Raising pigs makes money by selling feed at a loss!

　　Recently, there is a view in the agriculture and animal husbandry industry that in the past two years, there has been a strange phenomenon in the pig industry: a company that raises both pigs and produces feed, and the pig sector loses money and can earn back from the feed sector
.
The price of raw materials has risen, and the price of feed can follow; but the price of raw materials has fallen sharply, but feed companies have not cut prices, but have made a lot of money from pig farmers
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

There is a strange phenomenon in the pig industry

　　Compared with the "roller coaster" market of pig prices, the gross profit margin of the feed industry is stable, especially in the first half of this year, the feed industry has successively raised prices
.
Feed production and animal breeding are both in the industrial chain of the agriculture and animal husbandry industry, which can be described as "one prosperity, one loss and one loss"
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

Feed production and animal breeding are both in the industrial chain of the agriculture and animal husbandry industry, which can be described as "one prosperity, one loss and one loss"
.

　　Wang Zhong, chief consultant of Mouyi Consulting, told Yicai.
com that on the one hand, the price of feed raw materials such as corn and soybean meal is directly related to the price of feed, but it will take some time for price changes to be transmitted to the feed end; There is a certain relationship between procurement and raw material inventory
.
For example, some companies purchased a large batch of raw materials before the price increase, and when the price of raw materials increases, the procurement cost increases, and the company still has a certain amount of inventory.
At this time, there is a certain cost advantage, and the price may increase or not.

.
For another example, some companies have high raw material procurement costs, and they need to wait until the high-priced raw materials are consumed before lowering the feed price
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　In fact, "pig raising loses, feed earns" is not a short-term phenomenon, but is determined by the characteristics of the industry
.
According to industry insiders, in the industrial chain of the agriculture and animal husbandry industry, pig breeding experiences periodic fluctuations and is prone to losses
.
However, related enterprises in the industrial chain, especially the production materials industry, will not suffer losses, but at most, their profits will decline due to the pressure of the industry
.
For example, the feed industry is an industry with low gross profit and high turnover.
Feed is a rigid demand of the pig industry and has continuity.
As long as it can be sold, feed companies can make profits, and the feed industry can quickly scale up and make money easily.
When it comes to money, this is determined by the characteristics of the industry
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

The feed industry is a low-margin, high-turnover industry.

　　Feed production and prices are less affected by the "pig cycle" P9v China Feed Industry Information Network-based on feed, serving animal husbandry

Feed production and prices are less affected by the "pig cycle"

　　According to official statistics of China's feed industry, the country's total industrial feed output was 74.
29 million tons in 2000 and 293.
443 million tons in 2021
.
This means that it has grown by 295.
0% in 21 years
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　From the overall trend, the total output of industrial feed in the country continued to grow
.
During this period, the only negative growth occurred in 2018, when the country suffered from African swine fever, and the number of live pigs and reproductive sows fell sharply, resulting in a 3.
7% year-on-year decrease in feed production in 2019; but then it began to rebound strongly, in 2020 The year-on-year growth in 2021 will reach 10.
4% and 16.
1% respectively
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　There are two main reasons for the steady growth of feed production
.
Lin Guofa, the research director of Brick·Agricultural Shopping Network, told Yicai.
com that firstly, stimulated by the demand for meat, the scale of the domestic aquaculture industry has grown; secondly, the scale of the aquaculture industry has increased
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

First, stimulated by the demand for meat, the scale of the domestic aquaculture industry has grown; second, the scale of the aquaculture industry has increased
.

