June 18, 2015
China Feed Market Monthly Review: Poor feed demand in China livestock sector decimates output growth
An eFeedLink Exclusive
China's feed output expanded at a slower rate amid shrinking production of hog and layer feed.
Market Analysis

Table 1China's feed production in May 2015 


Hog feed

Layer feed

Broiler feed

Aqua feed

Ruminant feed



Feed production change compared with previous month (%)








eFeedLink's statistics

The growth of feed production continued to slow down for the third consecutive month, despite recording an expansion of 3.93%. Nonetheless, year-on-year, feed output was higher by almost 20%.
Hog feed output, which accounted for over a third of total feed production, shrank 1.61% to below 5 million tonnes with total hog inventories dipping. Meanwhile, layer feed production dropped 1.19% due to high culling rates of aging hens amid poor farming returns. 
Broiler feed production expanded a modest 3.93% as inventories continued to grow during May. However, as prices of AA broiler plunged 10% in May, resulting in production cuts of day-old chicks, feed millers prudently limited output. Hence, broiler feed output growth was only a fraction of April's 13% expansion.
The growth of aquaculture feed production remained robust, higher by 37.58% over the month as the climate temperature continued to rise.
Feed ingredients markets were weaker during May, with corn prices inching lower 0.55%. Supplies increased as the government continued to hold auctions of corn from state reserves, while traders in some regions attempted to clear stocks in preparation for the wheat harvest. Meanwhile, feed millers cautiously limited corn purchases as the outlook of the livestock markets was uncertain. In the production regions of wheat, demand was even weaker, as feed producers reduced the usages of corn, substituting it with wheat, the cheaper alternative. Nonetheless, with corn supplies fundamentally tight, price falls were limited to less than 1%.
Soy market remained under tremendous pressure with supplies from the US abundant and South America enjoying a bumper harvest. While ingredients costs were low Chinese soy crushers maintained high output to maximise returns. With demand flat and supplies in excess, soymeal prices plummeted over 4% during May, losing a whopping 27% compared with a year ago.
Meanwhile, fishmeal prices slid over 4% as traders eagerly released inventories with Peru smoothly on its way to meet the current season's fishing quota. However, with soymeal cheap and abundant, feed millers were not keen to stockpile fishmeal inventories. By end of May, prices of FAQ fishmeal have fallen below RMB1,200/tonne.
Feed additives prices mostly moved in a narrow range during May. However, amino acid prices were significantly lower. Leading the pack, methionine prices plunged 26% as imports from Southeast Asia increased gradually, helping to ease the supply crunch in China. Moreover, feed millers were not eager to accumulate methionine inventories as the poultry markets remained on weak trends.
Threonine also recorded a sharp fall of 22% during May. Prices remained stable during early parts of the month as producers stood firm. However, after mid-month, producers slashed prices amid mounting inventory pressure while feed millers withheld purchases.
Price of tryptophan and lysine were lower by 10% and 7% amid slack demand and plentiful availability.
Prices of vitamin products were mostly stable to slightly higher, expect for biotin, inositol and vitamin D3, which fell by 2%, 5% and 10 respectively % in prices. With feed demand sluggish, feed millers withheld purchases of feed additives, hence limiting the upward scope of the market. Even folic acid, which was highly lacking in supply and climbing robustly over the past several months, only increased 8% as price hikes flattened out towards end of the month.
With prices of grains and feed additives flat or significantly lower, feed millers' production costs dropped considerably during May.
Hog feed
Hog market remained upbeat in May, with prices surging another 9%. However, that was due to a shrinking hog inventory, which was not a motivating factor for feed producers to manufacture more.
Meanwhile, sow population dwindled further, falling below 40 million head. Feed producers were therefore prudent in their production, as it meant that piglet reproduction, and subsequently the hog population, was unlikely to increase in the near to middle term.
Consequently, 1.71% less hog feed was produced in May, with the output of complete feed and premixes falling 2% and 4% respectively. However, low soymeal costs encouraged feed millers to produce more concentrated hog feed, hence lifting its output by 2% over the month.
While raw ingredients costs softened, feed producers lowered the price of hog feed by 0.31%.
Layer feed
Layer farmers discarded aging hens vehemently, over 12% more than the previous month, in attempts to cut down egg production while prices continued to slide. Total layer numbers shrank almost 2% over the month as pullet procurements dipped as well, as farmers' confidence over the outlook for the egg market was low.
With layer inventories falling for the third consecutive month, and at an accelerating rate, feed millers cut feed output for the sector by 1.19%. This was, nevertheless, still 9% above May 2014's feed production.
Layer premixes slumped a tremendous 8%, as almost all regions in China cut production. Complete feed output dipped 1% whereas that of concentrated feed rose by 1%.
Prices of complete feed were lower by 0.68%.
Broiler feed
Excess chick production due to high breeder broiler population resulted in tumbling chick prices, falling 46% for AA broiler species and 24% for native breeds. Inventory growth was underpinned by the low costs of chicks in the early parts of May, but slowed after middle of the month, when broiler prices showed no signs of stabilising. Overall, broiler inventory grew moderately by 2%, hence supporting feed production to expand almost 4%.
The production of complete feed and premixes increased 4% each, whereas concentrated feed output grew 7%. Prices of complete feed dropped 0.30% amid lower cost expenses.
Aquaculture feed
Aqua farming recovered robustly in May amid warmer weather. However, as several regions in China experienced high precipitation climates and floods, aquaculture was disrupted, decimating the feed production growth to a certain extent.  
With the support of mounting demand, cheap soymeal costs and tumbling fishmeal prices, feed production increased 37.58% in May, higher by 49% compared with a year ago. Growth was exceptionally strong in the northern regions, registering triple digit jumps, as aquaculture finally gained traction due to rising weather temperatures.
Production of complete feed for marine animals jumped 38%, while those of concentrated feed and premixes surged over 50%.
Ruminant feed
Ruminant feed output inched up 0.78% after April's 4% slide. Production of premixes grew at a tepid rate of less than 1%, whereas complete feed output remained flat. Only the manufacturing of concentrated feed increased at a more prominent rate of 4% amid cheap protein ingredients prices.
Market forecast
Hog market will remain firm with tight availability of finishing hog helping to underpin prices even as pork demand during summer is traditionally low. Moreover, with sow population under 40 million head, and about 20% below the government's warning level, the quantity of hog in China is unable to recover rapidly. This means that hog feed consumption will stay low, inevitably curtailing the production of hog feed.
For the layer sector, high culling rates over the past couple of months, which cut total inventories by over 2%, will put a lid on the demand for layer feed. As a result, layer feed production is expected to fall further in June.
Although broiler population continued to expand during May, hatcheries started to cut production during late May as chick prices plummeted to record lows. This will impede the inventory growth of broiler in conjunction with weak broiler prices. Hence, it remains uncertain whether broiler feed production will continue to expand in the coming period.
The only major sector that is poised to expand strongly is aquaculture. The warm summer climates will expedite the growth of marine animals, boosting the demand for aqua feed. However, several regions in China, including the major aquaculture production provinces in the south and east, are troubled by floods and heavy rains. Should the situation worsen, feed demand will increase at a slower rate, hampering production.
On the whole, China's feed production should continue to increase in June, with the support of the robust aquaculture sector. However, flat to lower feed demand in the livestock sector will likely keep the increment below 3%.

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