced in the United States," he said. 

Tyson's experiences indicate that with "one profit center and multiple cost centers," vertically integrated businesses not only have an immediate advantage through the economies of scale, but also a different philosophy in optimising profits.

"With the profit of final product in mind, some cost centers may elect to produce costlier or less-efficient products. With one profit center, goals are consistent throughout the organisation," said Dr. Hewat.

In his speech, Michael Donohue, vice president of US Agri Stats Corporation, explained how, after the development of modern US broiler companies, chicken production and consumption in the country greatly improved. Donohue presented some of the critical key performance indicator changes in the broiler industry in the last 30 years.

The US Ambassador to China, Terry Branstad, joined the speakers and Chinese guests at the reception at the US Embassy.