Feed industry situation during Jan.- May 2021

    Summary: In the first five months in 2021, China's total feed output increased dramatically. Pig feed output featured a fast growth during this period; poultry feed output experienced a smaller fall in May; aquafeed, ruminant feed, and pet feed all saw a greater demand.   

    On 18 June, the China Feed Industry Association held a symposium on feed industry trend in H1 2021 in Beijing, at which feed production in the first five months of this year was analyzed comprehensively.   

    According to monitoring data from the China Feed Industry Association, China's feed production in the first five months of this year takes on five characteristics as followed:   

    Ⅰ Great increase in total feed output   

    
•       In the first five months of this year, China's total feed output increased by 21.5% YoY, compared with the average annual growth of only 3.8% in the recent decade.     
    

            

    

      Ⅱ Fast growth in pig feed output     

    

            

    
•       Since June 2020, pig feed output has grown considerably for 12 months on a row. Pig feed output achieved during Jan.–May this year rose by 75.4% YoY and rose by 25.0% and 41.0% compared to the same period in 2018 and 2019 respectively. Specifically, feed output of piglets, sows, and fattening pigs went up by 67.6%, 68.2%, and 81.8% on the YoY term respectively.     
    
•       However, the growth rate of pig feed began to slow down in May, due to faster recovery of hog population, less consumption, and greater fall of pork prices than expected and other factors. In May, pig feed output grew only 1.2% MoM, reporting 8.3 percentage down from last month in terms of growth rate. It should be noted that sow feed output decreased by 0.4% MoM, a fall resulting from non-seasonal factors for the first time for 20 straight months.     
    
•       According to monitoring date from the National Development and Reform Commission (NDRC):     
    
•       From 21 June to 25 June, China's average pig grain ratio registered 4.90:1, excessive down into the level-one early warning interval (<5:1). In respond to such situation, the central government and local governments nationwide will launch pork collection and storage for pork reserves. According to related mechanism, the NDRC released level-one early warning, sending a signal for the pig breeding industry to adjust output timely.     
    
•       On 28 June, China's pork price rebounded from the bottom, but the average price was still lower than last week. As pork price had plunged on a constant basis, provoking an outcry of pig breeding units against low pork prices, pork prices in those low-price areas of North China rebounded from the bottom this week and then pork prices in Central China, Southwestern China and South China followed suit. Presently, pig breeders have restricted the number of pigs supplied to the market and slaughter enterprises have shown attempt to raise output. NDRC predicts that pork prices will be likely to continue to rebound in the short term, helping reduce losses in the hog breeding industry.     
    

            

    

      Ⅲ Smaller fall in poultry feed output     

    

            

    
•       From Jan. to May 2021, poultry feed output dropped 7.0% YoY. In May, poultry feed output dropped 0.5% YoY, marking a YoY fall not fueled by seasonal factors for six consecutive months since Nov. 2020. Due to improved profits in breeding egg-laying chickens and broiler chickens in May, up 1.9% and 0.2% YoY respectively, the fall of poultry feed output shrank by 4.7 percentage compared to last month.     
    
•       According to the NRDC on 28 June:     
    
•       Poor market demand for broiler chickens: the national chicken/feed ratio in the fourth week of June stood at 2.17, down 7.26% MoM. Calculated by the current price and cost, the loss facing broiler chickens breeding industry will be USD0.26/head (RMB1.64/head) in future. At present, broiler chickens market suffers poor demand; slaughter enterprises show little interest in purchase with some of them having days off and stopping buying in; delivery of chicken slows down, resulting in more pressure on the decrease of chicken prices. In the short term, domestic supply of chickens will be not ample; consumption of the terminal market sees no obvious growth for the time being, and poor demand leads to a bleak chicken market.     
    
•       Expected profits as to egg-laying chickens fall down close to the costs: the national egg/feed ratio in the fourth week of June stood at 2.63, down 1.13% MoM. Calculated by the current price and cost, egg-laying chickens breeding industry will gain a profit of USD2.15/head (RMB13.64/head) in future. Since the present stage is the traditional off-season for eggs demand and eggs are moldy-prone in the present's hot and humid weather, eggs are subjected to poor market circulation, which cause eggs surplus in all links and egg prices to continue to decline. In the short term, bearish factors may dominate and therefore egg prices are expected to keep declining with a narrow fall next week; expected profits in breeding egg-laying chickens might fall down close to the costs in near future.     
    

            

    

      Ⅳ Greater demand in aquafeed and ruminant feed; fast growth of pet feed output     

    

            

    
•       Prices of aquatic products, beef and mutton keep rising constantly as high breeding efficiency has made aquatic inventory and ruminant inventory recover gradually. From Jan. to May this year, aquafeed and ruminant feed output increased by 5.8 % and 19.5% YoY respectively.     
    
•       Pet feed output has hit record high for three straight years, up by 22.3% in the first five months this year.     
    

            

    

      Ⅴ Prices surge in raw materials of feed, pushing up feed cost     

    
•       From Jan. to May, the average purchasing price of corn and soybean meal was USD453.2/t (RMB2,881/t) and USD579.5/t (RMB3,684/t) respectively, up 40.2% and 18.5% YoY respectively, which drove formulated feed cost and concentrate feed cost up by USD84.9/t (RMB540.0/t) and USD454.0/t (RMB286.0/t) respectively.     
    

            

    

      Ⅵ Bigger market share taken by large enterprises     

    
•       From Jan. to May, feed enterprises with a production scale of over 10,000 tonnes raised their output by 29.5% YoY, 8% above the national average; their output amounted to 91.2% of the total in China, up 3.1% compared to the same period last year.     
  

    Source:CCM