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Asian Agribusiness Consulting China 1 million tonne and over Feed Manufacturer Report
Asian Agribusiness Consulting, Jan 2008, Pages: 91
China is an attractive feed market producing 123 million tonnes of feed in 2007 from 15,000 feed businesses. The industry has grown 20 per cent since 2005. The forecast market size is 148 million tonnes by 2010.
Rising raw material prices have accelerated the consolidation of China's feed and livestock industries. Higher prices grain prices, coupled with the threat of disease has resulted in smaller disease prone producers leaving the industry and increased investment from successful industry members and new investors.
A modern pig and poultry industry increases the demand for professional feed and creates opportunities to increase the level of technology offered through feed sales. China's forecast total feed production in 2008 is 130 million tonnes. The compound feed market size is 98 million tonnes and has grown at 26 per cent since 2005. The concentrate feed market is 26 million tonnes and has grown at 4 per cent and the premix market is 5.6 million tonnes growing at 19 per cent.
The trend in China's livestock industry is to purchase more compound and less concentrate feed. Fifty seven per cent of the total feed in China is produced in the eight largest feed producing provinces:
- Guangdong
- Shandong
- Henan
- Hebei
- Liaoning
- Hunan
- Sichuan
- Heilongjiang
Guangdong and Shandong dominate the feed market in China with 22 per cent of the total production. Both provinces have relatively high levels of modernization and integration. Concentrate feed production is largest in Liaoning, Henan, Heilongjiang and Shandong. As the livestock industry modernizes and specializes the use of concentrate feed will reduce.
Shandong, Henan, Sichuan and Hunan offer the greatest opportunities because:
Shandong
- Dominant compound category and large concentrate feed category
- Local government favourable to livestock
Henan
- Large concentrate and compound feed and fragmented feed industry
- Modernising large pig population and moderate broiler industry
- Local government actively encouraging investment
Hunan
- Large compound feed industry and relatively large concentrate feed industry
- Large modernising pig industry supported by the Government
Sichuan
- Large compound feed market
- Fragmented existing feed industry
- Large modernising back yard pig, broiler and layer industries
China's livestock industry will become more equipped to manage and prevent disease outbreaks and as such will reduce volatility due to disease. The pig industry offers the greatest opportunities in China, followed by the broiler industry and then the layer industry. To target the pig industry the provinces of Shandong, Sichuan, Henan, Hunan and Yunnan are important.
The ten largest feed manufacturers in China produce 32 million tonnes or 40 per cent of China's total feed output. The largest two feed manufacturers, New Hope (Liu He) and Chai Tai manufactures 12 million tonnes of that 32 million tonnes.
China's feed industry is attractive to new entrants and is characterised by high competitor rivalry, excess capacity, a large number of buyers and a small number of substitutes.
The largest manufacturers have been successful in securing production facilities across the country and establishing distribution networks. The corporate structure of a feed business in China is important to ensure that strategy is implemented locally.
With the exception of Chai Tai multinational feed manufacturers have been successful in producing higher priced quality products but have not been successful with expanding their business at the same rate as their domestic rivals. The businesses of East Hope, Tong Wei, Dabeinong and WenShi warrant further investigation. China's market for young pig feeds is approximately 4.5 million tonnes and the market will expand to 7 million tonnes by 2010. China's ten largest manufacturers of young pig feeds represent 17 per cent share of the current market and is dominated by the four largest manufacturers. The young pig feed industry will attract new entrants and attention from China's largest feed manufacturers. Competitive rivalry within this market is high and the cost of selling is relatively high. Large potential customers are small compared to the number of medium to small customers. The businesses of Muhe, Yang Xiang, DKSH and Chen Nong deserve further investigation.
Products mentioned in this Report:
- Compound Feed
- Concentrate Feed
- Premix Feed
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