August 12, 2004

China's Feed Output Down By 11% in the First Half - Year of 2004
 

An eFeedLink Exclusive Report

Statistics compiled by China Feed Mills Association on 200 feed enterprises in the country showed that total feed output for the first half of 2004 was 36.77 million tons, registering a decline of 11% compared to the same period in 2003. Specifically, the output of complete feed was down by 8%, to 28.24 million tons. The output of feed concentrates was 7.45 million tons and that for premixes was 1.08 million tons, down by 20% and 25% respectively.

In the first half of 2004, China's animal production and feed industry was hit by the outbreak of the avian flu and consequently demand for livestock products had fallen substantially. Sales of feed products were affected by a combination of the following factors:

• The outbreak of the avian flu led to a drop in farmers' inventories of layers, broilers and meat hogs. Demand for animal feed fell substantially during April-May period and some feed millers' output were reportedly cut by 20 to 30% during the period;
  
  
• The dominance of soymeal supply in the hands of some major crushers has affected the price stability of this important feed ingredient and had led to the ineffective allocation of farm resources. Ultimately, the profitability of the poultry and livestock sectors was adversely affected.  Farmers rearing layers and broilers had been incurring losses for a prolonged period due to the high cost of feed. The inventory of piglets was also inadequate to meet market demand;
  
  
• The incidence of corn fungus has affected feed quality and has resulted in lower fertility levels and higher rates of miscarriages amongst sows. Meanwhile, the inventory of meat hogs has also dropped to low levels;
  
  
• With the government's stepped up efforts to curb the violation of load limits by trucks, the resulting higher transport costs has translated to a 10% rise in the cost of feed production. The profit margin of feed millers has been narrowed in addition to the slowing down in sales of feed products;
  
  
• In the effort to cool an overheating economy, the Chinese government has tightened the availability of credit loans from banks to businesses. Thus the procurement of raw materials and the sales volume of feed increasingly hinge on a feed miller's ability to maintain a healthy cash flow. The credit squeeze also means that the future development or expansion plans of feed millers might have to be delayed or shelved.