China's chicken farming industry posted an overall huge loss of 100 billion yuan in 2013

In 2013 the industry's losses reached as high as 100 billion yuan

In January 2014 the industry's total losses were estimated at around 20 billion yuan

According to fixed-point monitoring by the Ministry of Agriculture, poultry product prices fell instead of rising before the Spring Festival. In the 4th week of January, live chicken prices were 17.31 yuan/kg, down 4.42% year on year; egg prices were 8.62 yuan/kg, down 10.21% year on year. According to monitoring by the Ministry of Agriculture's agricultural products wholesale market information network, poultry product sales fell abnormally before the Spring Festival. At 27 wholesale markets in Beijing, Shandong, Jiangsu, Shaanxi and other places, the trading volume of dressed chicken in January 2014 fell 8.0% year on year and 2.7% month on month.

According to monitoring by the Ministry of Agriculture, both sales volume and prices of commercial day-old chicks are currently falling. In the 4th week of January 2014, the prices of commercial layer chicks and commercial broiler chicks both fell 10% year on year. According to enterprises, large-scale breeder farms in Guangdong province reduced their inventories by 30%-40%, and chick placements fell by more than 20%; in Jiangsu's main production areas, each commercial day-old chick incurred a loss of 1 yuan.

“The money earned over the past 10 years was all lost in a single year last year.” Cheng Enbao, head of Chengpeng Poultry Co., Ltd. in Dehui City, Jilin, had a particularly agonizing Spring Festival———in 2013, he posted a net loss of 10 million yuan from chicken farming.

He is not a rare “unlucky one” in the chicken farming industry: battered by two major storms——the “instant chicken” controversy at the end of 2012 and the H7N9 flu outbreak in March last year——a crisis unseen in 30 years is quietly pushing the poultry farming industry to the brink of a cliff. Data provided to a Southern Metropolis Daily reporter by the Poultry Industry Branch of the China Animal Agriculture Association shows that last year the entire chicken farming industry posted a huge loss of 100 billion yuan.

A Southern Metropolis Daily reporter's in-depth investigation in Jilin and Guangdong found that almost all are in severe loss, whether they are parent-stock broiler breeder farmers, commercial chicken farmers, layer farmers or slaughterhouses.

Yet the crisis is far from over. With continuous reports of H7N9 flu cases before and after the Spring Festival, this grim situation is intensifying. Quite a few farmers even ask, bewildered: is this industry, with more than 70 million workers, about to disappear?

Enterprises cull chickens to survive

The Animal Husbandry Department of the Ministry of Agriculture provided a Southern Metropolis Daily reporter with data: according to Ministry of Agriculture monitoring, at the end of 2013, white-feathered broiler inventories fell 14.5% compared with 2012, and the full-year slaughter volume was expected to decrease 16.2%; yellow-feathered broiler inventories fell 8.2%, and the full-year slaughter volume was expected to decrease 7.7%; layer inventories showed fluctuating declines, with inventories at the end of 2013 down 11.5% year on year.

The hard data correspond to a cruel reality. Parent-stock broiler breeders (breeding chickens that, after brooding and rearing, are crossbred between designed lines and lay eggs used to hatch and multiply commercial chickens) wait for the breeders to lay breeding eggs, hatch them into chicks, then supply the chicks to farmers for rearing through the “company + farmer” model, and later buy them back. This is a common model in the chicken farming industry. Yet in this round of crisis, parent-stock broiler breeding enterprises have become the hardest-hit “disaster area” of losses.

Lin Shuqing, head of Mingxing Animal Husbandry in Yongji County, Jilin City, has worked in chicken farming for more than 30 years and is Jilin City's second-largest parent-stock broiler breeder farmer. “I have never seen this industry stay in the doldrums for so long, or the scope of losses be so wide.” Lin Shuqing feels helpless.

The sharp market decline forced Lin Shuqing to continuously shrink her farming scale. “In August 2013 I culled 65,000 sets (sets indicate the number of breeding chickens; for example, 100 sets means the combined number of 100 hens and matched roosters), at the end of November 2013 I culled 46,000 sets, and 110,000 sets remain now.” At the peak, her parent-stock breeder farming scale reached as high as 240,000 sets. With such culling, Lin Shuqing's losses reached 11 million yuan.

