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China sets ambitious goals for feed production despite U.S. trade disputes

Implementation of plans to be achieved mainly through further industry consolidation and increase in efficiency and will be part of existing five-year state strategy.

November 5, 2018

3 Min Read
China sets ambitious goals for feed production despite U.S. trade disputes

By Eugene Gerden

China is ready to implement its earlier announced ambitious plans and to increase its annual production of animal feed up to 220 million metric tons by 2020, despite the ongoing stagnation of the country’s economy and trade wars with the U.S., according to recent statements of some leading Chinese state officials and local experts in the field of feed business.

Implementation of the plans will be mainly achieved through the further consolidation of the industry and an increase in its efficiency and will be part of the existing five-year state strategy, which regulates the development of the Chinese feed sector during the period of 2016-20.

The ever-tightening environmental regulations in China have already resulted in the bankruptcies of many local feed producers. Under pressure are mostly companies of small and medium size, which were unable to adapt to new conditions. Some of them have already been acquired by larger players.

Currently, China is the world's largest producer of feed, with the annual output of 188-190 mmt. However, analysts with the country’s Ministry of Agriculture believe there is more to come. China has a potential to produce about 250 mmt plus.

Further rapid growth of the industry, though, is hindered by high domestic prices. Prices for feed in the Chinese market are almost by two times higher than in other countries from among the top 10 global producers.

This is mainly due to the high cost of raw materials and the increased awareness of Chinese regulators and farmers to the issues of feed safety, which results in the growth of prices for it.  

It is expected that a planned increase of production will take place through building new facilities and the modernization of already existing production facilities.

Plans of the Chinese business and the Ministry of Agriculture include building large-scale feed facilities outside the country. For example, such facilities are expected to be built in Russia’s Far East region and will mainly specialize in the production and supplies of feed to the Russian market.

In addition to the increase of production, part of the plans of the Chinese authorities is to reduce dependence of the industry from imports, particularly those from the U.S.

In the short term, China wants to reduce its soybeans imports from the U.S. and, for this purpose, will reduce the content of soybean byproducts in its domestic feed production. These plans do need to be officially approved by the Chinese government in order to come into force.

Instead of U.S. soybeans, it is said particular attention will be paid to the increase of imports of rapeseed, sunflower meal, palm kernel cake and some others similar products with low protein content.

According to the plans of the Chinese Ministry of Agriculture and local experts in the feed business field, next year China will be able to reduce imports of soybeans by about 10 million tons. Prior to the trade war with the U.S., the estimated imports from the U.S. were at about 30 mmt.

Traditionally, the share of soybean meal in the diet of pigs in China is estimated at 20%, with fodder corn being the basis for the diet with a share of 58%. In the case of corn, in recent years, the volume of its usage in the Chinese feed industry has significantly declined, being currently at record low levels.

However, experts with the Ministry of Agriculture predict another round of a growth of demand for corn due largely to the restrictions in the U.S. soybean imports and the decline in the demand for sorghum and other non-traditional crops.

Low world food prices also are an incentive to increase imports of corn, especially taking into account the current weak positions of the biofuel industry in the current economic environment.

Overall, according to experts’ predictions, China can reduce the share of soybean meal use in feed as much as 12%.

With soybean meal prices soaring on trade war worries, analysts say Chinese farmers and feed producers will be more motivated to cut soybean meal use in animal feed.

*Eugene Gerden is an international freelance writer specializing in covering global meat and feed industries. He has worked for several industry titles and can be reached at [email protected].

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