January 4, 2010
Chinese feed enterprises reorganise to meet challenges
There is high potential for the Chinese feed resources market but at the same time, pressure weighs on feed millers to adjust their strategies to reduce operation costs for survival.
Following years of development, China''s feed industry has set up a complete feed industrial system that has integrated the feed processing, feed additive, feed raw material and feed machinery manufacturing industries as well as feed research, education, standard and examination. In 2008, the Chinese feed market scale was about RMB400 billion (US$58.6 billion).
In 2008, China''s industrial feed production, compound feed production, concentrated feed production and feed additive premix production totalled to 137 million tonnes, 105.90 million tonnes, 25.31 million tonnes and 5.46 million tonnes, an on-year rise of 10.83%, 13.64%, 1.58% and 4.79% respectively.
The increase in feed production mainly comes from those regions with rising population and personal income as well as accelerating urbanisation process.
However, with an equipment utilisation rate of less than 50%, China''s feed industry faces the issue of severe overcapacity in production. There are over 10,000 feed producers in the country but the annual production of one feed producer can be fewer than 10,000 tonnes.
Taking into consideration of the increase in total feed production, the lowest production of feed enterprises and the productivity-led market distribution, China''s feed market can only support a maximum of 1,000 feed enterprises.
Therefore, mergers and acquisitions (M&A) have become the indispensable survival condition for enterprises. In 2008, the number of Chinese feed enterprises was reduced by over 1,000 year-on-year.
Researchers predict that in the following three to five years, the feed enterprise number will continue to fall while the market concentration will be improved, leading to more M&A and reorganisation in the industry.
Nonetheless, the competition among Chinese feed enterprises is transferring from the product competition to the value chain competition as well as from the single feed production to the offering of solutions for livestock producers.