When chicks can't be sold, they are burned; poultry farming hits a cold winter

After two years in the doldrums, the poultry farming industry, which had originally hoped to see a turnaround in 2014, has been left even more depressed under the market panic triggered by the H7N9 avian influenza outbreak. Industry experts analyze that the poultry farming industry will be forced to transform and upgrade to improve its ability to withstand risks.

“The chicks we can't sell have been burned. It breaks my heart!”

These days, Wang Lei, a broiler farmer in Liuyuan Township, Linzhang County, is worrying about this year's farming plan. “Last year I lost more than 50,000 yuan, and I'm struggling over whether to farm this year.”

Wang Lei began raising broilers in 2012. His shed can hold 10,000 broilers at a time, and he can bring 60,000 to market in a year. In the first year, due to lack of experience, he lost more than 40,000 yuan. He had hoped to turn things around last year, but unexpectedly ran into an industry-wide downturn and lost money again.

“None of the chicken farmers around here made money last year, and this year many of them don't plan to raise chickens anymore,” Wang Lei said.

Broiler farming was originally a leading industry in Linzhang County, with nearly 300 large-scale farms and households. The market panic caused by the H7N9 avian influenza dealt a heavy blow to this major broiler-farming county. “There are many empty sheds now. At least more than half of the chicken farmers have suspended farming and are in a wait-and-see state,” Huang Zenggang of the Animal Health Supervision Institute of the Linzhang County Animal Husbandry Bureau told reporters.

In Guantao County, the “home of laying hens in China,” the farming industry is also in a slump. “Last year most chicken farmers in the county lost money,” said a staff member of the Guantao County Animal Husbandry and Fisheries Bureau. Some small farmers felt that raising chickens was not as profitable as working as laborers, and they have already given up raising chickens.
Data provided by the provincial Animal Husbandry Association shows that Hebei Province's laying hen industry suffered losses in 2013. “Egg prices have long remained low, and the prices of culled chickens are relatively low, while farming costs such as feed prices, labor wages and epidemic prevention expenses have risen rather than fallen. The persistently sluggish market has left farmers and farming companies gasping for breath,” said Liu Wenke, secretary-general of the provincial Animal Husbandry Association.

The slump in the market for terminal commercial chickens began to spread upstream, and many breeding poultry farms in Hebei Province have encountered difficulties in selling chicks. “The current situation is not very optimistic, and it is hard to predict when we will emerge from the downturn,” said Zhang Junyi, marketing director of Wu'an Ruiyang Poultry Breeding Co., Ltd. He said chick prices are low and sales are sluggish, forcing him to sell some breeding eggs as commercial eggs, and “some chicks that cannot be sold have to be burned.”

“The chicks we can't sell have been burned. It breaks my heart!” Zhao Suli, head of the No. 1 Breeding Chicken Farm in Ningjin County, said helplessly.

Overcapacity and rising costs cannot be ignored

“The poultry farming industry generally has a cycle of two to three years. Everyone had been optimistic about the market in 2014, but the market panic triggered by the avian influenza outbreak made end customers lose confidence,” Zhang Junyi analyzed. If the avian influenza outbreak passes quickly, the industry should see a turning point this year. However, the continuous news of human infections with H7N9 avian influenza has kept market panic going, casting another shadow over hopes for a recovery in the poultry farming industry.

While the industry generally blames the market slump on the market panic triggered by the H7N9 avian influenza outbreak, some experts believe that excessive overall supply in the poultry industry is also an important reason for the industry's losses.

Relevant data shows that after the golden development period of 2010 and 2011, an excessive volume of grandparent chicken imports in China led to a serious imbalance between supply and demand in the industry. In 2012 and 2013, China's poultry industry introduced about 1.4 million to 1.5 million sets of grandparent chickens, while under normal circumstances the import volume matching market demand should have been 1 million to 1.1 million sets, resulting in an estimated surplus supply of commercial chickens as high as 200 million to 240 million birds.

Reporters learned from some breeding poultry farms in Hebei Province that before 2013, chick sales were generally good, and they also increased their import volume. “From 2010 to 2011, chick prices could reach as high as about 5 yuan each. Farmers were optimistic, and breeding poultry farms also began to increase imports. After two or three years of accumulation, by 2013, overcapacity in the industry had become fairly obvious,” said a person in charge of a breeding poultry farm. Yet in 2013, some companies still harbored a gambling mentality, and the number of grandparent chickens imported rose instead of falling, further increasing the supply of chicks.

“At that time, I thought raising broilers brought quick results and the market was good, so I wanted to get rich by raising chickens,” said Wang Lei, who tried raising broilers in 2012. Many farmers around him also entered the industry only after seeing how booming poultry farming was.
Several people in charge of breeding poultry farms believe that the current industry downturn was originally due to overcapacity and rising farming costs, while the market panic triggered by the avian influenza outbreak was the final trigger.

Large-scale and modern farming strengthens the ability to withstand risks

Amid the industry-wide downturn, those large-scale and modern farms have shown a relatively strong ability to withstand risks.
Sun Jianguo, a major laying hen farmer in Gaocheng City, has more than 50,000 chickens on his farm and has adopted modern farming methods, with hardware facilities such as automatic manure cleaning, wet curtain cooling and mechanical feeding all keeping pace. Because product quality control and disease prevention were done well, the chickens basically never got sick. Although he did not make money last year, he did not lose much either. “Let's see how this year goes. I hope the market picks up,” Sun Jianguo said with considerable confidence.

“Many breeding poultry farms are now having difficulty selling chicks, and prices are low, so I plan to buy 10,000 more chicks this year,” said Liu Zhixin, manager of Guantao County Daxin Poultry Industry Co., Ltd. His farm currently has more than 50,000 chickens and is managed fairly well. Although profits last year were not large, this year he still plans to further expand the scale and strengthen management, hoping to achieve something.

While many breeding poultry farms are struggling to sell chicks and some even have to burn them, Hebei Huayu Poultry Breeding Co., Ltd. is seeing gratifying chick sales. “From a farming perspective, now is the golden time for farmers to take in chicks, and our sales are relatively good,” said the person in charge of the company's marketing department. At present, the company's chick output is stable, and some customers buy them in quantities of tens of thousands or more than 100,000.

The person in charge said that in 2013 the company completed its annual target and sales increased by 31%. “Among the top 10 laying hen farming enterprises nationwide, 6 are our customers. Most of our sales targets are group customers. They all have modern farms and a relatively strong ability to withstand risks.”

“Although the poultry farming industry has encountered difficulties, it has also accelerated the pace of industry differentiation and consolidation, bringing the whole industry into a new stage of enhanced production capacity and transformed production methods,” Liu Wenke believes. The industry downturn will eliminate a number of small-scale farms and households with low management levels, and push large and medium-sized farming enterprises to invest more in hardware facilities and improve management, thereby enhancing their ability to resist risks. In addition, relevant departments should also introduce targeted measures to promote quality improvement and efficiency in farming enterprises.

“Taking laying hen farming as an example, Hebei Province still shows the industrial characteristics of small scale and large groups, with a relatively low degree of scale. Under the small-scale production model, production facilities are simple, the layout is unreasonable and production efficiency is low, leading to poor economic returns,” Liu Wenke suggested. Based on Hebei Province's actual conditions, support should focus on farms with a scale of 10,000 to 30,000 chickens so that they can transform as soon as possible. “As long as poultry farming enterprises speed up transformation and upgrading, sharpen their internal skills, and survive the downturn, they will live better,” Liu Wenke believes. Reporter Ma Yanming