China's feed and livestock industry development encounters great difficulties

Since last year, the development of China's livestock industry has encountered unprecedented difficulties. It can be said that the development of China's livestock industry over the past two years has been the most difficult period since reform and opening up, and also the period with the most problems and contradictions. This is first manifested in weak consumption growth. Pigs, affected by cyclical fluctuations, have already been in a state of comprehensive loss. Before May this year, there were 7 consecutive months of severe losses. From May onward the situation improved somewhat, but up to now the situation of losses across the entire industry has still not been reversed. So this round of cyclical fluctuations in pigs has lasted much longer than previous ones, and therefore we must carefully analyze the new circumstances and new problems of this cyclical fluctuation. In the entire livestock industry, the two major sectors of pigs and poultry are in a very bad situation, and only beef and mutton production is in a very good situation.

According to analysis, the reason why China's livestock production has taken such a turn since last year, apart from being affected by the cyclical fluctuations in pigs and the impact of unexpected poultry incidents, there is also a very important factor, namely policy factors. After the introduction of the Central Eight-Point Regulation, it had a direct and important impact on livestock product consumption, but I think this impact is a positive one. In our past livestock product consumption there was a very large bubble. The bubble was composed of several aspects: First, wasteful consumption, that is, consumption with public funds, and this proportion should not be small. Second, excessive consumption. In the past, every year during festivals, and even in daily life, government organs, organizations and units all had to make group purchases for their employees, such as buying meat and eggs. Basically, units large and small all had such welfare benefits. Whether or not your family had any, whether or not you wanted to eat it, it was distributed. This was a kind of excessive consumption. After the introduction of the Central Eight-Point Regulation, this bubble was squeezed out. I think the total amount of these two parts combined is definitely not a small figure. At present no institution has made an accurate judgment on this figure, but I believe this figure accounts for no small proportion of total livestock product consumption. After this bubble was burst, the contradiction of supply exceeding demand became even more prominent. It needs to be pointed out that from now on, whether engaged in production or in feed, when forecasting and calculating future livestock product consumption, this bubble must be removed. For decades before, this amount was always counted in total consumption, so I think the impact of this factor cannot be underestimated.

⟦NL> In addition, people's living habits are also undergoing profound changes, especially among the new generation. As for the consumption of livestock products, many of them do not know how to cook, so due to changes in lifestyle, the actual consumption in this area is also decreasing. At the same time, due to the slowdown in macroeconomic growth, group consumption at construction sites and factories in the past has clearly declined. In many construction sites in the past, whether railways, highways, including house building, and also many factories, this kind of canteen group consumption mostly consisted of pork, eggs and chicken, and this amount was also not small. This is also an important factor causing weak consumption growth.

Second, overcapacity in livestock product production. The most prominent manifestation is in pigs. At present, the number of breeding sows nationwide is close to 50 million head. Despite the pig situation being so bad, the reduction in the number of sows is very limited. With 50 million head of breeding sows, calculated at 13 or 14 piglets per head, each can produce 30 to 40 per year, and oversupply is obvious. The same is true for broilers. Under the severe impact of H7N9, last year 1.5 million sets of breeding chickens were still imported, and production capacity remains severely excessive.

However, the adjustment of production capacity in livestock production is not as simple or as easy to do as in industry. There is still no way to begin tackling the problem of adjusting production capacity, but this problem must be taken seriously and studied.

Due to the impact of the livestock production situation, the growth rate of the entire feed industry has slowed sharply, and some feed products have even seen relatively large declines. A special reason why pig feed continued to grow this year is that many pig farming enterprises have been holding back animals from the market very seriously. Many enterprises only sent pigs to market after raising them to more than 150 kg. The feed consumed by one pig is almost equivalent to that of two pigs. This year the phenomenon of holding back pigs from the market has been very common. If pig feed consumption is calculated according to the conventional methods of the past, the figures do not match up.

