2015: The Feed Industry Faces Three Major Battles

 

The past two years can be described as a turning point for the feed industry, having gone through overcapacity in the breeding industry, the survival of the fittest among enterprises, and drastic fluctuations in raw material prices. 2015 became 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. Here, the Nongbo Feed editor summarizes the three major battles of the feed industry in 2015:

The Battle for Internet Transformation

Internet genes have already been integrated into every industry, especially the livestock and feed industry in the past two years. With the acceleration of feed enterprise integration and intensification, a single, traditional marketing model has 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 agriculture and animal husbandry 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 ignited the entire livestock and feed industry, fully proving Dabeinong's determination to enter the Internet. On the road to 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 right moment, the market will not give too much time or too many opportunities. The Nongbo Feed editor believes that only by using Internet thinking to upgrade the traditional feed industry anew, presenting a “new normal” and serving the entire livestock industry, can the Internet truly be embraced.

The Battle for the Aquatic Feed Industry

Today, with overcapacity in the livestock and poultry breeding industry, the highly profitable aquatic feed industry has become a battleground that many leading enterprises must contest. Setting aside aquatic feed giants Haid and Tongwei, agriculture and animal husbandry enterprises such as Dabeinong and New Hope, which are committed to livestock and poultry feed production, are also making major moves into the aquatic feed industry. In fact, behind the high profits of the aquatic feed industry, which depends on the weather, there are also relatively high risks. 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?

Here is a set of figures: in 2012, domestic aquaculture output was 43.05 million tons. If calculated according to a feed coefficient of 1.3, aquatic feed demand 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 would be needed, and the industry still has room for growth of 60%. This fully proves that the aquatic feed industry has huge development potential. In addition, the giants stationed in the aquatic feed industry are only Tongwei and Haid. By contrast, there are many livestock and poultry feed agriculture and animal husbandry giants and competition is fierce. Therefore, enterprises that seize the initiative and enter the aquatic feed industry first will have a somewhat greater advantage.

The Battle for the Feed Raw Material Industry

⟦NL> 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 feed enterprise procurement. In 2012, heavy speculation about U.S. weather caused soybean meal prices to soar, and then they plunged again after the USDA report was released. Purchasing large amounts of high-priced soybean meal in the early stage made feed production costs too high; when soybean meal plunged later, customers clamored for feed product price cuts, but with costs too high, how could prices be reduced? These problems left feed enterprises very conflicted. In fact, when it comes to 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; others use trading methods such as hedging in the procurement process to directly control costs. In the view of the Nongbo Feed editor, direct cooperation with grain and oil processing industries is a good 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 can be implemented in 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 urgent, and 2015 is destined to become a critical year for transformation. In addition to the three major battles mentioned above by the Nongbo Feed editor - Internet transformation, the aquatic feed industry, and the feed raw material industry - talent, services, and other aspects will also become battlegrounds for competition among feed enterprises.