　　Lin Guofa said that, in general, large-scale breeding enterprises tend to buy ingredients that are comprehensive in nutrients and can be directly fed, while small-scale breeding units purchase premixes or concentrates and make feeds by themselves in order to save breeding costs
.
Especially during the outbreak of African swine fever, pig farming enterprises are more inclined to purchase finished pig batches in one stop, rather than buying premix and concentrate for on-site reprocessing
.
The increase in the scale of aquaculture has led to an increase in the demand for feed
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　As for the last two years, the total feed output has shown a double-digit growth rate.
According to the industry interpretation, due to the expectation of high pig prices, the industry is generally overwhelmed, resulting in a decline in the feed conversion rate and an additional increase in demand
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　From the perspective of feed product structure, pig feed and poultry feed are the main varieties
.
Taking 2006 as an example, the total output of industrial feed in the country was 110.
6 million tons
.
Among them, pig feed was 40.
15 million tons, accounting for 36.
3%; poultry feed was 51 million tons, accounting for 46.
1%
.
By 2021, pig feed will be 130.
765 million tons, accounting for 44.
6%; poultry feed will be 121.
41 million tons, accounting for 41.
4%
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　Although pig feed accounts for a high proportion and surpasses poultry feed, ranking first in the feed product structure, feed production and feed prices do not show significant "feed cycle" characteristics due to the "pig cycle"
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　From the perspective of feed production, the imbalance between supply and demand in the "pig cycle" leads to price fluctuations.
Although the supply of live pigs will affect the consumption of feed, for example, the only negative growth in the feed industry is due to the sharp drop in the number of live pigs, but the feed industry is only A slight decline
.
This is due to the high pig prices brought about by the decline in the number of live pigs, resulting in a considerable part of meat consumption being replaced by poultry, aquatic products, beef and mutton, resulting in no substantial decline in feed consumption
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

For example, the only negative growth in the feed industry was caused by a sharp drop in the number of live pigs, but the feed industry only declined slightly
.

　　Lin Guofa said that there is no significant correlation between feed production and the "pig cycle"
.
However, after the price of pigs has risen sharply, it is easy to stimulate farmers and enterprises to increase the amount of feed or seriously overwhelm the hurdles in order to speed up the recovery of production capacity, greatly increasing the demand for feed
.
For example, in 2021, pork production will increase by 28.
8% year-on-year, but pig feed production will increase by 46.
6% year-on-year
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

There was no significant correlation between feed production and the "pig cycle"
.
In 2021, pork production will increase by 28.
8% year-on-year, but pig feed production will increase by 46.
6% year-on-year
.

　　From the perspective of feed price fluctuations, taking pig feed prices in the past ten years as an example, from 2012 to 2014, it went out of the upward trend; from 2015 to 2019, it was at a low level for four consecutive years; since 2020, it has shown a rapid upward trend in a short period of time
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

From 2012 to 2014, it went out of the upward trend; from 2015 to 2019, it was at a low level for four consecutive years; since 2020, it has shown a rapid upward trend in a short period of time
.

P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　In feed prices, corn and soybean meal usually account for more than 50% of feed costs
.
Therefore, feed prices are largely determined by raw material purchase prices
.
Lin Guofa explained that the low feed prices from 2015 to 2019 were related to the fall in corn prices and the relatively low levels of soybean meal
.
The jump in prices from 2020 to the present is related to the skyrocketing prices of corn and soybean meal in anticipation of the global food crisis
.
In 2022, domestic feed prices hit a record high
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

In 2022, domestic feed prices hit a record high
.

　　Recently, as the price of corn has fallen, the price of soybean meal is still at a high level but has fallen, and the price of feed has fallen slightly from the second quarter of 2022
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　Wang Zhong said that there is no periodicity in feed prices, nor does it have a significant correlation with the "pig cycle"
.
Feed accounts for about 60% of the total cost of pig breeding, and changes in feed prices will have an impact on the cost of pig breeding
.
The price of live pigs will be affected by the cost of live pig breeding to a certain extent, but the price of live pigs is more affected by the relationship between pork supply and demand
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

Wang Zhong said that there is no periodicity in feed prices, nor does it have a significant correlation with the "pig cycle"
.

　　Feed companies enter the pig industry in a big way

Feed companies enter the pig industry in a big way

　　In the last round of super "pig cycle", the price of pigs soared, attracting all kinds of capital to enter the pig industry
.
Wang Zhong said that enterprises are the main body of profit-seeking.
Compared with capital cross-industry pig raising, feed enterprises have inherent advantages in extending downstream
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　The entire industrial chain of the agriculture and animal husbandry industry, including feed raw materials, feed production, animal breeding, animal slaughtering, meat food circulation and consumption,
etc.
In recent years, enterprises in the industrial chain have gradually expanded upstream and downstream to accelerate the process of industrial chain integration
.
For example, feed companies extend upstream of the industrial chain to carry out grain and oil processing or feed raw material production and trade business to obtain low-cost and stable feed raw materials; feed companies expand their breeding industry downstream to carry out large-scale production such as pig and chicken raising; In addition to the upstream feed processing business, breeding enterprises continue to extend further downstream in the industrial chain, and carry out the production and sales of live pigs, poultry slaughter or branded meat
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

In recent years, enterprises in the industrial chain have gradually expanded upstream and downstream to accelerate the process of industrial chain integration
.

