Analysis of the Three Major Battles in China's Feed Industry in 2015
Data shows that in 2014, China's total industrial feed output was 193 million tons, up 0.2% compared with 2013. 2015 may become the most important transition period for the feed industry.
The past two years can be described as a turning point for the feed industry. Having experienced overcapacity in the breeding industry, the survival of the fittest among enterprises, and dramatic fluctuations in raw material prices, 2015 has become a critical period for the transformation of the feed industry. While awakening the industry's recovery, feed enterprises also have many tough battles to fight among themselves. Here, the editor summarizes the three major battles of the feed industry in 2015:
The Battle Over Internet Transformation
Internet genes have been integrated into all walks of life, especially the livestock and feed industry in the past two years. With the acceleration of integration and intensification among feed enterprises, single and traditional marketing models have long been unable to keep up with the pace of industry development. Embracing the Internet has become a major trend in the development of the feed industry. How can the Internet be well combined with the feed industry? Here, the agricultural and livestock enterprise that must be mentioned is Dabeinong. Whether in terms of early-stage investment or later-stage development, Dabeinong has achieved good results in Internet transformation. Its recent private placement of 2.2 billion yuan to boost agricultural Internet development once again detonated the entire livestock and feed industry, enough to prove Dabeinong's determination to enter the Internet. On the path of Internet transformation, if feed enterprises are too formalistic, they will neglect the fundamental purpose of the enterprise. If they merely observe and wait for the opportunity, the market will not give too much time or too many opportunities. In the editor's view, only by using Internet thinking to upgrade the traditional feed industry anew, presenting a kind of "new normal," and serving the entire livestock industry, can one truly embrace the Internet.
The Battle Over the Aquatic Feed Industry
Today, with overcapacity in the livestock and poultry breeding industry, the high-profit aquatic feed industry has become a contested battleground for many leading enterprises. Leaving aside aquatic feed giants Haid and Tongwei, agricultural and livestock enterprises dedicated to livestock and poultry feed production, such as Dabeinong and New Hope, are also making major moves into the aquatic feed industry. In fact, the aquatic feed industry, which depends on the weather, also carries relatively high risks behind its high profits. Judging from last year's situation, even if aquaculture was not dismal, it could still be described as sluggish. So why can it still attract the favor of many enterprises? For more related content, please consult the feed industry market survey and analysis report published by China Report Hall.
Now look at a set of figures: in 2012, China's farmed aquatic output was 43.05 million tons. If calculated according to a feed conversion ratio of 1.3, the demand for aquatic feed would be 55.97 million tons, while actual output was only 18.83 million tons, with a coverage rate of 31.4%. It is estimated that by 2020 China's aquaculture volume will be 58 million tons. Assuming a coverage rate of 40%, 30.16 million tons of aquatic feed will be needed, leaving room for industry growth of 60%. This is enough to prove that the aquatic feed industry has huge development potential. In addition, only two giants, Tongwei and Haid, are stationed in the aquatic feed industry. By contrast, there are many livestock and poultry feed agricultural and livestock giants and competition is fierce. Therefore, enterprises that seize the opportunity and are the first to enter the aquatic feed industry will also have a greater advantage.
The Battle Over Feed Raw Materials Industry
The foundation of feed enterprises lies in producing feed, which cannot be separated from the supply of raw materials. In recent years, prices of bulk feed raw materials in China have fluctuated sharply, which is undoubtedly a headache for procurement by feed enterprises. In 2012, heavy speculation about U.S. weather caused soybean meal prices to soar, and then they plummeted again after the USDA report was released. Purchasing large quantities of high-priced soybean meal in the early stage made feed production costs too high; later, soybean meal plummeted, and customers clamored for feed product price cuts, but with costs so high, how could prices be reduced? These problems all left feed enterprises deeply conflicted. In fact, regarding the issue of feed raw material supply, every enterprise has its own solution. Some enterprises cooperate directly with upstream grain and oil processing industries to achieve a win-win situation; other enterprises use trading methods such as hedging in the procurement process to directly control costs. In the editor's view, direct cooperation with grain and oil processing industries is not a bad choice. It can not only reduce intermediate links, improve efficiency, and share risks, but also avoid problems caused by quality differences. The most important point is that it ensures quality and safety. In 2015, developing the upstream raw material segment will be another development measure for feed enterprises.
Against the backdrop of slowing national economic growth, the transformation of the feed industry is also extremely urgent. 2015 is destined to become a critical year for transformation. In addition to the three major battles mentioned above by the editor - Internet transformation, the aquatic feed industry, and the feed raw materials industry - talent, services, and other aspects will also become battlegrounds for competition among feed enterprises.