20151113-USDA-Development_of_China_s_Feed_Industry_and_Demand_for_Imported_Commodities_26页_794kb

Summary of China's Feed Industry Development and Demand for Imported Commodities

Core Content

China's feed industry has played a pivotal role in supporting the growth of its livestock sector and has become a major driver of agricultural imports. The industry's development has been closely tied to the country's economic reforms and policy changes, evolving from state-led initiatives in the 1970s to a mature, private-sector dominated industry in recent decades.

Main Points of Development

• Introduction and Growth:

  • The feed industry was initiated in the 1970s with government support and foreign investment.
  • By 2012, China's commercial feed output reached 194 million metric tons (mmt), surpassing the U.S. and EU.
  • The industry's growth paralleled that of meat and egg production, which increased from 15 mmt in the early 1980s to 114 mmt by 2014.
  • Projections indicate a more moderate growth rate of 1.5% annually for the feed industry from 2014 to 2024.

• Key Phases of Development:

  • 1970s-80s: Government launched the feed industry with the construction of modern feed mills and support through tax exemptions, reduced tariffs, and foreign exchange allocations.
  • 1980s-90s: The rise of backyard producers using local feedstuffs and surplus labor. The government reduced import barriers for nongrain feed materials, boosting supply.
  • 2000s: Livestock modernization accelerated, with commercial feed replacing traditional on-farm feed sources. The "company + household" model became more common.
  • 2013-15: The feed industry entered a "new normal" of slower growth and consolidation, influenced by economic slowdown, disease outbreaks, and stricter regulations.
  • Future Growth: Expected to continue with urbanization and modernization of livestock and aquaculture sectors, promoting the use of commercial feed. The government aims to increase the share of large-scale farms in meat and dairy production.

Key Commodities and Raw Materials

• Chief Raw Materials: Corn and soybean meal are the most important ingredients in China's feed industry, with corn accounting for over 50% of feed mill raw material consumption in 2013.
• Imported Commodities: China is the world's leading importer of soybeans, rapeseed, distillers' grains, sorghum, barley, and fish meal, all used in feed production.
• Import Policies: These commodities benefit from quota-free access and low tariffs, which are partly due to the feed industry's demand.

Competition and Consolidation

• The feed industry has become more competitive, with a shift from state and foreign investment to private equity and debt financing.
• Large feed companies are expanding operations, experimenting with new products and sales channels, and some are moving into meat and dairy production.
• The industry is consolidating, with a focus on reducing excess capacity and improving quality and safety through vertical integration and better regulation.

Impact of Policies

• Government policies in the 1970s and 1980s aimed to enhance the efficiency of animal protein production from grain.
• The 1990s saw policies encouraging the use of nongrain feed resources and oilseed meals, which helped alleviate pressure on grain supplies.
• The 2011-15 Five-Year Plan sought to transform China from a "big feed country" to a "strong feed country" by reducing the number of small, inefficient mills.

Challenges and Trends

• The feed industry faces challenges such as excess capacity, outdated equipment, and low-quality products, primarily due to the large number of small mills.
• As the industry matures, it is expected to become more integrated with the livestock sector, leading to increased demand for U.S. agricultural commodities.
• The push for vertical integration and traceability has increased due to food safety concerns and regulatory changes.

Conclusion

China's feed industry has grown significantly over the past four decades, driven by economic reforms and policy support. It now plays a crucial role in shaping global agricultural trade and is a key factor in the country's import demand for feed ingredients. As the industry continues to evolve, it will likely influence trade policies and increase its presence in international markets.