Recently, there has been a “rise” in feed prices across the country, including large feed enterprises such as New Hope Liuhe Co.Ltd(000876) and Tongwei, who unanimously announced an increase of 50 ~ 300 yuan per ton of feed price on the grounds of “sharp rise in raw material price”. Even Guizhou Banghong agriculture and animal husbandry Co., Ltd. announced that from February 9, the price of all concentrated materials will be increased by 600 yuan per ton.
As feed accounts for the majority of the cost of aquaculture, the rise in feed prices is eroding the profits of aquaculture. The root cause is the tight supply and demand. However, with the promotion of “reduction and substitution of corn and soybean meal” and “development and utilization of regional characteristic forage resources such as hybrid Broussonetia papyrifera and feed mulberry according to local conditions”, it will effectively alleviate the demand of China’s feed industry for feed raw materials (corn and soybean meal) and effectively improve the surge of grain imports.
behind the “ice and fire” price
The continuous rise of feed prices stems from the rise of feed raw materials.
Feed materials are mainly composed of corn (60% ~ 65%) and soybean meal (17% ~ 20%). If the price of corn is high, feed enterprises will choose wheat, sorghum, barley, DDGS, etc. to partially replace corn.
The rise in feed prices at the beginning of the year of the tiger is mainly due to the rise in the price of soybean meal, with an increase of 600 yuan per ton, which is converted into feed, resulting in an increase in feed cost of 90 ~ 120 yuan per ton. As for corn, it continues to remain high, with the price of 2700 ~ 2740 yuan per ton in the northern port and 2850 ~ 2880 yuan per ton in the southern port.
Lin Guofa, research director of brick Shenzhen Agricultural Products Group Co.Ltd(000061) jigou.com, told the first financial reporter that because the two basic raw materials of feed are at a high level and the substitution of corn such as wheat is reduced, feed factories cannot digest the rising cost of raw materials by themselves, but can only digest the rising price of finished products.
The rise of China’s bulk Shenzhen Agricultural Products Group Co.Ltd(000061) prices lies in the transmission of the international market. According to the industry, South American soybean production was affected and reduced, and the international supply and demand situation of beans changed from abundant to tight balance, which stimulated the continuous rise of American beans. Although China’s demand is sluggish, but boosted by the external market, China’s insufficient supply will make the internal market rise passively. In the short term, the weather speculation has not stalled, and the trend of soybean meal is still strong.
In addition, the industry reality supporting the rise in feed prices is that the stock of livestock and poultry in China, especially pigs, is at a high level, driving the growth of feed demand.
Corresponding to the rise in feed prices, pig prices continued to decline. The comparison between the two prices can be described as a “double day of ice and fire”.
According to statistics, at present, the price of pigs in many parts of the country has fallen below 12 yuan / kg. The cost of pig breeding was mainly 14 ~ 16 yuan / kg before the Spring Festival. Now the feed price has risen again, and the equivalent cost has increased by 0.3 ~ 0.5 yuan / kg.
The upside down between breeding costs and pig prices, coupled with the uncertainty of the African swine fever epidemic, has virtually increased the cost of pig breeding, resulting in losses for the pig industry.
So, what is the impact on the pig food ratio?
Lin Guofa said that since the pig food ratio refers to the ratio of the appearance price of pigs to the wholesale price of corn as the main feed for pigs, the feed rise is mainly reflected in soybean meal. Although the corn price is running at a high level, it has not increased significantly compared with years ago, which has little impact on the pig food ratio.
As for the pig price, “generally speaking, since January, with the decline of pig price, the breeding efficiency has entered a state of loss. After the Spring Festival, with the obvious seasonal decline of demand, pig farmers and enterprises are facing a two-way squeeze, and the loss range in the later stage may further aggravate, which will drive the second round of reduction of the production capacity of fertile sows after the festival.” Zhu zengyong, chief analyst of monitoring and early warning of the whole pork industry chain of the Ministry of agriculture and rural areas, said that by late February or early March, if the specific price of pig grain falls below 5:1, the state will start the collection and storage of frozen pork.
As far as the breeding entities are concerned, the price of pigs is down, and the losses of individual pig farmers are relatively serious, while large-scale enterprises generally have strong anti risk ability due to their large size, but there is also a certain differentiation among pig enterprises.