　　Feed companies have entered the pig industry aggressively, which is the product of this background
.
However, raising pigs by leading feed companies is not a whim
.
For example, from the end of 2017 to the beginning of 2018, New Hope Liuhe passed a series of board meetings and decided to increase pig production, and even planned to build a pig farm in Vietnam
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　For another example, Guigang Yangxiang Feed Co.
, Ltd.
, the predecessor of Guangxi Yangxiang Co.
, Ltd.
(hereinafter referred to as "Yangxiang Shares"), was established in 1998, and feed was the absolute focus; in 2005, it began to develop pig breeding; in 2009, it established scientific pig farming system
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　In June 2022, Yangxiang Co.
, Ltd.
took the initiative to withdraw the application materials on the eve of the IPO meeting.
However, according to the IPO prospectus of Yangxiang Co.
, Ltd.
, the company adopts the integrated mode of "feed + breeding", in which the gross profit of the breeding business reached 2019 and 2020 respectively.
56.
42% and 90.
40%
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　Wang Zhong believes that from a macro perspective, since the beginning of the 21st century, with the improvement of the level of urbanization, Chinese people's demand for pork is also increasing, and enterprises will timely fill the market gap
.
From the perspective of feed companies, extending to the downstream breeding industry has its own cost advantages, not to mention that it has some foundations, not just feed processing
.
Driven by the last round of huge profits in pig prices, many companies just increased the production capacity of live pigs
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　In Lin Guofa's view, the extension of the feed industry to the downstream breeding industry is mainly due to three considerations
.
First, with the rapid withdrawal of a large number of small and scattered farmers, the concentration of aquaculture has further increased.
It is difficult for ordinary feed factories to further expand production capacity.
They can only expand the aquaculture industry downward to ensure the demand for feed; second, although the aquaculture industry has cycles phenomenon, and even staged losses, but the big cycle can get good profits.
From the perspective of expanding the scale of the company, extending farming downstream is the right choice; third, it is not difficult to extend downward, and the two industries of farming and feed are related.
very high
.
At the same time, the feed sector can continuously improve the level of feed research and development and production through the breeding sector
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

First, with the rapid withdrawal of a large number of small and scattered farmers, the concentration of aquaculture has further increased.
It is difficult for ordinary feed factories to further expand production capacity.
They can only expand the aquaculture industry downward to ensure the demand for feed; second, although the aquaculture industry has cycles phenomenon, and even staged losses, but the big cycle can get good profits.
From the perspective of expanding the scale of the company, extending farming downstream is the right choice; third, it is not difficult to extend downward, and the two industries of farming and feed are related.
very high
.
At the same time, the feed sector can continuously improve the level of feed research and development and production through the breeding sector
.

　　Feed industry low gross profit, high turnover P9v China feed industry information network - based on feed, serving animal husbandry

Low gross profit and high turnover in the feed industry

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　　Although the industry's return rate is relatively stable, it does not mean that the company's income is static
.
Wang Zhong said that the price of feed itself is affected by the fluctuation of raw materials, and ordinary farmers may also look for feeding substitutes due to the increase in feed prices to reduce the demand for feed
.
In addition, the outbreak of "black swan" events can easily lead to a sharp drop in the production capacity of live pigs and a drop in feed demand
.
In order to avoid the loss of revenue, most feed companies still choose to raise pigs to neutralize the risk of feed management
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　Lin Guofa mentioned that at present, the feed industry has undergone fundamental changes
.
Under normal circumstances, to produce 1 ton of feed, the gross profit margin is only 2% to 3%
.
Companies tend to increase their total profits through high turnover and increased capacity utilization
.
However, after deducting logistics, marketing and other expenses, plus companies holding preferential activities such as "buy 1 ton (25 packs) and get 1 pack" or "buy 20 packs and get 1 pack", processing losses are prone to occur
.
At the beginning of this year, the phenomenon became more common
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

　　He believes that it is not impossible to focus only on feed, but it is necessary to focus on high-tech products such as concentrates and premixes
.
P9v China Feed Industry Information Network-Based on Feed, Serving Animal Husbandry

It is not impossible to focus on only making feed, but it is necessary to focus on high-tech products such as concentrates and premixes
.