A Comprehensive Review of Changes in the Feed Industry in 2015
After enduring the painful adjustment period of 2014, 2015 became a critical year for the feed industry to enter its transformation phase. Looking across the entire industry chain: raw materials—feed—livestock farming, this series of links suffered a severe blow over the past year. Since the beginning of this year, the industry seems not to have emerged from the trough. The prices of corn and soybean meal, the two most important raw materials in the bulk commodity market, continued to decline. Although the temporary storage purchase policy provided slight support for corn in Northeast China, the sales-area market was overall bleak; as for soybean meal, needless to say, prices fell again and again. Feed market production and sales were also less than satisfactory, and the peak sales season that should have appeared in the fourth quarter was slow in coming. What about the livestock farming industry? One could also describe it as a peak season that was not prosperous. Live pig sales were sluggish, and the epidemic accelerated farmers' slaughtering, with prices continuing to fall. Can the raw material, feed and livestock farming markets emerge from the doldrums in 2015? The Nongbo Feed editor believes the answer is yes.
Feed industry
There are turning points in the feed raw material market in 2015
Domestic soybean meal prices have continued to fall since early November last year; the leading factors: 1. Imported soybeans continued to arrive at ports, resulting in loose supply. 2. Consumer demand was sluggish, and oil mills suffered sales losses. Although the market did not see large-scale stockpiling before the Spring Festival, feed mills purchased small amounts near the holiday, and oil mills began settling previous contracts and transferring inventory for settlement, which led to a clear improvement in soybean meal shipments in the past two days; at present, the domestic soybean meal price range is 2800-2950 yuan/ton. After the holiday, soybean arrivals at ports will decrease substantially. Due to the earlier incidents of washed-out US soybean cargoes, soybean arrivals in February are expected to be around 4 million tons, and market supply may be relatively tight for a period after the holiday, with the possibility of a moderate rebound in prices. Starting in March, as South American soybeans begin to come onto the market, China may choose cheaper South American soybeans, and South American transportation logistics in the second quarter will become a major variable in market operation. If logistics problems strike again, domestic supply in the first half of the year will face a gap between old and new crops, and soybean meal prices are expected to rebound sharply.
In the second half of the year, the market focus shifts to US soybeans and domestic farming conditions. We will analyze domestic farming later; for now, let us look only at the US soybean situation. At present, US soybean prices are operating at low levels, with hopes pinned on the market conditions of the next year. From June to September, weather-related speculation during the US soybean growing period gradually unfolds. According to past patterns, this is a season when US soybeans tend to rise, and also a period when domestic soybean meal prices rise. Based on historical patterns, soybean meal may once again open a downward channel in the fourth quarter, but the Nongbo Feed editor believes the decline will be smaller than in 2014.
Overall, there are turning points in the soybean meal market in 2015; according to the above analysis, the second and third quarters are the key periods for soybean meal price rebounds.
Feed production and sales conditions are expected to improve in 2015
National feed output declined in 2014, mainly due to the impact of the severe downstream farming situation on feed consumption demand. The editor expects that there is a relatively high probability that feed output will show slight growth in 2015. Looking at pig feed, which accounts for a relatively large share; in 2014, live pig and breeding sow inventories were low, and it is expected that inventory levels will not be too high in the first half of 2015 either, though there will be a relatively upward trend. The highlight of development lies in the second half of the year. As farmers' enthusiasm for restocking increases, live pig inventories will reach a peak point in the second half of the year, and the overall inventory level for the year will be higher than last year. The demand for pig feed is also directly reflected in live pig inventories, and feed consumption will increase greatly compared with last year. Provided no major epidemic occurs, poultry feed demand is expected to recover. Aquatic feed depends on this year's weather; if the "weather is favorable," output growth will also become a high-probability event.
⟦NL> From the perspective of enterprise production conditions, as industry consolidation accelerates, small and medium-sized feed enterprises face the crisis of being eliminated, and the number of feed enterprises in China continues to decrease; data from the Ministry of Agriculture show that as of December 2014, the number of enterprises nationwide that had obtained feed production licenses was 7,061, a decrease of about 3,000 compared with the end of 2013. This development trend has a certain impact on China's feed output, but in the long run it is effective momentum for accelerating industry development. Although the number of feed enterprises has decreased, this is mainly concentrated in the elimination of small and medium-sized enterprises, while large and medium-sized feed enterprises will extend the industry chain, concentrate on increasing production capacity, and strengthen industry consolidation, which for China's total feed production and sales is beneficial with no harm.
Overall, China's feed output may show a certain degree of growth in 2015. For feed enterprises, 2015 will be a year in which opportunities and challenges coexist.
The highlight of livestock farming development lies in the second half of the year
The overall performance of the livestock and feed industry in 2014 was relatively poor, and the fundamental reason lay in the bleak situation of the pig farming industry. "One stone stirs up a thousand waves," and the live pig market was that stone; low pig prices—farmers slaughtering—low inventories—poor feed production and sales—poor raw material demand—falling raw material prices; through these connections, we can intuitively see the process of overall market downturn last year. The reasons for the sluggish live pig market: 1. Changes in dietary structure. 2. Restrictions on consumption by government organs. 3. Overcapacity.
Can the pig market make a comeback in 2015? The editor believes that, according to the laws of price operation, the live pig market in 2015 will clearly be better than last year. First, from the perspective of farmers, as the degree of intensification and large-scale development of the farming industry increases, small and medium-sized backyard farmers will gradually exit the market, and capacity fluctuations and price fluctuations in the live pig industry will become more stable. Second, from the perspective of live pig production capacity, in December 2014 live pig inventories were around 420 million head, and breeding sow inventories had already fallen below the level of 43 million head; the reduction in breeding sow inventories will gradually ease the situation of excess live pig supply. It is expected that live pig prices are expected to stabilize beginning in April-May, and the probability of a gradual rise in the later period is relatively high. The chance of a relatively large increase for the year is more likely to appear in the second and third quarters. However, whether in terms of farming volume or price changes, the highlight of livestock farming development lies in the second half of the year.