October 17, 2011

Over the next five years, China is targeting an annual feed output of 200 million tonnes, of which mixed feed output is to reach 168 million tonnes and feed concentrates output 26 million tonnes, figures from Ministry of Agriculture (MOA) showed.

China's feed market is growing fast. In 2010, its annual feed output was 162 million tonnes, valued at RMB493.3 billion (US$77 billion).

As the pace of urbanisation quickens and living standards improve in China, unbalanced supply and demand in the feed industry is becoming an issue, suggesting feed prices will frequently rise and be volatile in the coming years.

Imports dominate China's soy market. In 2010, 54 million tonnes of soy was imported, indicating a 75% dependence on foreign soy in China. Dependence on foreign fishmeal is also more than 70%. 

Demand for feed corn in China, which is also facing tight supply, has climbed to 110 million tonnes, and accounts for 64% of the annual output in China.

A basket of preferential policies are to be introduced to boost the industry's growth including continuing exemption from value added tax; greater subsidies on livestock farm equipment; encouraging farms to get involved in direct marketing; the construction of more hi-tech production bases; and a more active role for public funds.

Accelerating the pace of M&A in the feed industry is another highlight of the 12th five-year plan for the feed industry released by the MOA. The target is that by the end of 2015, there will be at least 50 feed producing companies with annual output capacity more than 500,000 tonnes, which will greatly improve the stability and profitability of the whole industry.

Many believe leading Chinese feed companies will benefit most from this new plan. In 2010, China had 10,843 feed producing companies, down 4,675 compared to the number in 2005. But many of them are small and medium-sized enterprises (SMEs). Only 30 feed production companies have more than 500,000 tonnes annual output capacity, making up 42% of China's annual output, an increase of 17% compared to 2005.

Overall then, the government is making every effort to encourage all forms of M&A in the feed industry.