China: sleeping giant rapidly awakens

The output of L-Lysine feed grade has risen steadily over recent years,
with the total production increasing from 78,000 tonnes in 2003, to 336,000
tonnes in 2005. Vitamin and mineral feed additives can basically satisfy the
needs of domestic markets with some volume being exported to foreign
countries.

The feed industry in China has already become an important contributor
in facilitating a healthy development in the international feed industry.

 

Production structure
The increasing rate for compound
feed, concentrated feed and feed additive premixes has remained on a high level.
The proportion of compound feed has seen a small decrease, while the proportion
of concentrated feed and feed additive premixes have increased with product
structure being matched more closely with the demands of the Chinese livestock
industry. The production of compound feed for aquaculture and ruminant
concentrated feed supplements have been increasing more rapidly than other
feeds.

 

China can be split into four main animal feed producing areas (2005
data):
• East – 10 provinces, 48.61 million tonnes (45% of total)
• Middle
– 6 provinces, 24.58 million tonnes (23%)
• Northeast – 3 provinces, 14.76
million tonnes
(14%)
• West – 12 provinces (no statistics from Tibet),
19.38
million tonnes (18%).

 

Between 2000 and 2005, the Chinese feed industry
experienced the attack of highly pathogenic avian influenza (bird flu) and
Streptococcus suis
pig disease,
as well as a big rise on raw material demands. The risk awareness of feed
enterprises has since been enhanced. The industry has also become more mature
and, in terms of production and profits, has steadily increased. It can
therefore be said that the feed industry in China has transformed from
volume-specific to both volumeand quality-specific.

 

Regulation improvements
Law and regulation systems have
gradually improved and the industry has maintained healthy development. The
Chinese government has always paid much attention to the safety of feed and,
since 1999, has formulated and implemented the “Regulations for Management on
Feed and Feed 

Additives”, formulating a series of normative law
documents.
With the application of science and
technology, feed conversion rate has been greatly improved with raising cycle
shortened and efficiency enhanced. Feed science, technological innovation and
science transformation have become the main reasons for promoting sustained and
healthy development of the industry, animal husbandry and aquaculture. Through
diversified merger activities, the number of feed enterprises has decreased,
while produced volume per enterprise has increased. In 2004, the number of feed
enterprises, with an annual output of over 100,000 tonnes, reached 70. The top
10 feed enterprises produced more than 20% of the total output of the
country.

 

More open market
China has proactively taken part in
international competition. At the beginning of reform, CP Group of Thailand and
other foreign large-scale feed companies have entered into the Chinese market.
Now, after more than 20 years of vigorous growth and development, some of
China’s feed

products hold a strong position in the competitive international
market. The market share of feed grade vitamin A, E and C accounts for 30-50%.
The use of L-Lysine is no longer dependent on imports, and China even exports
some of its products.

The technology of feed processing equipment and the quality of products
have been close to the international level, with export volume of feed
processing equipment increasing year by year, which has been warmly welcomed in
the Southeast Asian region. A group of feed processing enterprises have invested
in running feed processing companies in this region. These companies have the
ability to participate in international competition. The feed industry in China
as a whole has sound development, however, since the first three months of 2007,
the industry has experienced a decline in output due to the impact of bird flu.
A decrease in the overall income of animal husbandry has also been evident. Feed
enterprises are facing severe challenges, but, according to market experts, the
situation will change from the second half of this year.

 

Government commitment
The Chinese
government has attached great importance to the healthy development of the feed
industry and has released guidelines and recommendations in relation to the
industry’s growth and development, as

The Chinese  feed industry is catching up rapidly. (Photo: Xuyi)

well as given proactive support in terms of national budget,
taxation and finance. China has exempted feed processing enterprises from value
added tax, and even before 1994, feed enterprises had been exempted from income
tax, thus safeguarding the feed industry as one sector which supports
agriculture to move towards healthy development. The introduction of the (free)
market mechanism is the fundamental reason for the rapid growth of the feed
industry which, in China, has benefited from the reform and opening up in 1970s,
as well as the establishment of the socialist market system. The Chinese leader
of second generation, Deng Xiaoping, pointed out as early as in 1983 that “feed
should be operated as an industry, and this would be a big industry”.

From its inception, the feed industry has followed the principle of
“mass participation”, and operated in a diversified manner, such as
multi-element investment, market-driven operation system, commercialisation of
key technologies, enterprise group development and standardising of sector
management. The role of labour, knowledge, technology, management and capital
has been brought into full play.

 

Market development
Privately owned enterprises under
severe market competition have finally come into being and have occupied most of
the Chinese feed industry, which has become one of the sectors that have enjoyed
the highest development towards market operation. The China Feed Industry
Association (CFIA) has played an important part in this by strengthening
professional ethics and promoting its development. CFIA, established in 1985
after the approval by the State Council of the People’s Republic of China, was
the earliest industry association in the country with its function of
intermediary and professional ethics management, which links government and
enterprises. The Association takes a proactive role in the formulation of laws,
regulations and development programmes in relation to feed.

 

Constraints and challenges
Although achievements have
been made, the feed industry in China still faces some constraints and new
challenges. Firstly, due to the increasingly demand for animal products and the
improvement of the commercialisation and degree of scale of production for
animal husbandry, there is still a big demand for some raw materials for feed.
Fish meal, an important animal protein feed, still relies on imports with annual
import volumes reaching 1 million tonnes. About 70% of soybeans for meal
production need to be imported with annual imports reaching 20 million tonnes.
The resources of protein feed in China will face a long-term shortage
situation.

Secondly, there is a big difference among feed enterprises in different
regions with unbalanced growth. In China, there are currently 15,000 feed
enterprises, of which 2,800 enterprises produce more than 10,000 tonnes of feed
annually. There are 77 enterprises with annual production of more than 100,000
tonnes. The feed enterprises in the west operate on a relatively small-scale
with rather backward management means.

 

Future objectives
In the long-term, the
Chinese feed industry will establish a safe, qualitative and highly efficient
production system, and create a new type of industrialised path through sound
science and technology, good economic returns, low resource consumption and a
less polluted environment in order to realise a harmonised and coordinated
development for safety, quality

Sha Husheng: The Chinese feed industry still faces some contraints and challenges. (Photo: Dick Ziggers)

and high efficiency. A balance between
supply and demand will also be ensured, as well as quality and safety. Industry
structure will be optimised, international competitive edge for feed enterprises
enhanced, and the laws and regulation system for feed will be further completed
and improved. In order to adapt to the trend of a more intensified livestock
industry, feed manufacturers will accelerate the development of concentrated
feed, concentrate supplementation and feed additive premixes to realise a
diversified feed system and multiple feed structures. The sector is expected to
proactively develop new types of feed resources and varieties, and accelerate
the updating of feeds with the aim of satisfying the needs for feed products for
different livestock varieties and methods.
By doing so, the CFIA realises
that it needs to implement and improve the system of production permit and press
ahead for GMP and HACCP safety management systems among feed enterprises with
the aim of maximum reduction of risks. The industry should accelerate the speed
of  integration and updating level for feed enterprises, proactively
implement brand strategies to create a group of “Chinese Brands” and support a
number of feed enterprises with international competitive strengths, thus giving
imputes to the development of medium- and small-scale enterprises so as to raise
the modernised level of the Chinese feed industry.