There are countless enterprises that have suffered the same fate as Lin Shuqing. “Each set of broiler breeders culled costs about 120 yuan.” Cheng Enbao told the reporter. In 2013 Cheng Enbao raised a total of 156,000 sets of parent-stock broiler breeders, but only 46,000 sets remain now. His losses also exceeded 10 million. Sun Wanqi of Wanxing Breeding Poultry Farm in Gongzhuling City, Jilin, said that in 2013 he raised a total of 36,000 sets of parent-stock broiler breeders, but only 16,000 sets remain now, with losses of 1.8 million yuan.

Because no one wants the hatched chicks, parent-stock broiler breeding enterprises can only sell breeding eggs as commercial eggs. But this still cannot stop the losses. According to Cheng Enbao, the current price of chicks is 0.6 yuan each and of breeding eggs 4 jiao each, while their cost prices are 2.5 yuan and 1.6-1.7 yuan respectively. Once sold at a loss as commercial eggs, the sales channel may not necessarily open up either. Lin Shuqing admitted that before the New Year she still had more than 500 boxes of breeding eggs unsold. Calculated at the standard specification of 360 eggs per box, that is still 180,000 breeding eggs.

In Kaiping, Guangdong, thousands of kilometers from Jilin, a major production area for high-quality chickens such as South China three-yellow chickens, farmers are likewise struggling. Huang Yonglu, president of the Jiangmen City Poultry Industry Association and general manager of Guangdong Canhuang Farming Co., Ltd., has worked in the industry for nearly 40 years, yet he too is deeply bewildered; the two enterprises he serves at have lost nearly 100 million yuan. “If this continues, I dare not imagine what will happen. For an enterprise, bankruptcy is just bankruptcy, but behind it are the livelihoods of too many contract farmers.”

Enterprises going bankrupt due to broken capital chains are beginning to emerge. Sun Shuqing, head of Shengxi Feed Processing and Farming Farm in Dehui City, had a farming scale of 90,000 sets at its peak, but in September last year he had to shut down the farm. Huang Yonglu said that in Kaiping one farming enterprise with an annual slaughter volume of more than 1 million chickens has gone bankrupt and exited, and contract farmers lost everything.

This was caused by a chain reaction. “Because broiler consumption fell sharply, sales posted losses; this then led to a decline in chick sales, and chick supply posted losses; the loss effect was then transmitted to parent-stock and grandparent-stock breeder enterprises.” Chen Yingfeng (Weibo), president of the Guangdong Provincial Poultry Industry Association, said the industry is in a state of overall loss. In fact, the number of grandparent-stock breeders is small, so the pressure is not too prominent; as for commercial day-old chicks, farmers can reduce chick purchases if they are not profitable. But once parent-stock breeders are started, they continue for more than a year, hatching chicks continuously throughout, which makes parent-stock broiler breeding enterprises the most difficult position.

Farming households exit

At the very end of the entire farming industry chain are numerous farming households of varying scales. Under the now common “company + farmer” model, farming enterprises usually offer farmers a guaranteed buyback price. But this still did not let farmers escape the fate of losses.

Zhao Lin (pseudonym) is a farmer in Buhai Town, Dehui City, Jilin. In mid-December last year, he had just sent 7,500 white-feathered broilers to market. The farming enterprise bought them back at 3.35 yuan/jin. Although there was a guaranteed buyback, after deducting costs such as feed and veterinary drugs, Zhao Lin lost more than 10,000 yuan on this batch of chickens. “They were supposed to be sent to market after just 40 days of raising, but because the slaughterhouse had too much inventory and reduced the number of chickens it collected, I was forced to raise them to 50 days.” Zhao Lin revealed that after the optimal market period, the chicken's feed conversion ratio decreases, and the longer they are raised, the more is lost. Since this batch of chickens was sent to market, Zhao Lin has not raised any more.

“Around here, 9 out of 10 chicken houses are empty.” Zhao Lin said.

Local farmers told the reporter that exits are widespread. One farmer said that with outdoor temperatures more than ten degrees Celsius below zero and high temperatures inside the chicken houses, if chickens are being raised, white vapor will come from the chimneys on the roofs. If no white vapor comes out, it means they are no longer raising any.

Just a few hundred meters from Zhao Lin's chicken house, the reporter saw three chicken houses, and without exception their windows had been blown open by the cold wind and there was not a trace of white vapor from the chimneys. “I really wonder whether this industry is going to disappear.” Zhao Lin, who has raised chickens for 7 years, said he will only start raising them again once the slaughterhouse says chicken prices have risen.