CCM: Chinese feed enterprises set foot in pig farming 03-08-2016

Recently, Chinese feed enterprises have been entering into pig farming, encouraged by environmental policies and the huge profit margins in selling pigs and pork. Meantime, this may change the market risk and the client area of the corn deep-processing industry in China.


Pig farming is becoming popular among feed enterprises in China's feed industry.


On 1 Feb., 2016, Beijing Dabeinong Technology Group Co., Ltd. announced that it will invest in four projects during 2016, of which three are live pig industrial chain investments, totaling USD24.41 million (RMB160 million). It will build up a comprehensive industrial chain from boar breeding to commercial pig selling, and will establish a farm which can hold 20,000 sows in 2016.


On 17 Feb., 2016, New Hope Liuhe Co., Ltd. announced to invest USD1.34 billion (RMB8.8 billion) to farm 10 million live pigs in a project that has been described as "company + family farm" within 3-5 years. It also plans to acquire 70% of Yangling Besun Agricultural Industry Group Corporation Limited, a large pig farming enterprise in Southwest China, aiming to establish a pig farming industrial chain in this area.


Early in 2015, COFCO Corporation, Chia Tai Group, Guangdong Wens Food Group Co., Ltd., Henan Chuying Agro-Pastoral Co., Ltd., Muyuan Foodstuff Co., Ltd. and some large listed farming enterprises announced to invest in building live pig farming projects.


Data shows that there were 35 large pig farming projects, with an accumulative investment of USD4.58 million (RMB30 million) in China. The total investment exceeded USD10.68 billion (RMB70 billion) and 30 million of live pigs were sold.


There are two factors that are driving Chinese feed enterprises into pig farming.


1. At present, China is closing down small pig farms with annual sales of less than 500 pigs in order to protect water quality at water sources. Also, the government is implementing the most stringent pig farm relocation policy ever in Yangtze River Delta, Pearl River Delta, Poyang Lake and Dongting Lake regions. In 2015, China reduced over 30 million of pigs for sale due to environmental problems, among which 3.95 million were reduced in Fujian Province. As a result of these policies, small pig farms are forced to exit the market, leaving a sufficient market gap for large enterprises to fill. 


Small pig farms are being removed in China



2. 2015 was the most profitable year for China's pig farmers in the past five years. The price of pork hit a record high for the most recent five years due to supply shortages. At the same time, the price of corn, the major raw material of feed, also hit a five-year low. The huge profit margin attracted a large number of investors. Furthermore, since the Chinese government is likely to reduce its interventions on the corn price in the future, the corn price might further decline. This means that the costs of raw material and feed additives may reduce.


Market price of live pig in China, Jan. 2012-Jan. 2016

Source: CCM


 Market price of corn in China, Jan. 2012-Feb. 2016

Source: CCM


The large-scale pig farming will change China's corn deep-processing industry in two ways.


1. China's pig farming is currently based on small farms. Additionally, farmers differ greatly in pre-judging and controlling the market information, which results in largely fluctuating numbers of pigs in different farms. Large-scale pig farming can be much easier for the government to manage. Also, a stable farming scale is very important to the corn and amino acid market because the steady demand can greatly reduce the market risks.


Feed enterprises are important downstream clients for corn products. As a result, feed enterprises that raise pigs can create collaborative development for both the feed and corn product industries. In 2015, the reduced number of live pigs in farms weakened the demand for feed, DDGS, lysine, threonine, corn gluten meal and other feed products. Their sales prices even declined to the production costs, which made these products unprofitable.


2. The client area of the corn deep-processing industry may change. China's pig farming will gradually transfer from South China to North China. Therefore, feed enterprises are likely to relocate to North China to be closer to their clients and the production area of raw materials. As for corn deep-processing enterprises, the different client area will also create logistics costs and cause changes to inventory plans.


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta.


For more information about CCM, please visit or get in touch with us directly by emailing or calling +86-20-37616606.

Tag: feed, pig farming, corn



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