August 3, 2022
China's 2020-21 feed market: Rising corn prices and using wheat as substitute
An eFeedLink Hot Topic
The price of corn in China surged from ¥1,870/tonne in January 2020 to ¥2,629 /tonne by the end of 2020, an increase of ¥759/tonne.
Prices of corn stayed high in 2021. Entering 2022, the price of corn continued to trend higher. Price fluctuations triggered the substitution of this ingredient.
In 2020, the price of wheat was in the narrow range of ¥2400-2500/tonne. The proportion of corn used as an energy ingredient in the first three quarters of 2020 was unchanged, maintaining at 60-70% for pig feed formulation.
As the price of corn rose steadily to ¥2,300-2,400/tonne in the third quarter, feed manufacturers were prompted to partially replace corn with wheat.
By the end of 2020, when the price of corn exceeded ¥2,600/tonne, which is ¥150/tonne higher than wheat, feed producers used less than 10% wheat in pig feed, while reducing the proportion of corn usage to 45% from the usual 60%.
From the above table, it can be seen that wheat replacement differed among the top 50 feed producers in China. In the first two quarters, the inclusion of wheat was negligible. Entering September, wheat inclusion increased prominently in some feed mills, particularly at Muyuan and Wen's.
In the first quarter of 2021, the price of corn surged to a high of ¥3,000/tonne, which was ¥250-500/tonne higher than that of wheat.
Consequently, more feed producers began to replace corn with wheat in pig feed. In January 2021, the average use of wheat in China's pig feed reached 10%.
As the price of live pigs tumbled below ¥18/kg in June 2021, farmers were increasingly concerned about the costs of pig feed. Thus, wheat substitution increased.
By September 2021, the average wheat inclusion in pig feed rose to 27%, almost the same as that of corn.
Entering the same period, as the price of corn fell to levels equivalent to that of wheat, the advantage of wheat inclusion shrank.
In 2022, the price of wheat in China surged past ¥3,200/tonne (US$480) by March, higher than that of corn, hence eliminating its cost advantage.
As a result, pig feed producers cut the inclusion of wheat to 7-8%, similar to usage at the end of 2020.
- Shi Tao, eFeedLink