1. Basic Situation
In 2011, the feed industry maintained strong growth momentum. The total production of commercial feed nationwide reached 181 million tons, generating an industrial output value of 634.8 billion RMB. Of this, compound feed production was 149.15 million tons, an increase of 15%; concentrated feed production was 25.43 million tons, a decrease of 4%; and additive premix feed production was 6.05 million tons, an increase of 4.5% (see Figure 1). The ratio of compound feed, concentrated feed, and additive premix feed changed from 22.4:4.6:1 in 2010 to 24.7:4.2:1 in 2011.
In terms of additive premix feed, swine feed production was 3.37 million tons, accounting for 55.7% of the total, an increase of 0.1% year-on-year; layer poultry feed was 1.38 million tons, accounting for 22.8%, an increase of 18.9%; broiler feed was 0.56 million tons, accounting for 9.3%, a decrease of 0.4%; aquaculture feed was 0.22 million tons, accounting for 3.6%, a decrease of 3.0%; ruminant feed was 0.3 million tons, accounting for 5.0%, an increase of 51.3%; and other feeds were 0.22 million tons, accounting for 3.6%, a decrease of 20.4% (see Figure 2).
From a regional perspective, nearly 50% of the additive premix feed production is concentrated in Shandong, Guangdong, Beijing, Hunan, Jiangxi, and Henan. Among them, Shandong accounted for 11.1% of the total national production, Guangdong for 8.7%, Beijing and Hunan for 8.4% and 8.3%, respectively, and Jiangxi and Henan for 6.9% and 6.1% (see Figure 3).
2. Development Characteristics
Based on national feed industry statistics over the past five years and reports from 121 key monitored companies, additive premix feed in China shows the following characteristics:
2.1 Significant Changes in Product Structure
The production and proportion of compound feed have grown rapidly, concentrated feed has declined sharply, while additive premix feed has remained relatively stable. Over the past five years, total feed production nationwide has maintained steady growth, with an average annual growth rate of 10%. Specifically, the annual growth rates of compound feed, concentrated feed, and additive premix feed are 12.5%, 0.6%, and 3.9%, respectively (see Table 1).
2.2 Decline in the Proportion of Additive Premix Feed Production
The proportion of additive premix feed production decreased from 4.2% in 2007 to 3.3% in 2011, mainly due to the increase in compound feed production (see Table 2).
2.3 Slight Increase in Swine, Layer Poultry, and Ruminant Additive Premix Feed Proportion, Decrease in Broiler, Aquaculture, and Other Feed Proportion
The proportion of swine additive premix feed increased from 53.3% of total additive premix feed production in 2007 to 55.7% in 2011, reaching a peak of 58.1% in 2010. The proportion of layer poultry additive premix feed increased from 19.6% in 2007 to 22.9% in 2011, remaining around 20% in recent years. The proportion of broiler additive premix feed decreased slightly, from 10.5% in 2007 to 9.2% in 2011, staying around 10% in recent years (see Figure 4).
2.4 Regional Shifts, Technology Diffusion, and Price Competition Favor Leading Production Areas
Over the past five years, ranking of additive premix feed production across 30 provinces, cities, and autonomous regions has changed. Before 2010, Beijing ranked first, but its share of national production has gradually declined. In 2011, Shandong and Guangdong surpassed Beijing in production volume for the first time (see Tables 3-5).
Currently, additive premix feed production in China is mainly concentrated in Shandong, Guangdong, Beijing, Hunan, Jiangxi, and Henan. These regions have the following advantages:
They are located in the forefront of China's information technology, with advantages in research, technology, talent, and information, as well as favorable geographical location, transportation conditions, and market environment.
They are major livestock-raising provinces.
Some areas have a cost advantage for feed raw materials.
2.5 Significant Growth in Production Volume Across Enterprises of Different Sizes or Operating Models
In the past five years, additive premix feed production in China, with the exception of 2010 when the Ministry of Agriculture’s "Feed Additive Safety Usage Regulations" restricted trace element usage, has shown nearly 20% growth. In 2011, second-tier enterprises focused on premix feeds, such as Ganzhou Bawei, Shandong Jinghua Agribusiness, and Ganzhou Zhu Shifu, saw over 50% year-on-year growth. Established additive premix feed companies like DBN, Tianjin Chia Tai, Hunan Jiu Ding, Chia Tai Kangdi, and Guangdong Wangda had growth rates between 10% and 20% due to their large production base.
In addition, user demand, sales channels, and pricing significantly influence the additive premix feed market.
User Demand: According to research, the main reason livestock farmers use additive premix feed is the need for formula technology support from feed mills. Product quality, effectiveness, and safety are key considerations for users. Strengthening cooperation with farms and providing operational support is crucial for feed mills to capture the market.
Sales Channels: Over the past three years, nearly 80% of the product has been sold to livestock farms, with a roughly equal split between distributors and direct sales.
Pricing: In the past three years, the ex-factory price of additive premix feed products has been set at about 25% above cost; distributors may sell at a maximum markup of 50% over cost. In the aquaculture sector, distributor prices are around 73% above cost, significantly higher than the markups for the other four types of products.
3. Development Trend Analysis
Based on national additive premix feed statistics over the past five years and reports from 121 companies, as well as discussions with industry professionals during research, the following points are put forward.
Currently, the relatively high profit margin for swine additive premix feed has attracted widespread attention from companies. Established enterprises are increasingly focused on investing in formula technology innovation. To combat homogenization in formula technology, companies have begun to produce swine additive premix feed with formulations of 6% or more. According to research, companies aim to gain market share by leveraging their advantages in formula technology innovation and production equipment.
Additive premix feed for poultry mainly consists of products with formulations of 4-5%. Due to the low profitability of poultry additive premix feed, especially for layer poultry, some companies are even operating at a loss just to increase volume, so they pay relatively less attention to this market segment.
We believe that additive premix feed will continue to have significant growth potential over the next decade.
Among feed products, additive premix feed has a higher added value than compound feed and concentrated feed, and it is a crucial core component of feed products.
In the next 2-3 years, the market for additive premix feed remains promising, as the number of livestock farms continues to grow, and the market capacity for swine feed and aquaculture feed expands, driving demand growth.
As large-scale farming accelerates, small-scale farmers are exiting the market more rapidly. The "feed companies + large-scale farmers" model will become an important structure in the feed and livestock industry. Under this model, end-users will utilize 4% (or more) swine additive premix feed for self-prepared feed, further boosting market demand.
With the introduction of the revised "Feed and Feed Additive Management Regulations" and related policies and regulations, industry entry barriers are rising, which will lead to the elimination of non-compliant companies, giving more room for development to strong enterprises. In the future, the concentration of the additive premix feed market is expected to increase gradually, benefiting large premix feed companies.
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