Because the growth rate of the feed industry has slowed, the impact on corn consumption is also very direct. The increase in corn consumed by feed this year compared with previous years is not very obvious. From my personal view, although North China and Northeast China were affected by drought this year, with the drought impact in Henan, Liaoning and Jilin relatively severe, Heilongjiang was unexpectedly good this year, so overall this year is still a year of bumper corn harvest, especially since the quality of corn in Heilongjiang this year is better than in previous years. Based on a comprehensive analysis of this year's corn planting area and drought conditions, this year's corn production may be slightly reduced compared with last year, by at most a few billion jin or so, and will not exceed 10 billion jin. Last year's corn output was 214 million tons, and this year it should be around 210 million tons. Today is September 22. How does everyone judge this year's situation? The production situation is basically clear. The main question is how to judge the price at which this year's new grain will come onto the market. I think this year's new grain price will not be low. I worked in Harbin for several years. I estimate that the opening price for corn in Heilongjiang this year should not be lower than 0.75 yuan, because I myself am not engaged in grain trade, so I can only make such a judgment rashly. Although the actual production reductions in Henan, Liaoning and Jilin this year are not very large, the signal they send will be far greater than the actual reduction. This signal was released long ago and will have a direct impact on the market-entry price of new grain. This year's new grain market-entry price mainly depends on policies issued by the state, first the temporary storage price, and second the freight subsidy. At what level should this year's temporary storage price be determined? Overall it should remain stable, and maintaining stability is relatively reasonable. If you set it one cent higher, I think the signal sent is wrong, and one cent lower is also wrong, so from a scientific and reasonable point of view, it should remain at last year's level. There is also the freight subsidy, which will also directly affect the new grain price. At the same time, because a relatively large amount of new warehouse capacity has been added since last year, after the new grain comes onto the market there may be a situation of grain grabbing. Why grab at this time? What is being grabbed is the price spread, from September 25 this year until the official introduction of the temporary storage price, roughly half a month to 20 days. If you bet correctly on this price spread, the return will not be small, so I estimate that after this year's new grain comes onto the market there may be grain grabbing. The first battlefield is in Heilongjiang, but this judgment may not be accurate.

At present, the situation of corn deep processing is poor overall. The existing corn deep processing capacity nationwide is roughly close to 80 million tons, but at present the entire industry is in a state of severe losses. In producing alcohol and starch, generally each ton loses 200 yuan. So although our entire corn deep processing capacity is 80 million tons, actual corn consumption last year was just over 50 million tons. Since the beginning of this year, the operating rate of corn deep processing enterprises has been just over 40%, less than half. This is mainly due to losses across the entire industry, and the export situation is also poor. In the past, we exported about 500,000 tons of alcohol annually, and this year it is estimated that only a few tens of thousands of tons will be exported. For starch, in the past 400,000 to 500,000 tons were exported each year, and this year it will not exceed 100,000 tons. The entire corn deep processing industry is in a state of industry-wide losses, and this situation will not be effectively reversed in the near term.

At the same time, because the corn purchase and storage price has been raised substantially for many consecutive years, domestic corn prices are far higher than international market levels. At present, the duty-paid price of corn imported from the United States to Guangdong is more than 1,740 yuan per ton, but transferring corn from Northeast China to Guangdong costs more than 2,700 yuan, a difference of 1,000 yuan per ton. The impact of this price gap is very great. There is also the substitution of corn. With corn prices running at a high level, corn deep processing enterprises imported more than 5 million tons of cassava last year and 900,000 tons of cassava flour, equivalent to replacing more than 6 million tons of corn. Feed enterprises do not yet have complete figures. I estimate that the amount of wheat substitution since the beginning of this year is also definitely not a small figure, so the supply and demand situation for corn is also changing. This year is still a bumper year for corn, but consumption growth is weak and substitutes are constantly increasing, so the actual supply-demand relationship for corn is still one of oversupply. Therefore, next year's corn inventory pressure will still not be small.

Although corn is generally in oversupply, prices will not undergo subversive changes because of oversupply. Corn prices will still remain in a high-level operating trend.

In addition, with temporary storage corn inventories so large, if it were allowed to sell at a loss and create new book debts, the state finances could not bear it either, so the overall pattern of selling at a profit must be maintained, and it must be possible to sell it through at a profit. I think this is a general principle. A situation of losing money and new book debts absolutely will not appear, so the price should still remain in a high-level operating state. Then everyone has to make a choice: how should corn trade be handled this year? First, how much new grain should be purchased? Second, at what price should new grain be sold? What is especially important is to scientifically determine reserve volumes. Every processing enterprise must have a reasonable reserve volume, otherwise there may be rollovers, persistently high costs and so on. With the freight subsidy unclear, many people do not dare to act, and this year even bagged grain is becoming less and less attractive for people to handle, so in the future the problem in the Southwest region will become even more prominent. In the past two years, corn in the Southwest region has mainly been transferred in from Xinjiang and Shaanxi. Next, as consumption continues to increase, its guarantee capacity is still limited. For example, bagged grain in the Northwest is not cost-effective and no one does it, so how will bulk grain be brought in next? Therefore, you should put forward some suggestions on state policies from different angles, that is, for future bagged grain and bulk grain, exactly which policies should be sought.

In short, I think this year's corn situation is becoming more and more complex. Everyone must pay close attention to the state's macroeconomic regulation and control policies on grain; at the same time, they must also pay close attention to actual changes in the market, have correct expectations for future development, and make correct judgments.