Zhang Haifeng, associate researcher of the industrial economy research office of the national pig industry technology system, told the first financial reporter that in this round of pig cycle, pig enterprises with better cost control and controlled production capacity are relatively less affected. Some enterprises even effectively offset the decline of pig prices through derivatives such as pig futures. Therefore, this rise in feed prices will not have much impact. However, some enterprises with large expansion and poor planning will be very uncomfortable in the near future.
periodically fluctuating feed prices
The fluctuation of feed price is closely related to the demand of feed raw materials and breeding industry. Specifically, the cost of corn accounts for about 60% of the whole feed cost, which has a great impact on the feed price; Followed by soybean meal, fish meal and lysine, which will also drive the rise of feed prices.
In the past decade, the fluctuation of feed price resonates with the trend of corn price. Zhu zengyong said that generally speaking, from 2010 to 2014, feed prices rose steadily due to the rise of corn prices; With the decline of corn prices in 2015, feed prices began to fall gradually, and remained low from 2015 to 2019; From the fourth quarter of 2019, with the gradual recovery of pig production capacity and the growth of poultry stocks, the rise of corn prices has led to the rise of feed prices.
For this cyclical change, Zhang Haifeng said that the core logic of the cyclical characteristics of Shenzhen Agricultural Products Group Co.Ltd(000061) is still determined by profit, capacity and demand. On this basis, external variables such as weather, output and policy are superimposed. The performance and fluctuation of feed prices basically follow the changes of market supply and demand, and policies, exchange rates, imports and exports and other factors play a catalytic role.
He said that the price of corn remained stable in the range of ~ 2300000 {tons in 2015 compared with ~ 2300000} in other years; Until 2015, affected by supply side factors such as import and output, the price dropped to 1300 yuan / ton, showing an increasing trend year by year. Soybean meal is a similar logic.
The rapid development of China’s aquaculture industry has stimulated a large number of imports of feed grain, resulting in the continuous decline of grain self-sufficiency rate. In 2021, China imported 164.539 million tons of grain, accounting for 24.1% of the total grain output (68.285 million tons). This means that China’s dependence on foreign grain is 19.4%. Among them, the soybean import volume is 96.518 million tons, and China’s output is only 16.4 million tons, which means that the dependence on soybean import is 85.5%. The largest increase in imports was corn, accounting for 10% of China’s output (272.55 million tons).
In view of the long-term large-scale import of corn and soybeans, the competent animal husbandry department put forward the concept of reducing and replacing feed grain many years ago, and finally issued the working plan for reducing and replacing corn and soybean meal in feed in March 2021, requiring “reducing the proportion of corn and soybean meal in feed”, The purpose is to “adapt to the new situation of tight supply and demand of bulk feed raw materials, improve the utilization efficiency of raw materials, build a new diet formula structure based on national conditions, accelerate the reduction and substitution of corn and soybean meal, and promote the stable supply of feed and grain”.
In December 2021, the Ministry of agriculture and rural areas issued the national development plan for animal husbandry and veterinary industry in the 14th five year plan, which once again defined “promoting precise ingredients and materials, and promoting the reduction and substitution of corn and soybean meal”.
Zhu zengyong said that the implementation of the policy of “reduction and substitution of feed grain” is conducive to the establishment of livestock and poultry feed formula suitable for China’s resource endowment and industrial environment, and gradually reduce the feed breeding cost. With the optimization of feed formula and the substitution of high-quality and efficient products, the import of grain, especially feed grain, will gradually decline.
In Zhang Haifeng’s view, this is actually a deep reform of the industry to promote the professional cooperation and division of labor between the aquaculture industry and the feed industry. Large feed enterprises with technological and talent advantages have been optimizing and adjusting the original feed formula in order to reduce the cost of raw materials.
However, Lin Guofa believes that “feed grain reduction substitution” is more difficult to reduce the dependence on corn and soybean meal. The core is to improve the feed conversion rate and avoid the “wasteful demand” of feed caused by large proportion and large weight column pressing similar to that from 2020 to 2021 and sacrificing breeding efficiency.
In addition, in September 2020, the general office of the State Council issued the opinions on promoting the high-quality development of animal husbandry, proposing to improve the forage supply system, adjust and optimize the feed formula structure, and promote the reduction and substitution of corn and soybean meal. In December 2021, the central rural work conference also proposed to expand the planting of soybeans and oil plants in 2022.
Lin Guofa said that the combination of these policies will effectively alleviate the surge in grain imports and effectively ensure food security. China’s soybean is highly dependent on foreign countries. Appropriately increasing the planting area of soybean and oil can alleviate the impact of international environmental uncertainty on China’s oil and oil supply.
