Ryan - China Pork and Poultry Value Chains

OCTOBER 2015
CHINA PORK AND BROILER

VALUE CHAINS
Report to International Finance Corporation
Oliver Ryan
21 February 2010
A JOINT REPORT BY OLIVER RYAN

AND ASIAN AGRICULTURE CONSULTING LTD
TABLE OF CONTENTS
Abbreviations
AAC = Asian Agricultural Consulting Ltd

A&P = Advertising and promotion
AI = Artificial InseminationCEO
CEO = Chief Executive Officer
CGM = Corn gluten meal
CPVT = Charoen Pokphand China
CWE = Carcass weight equivalent
CIF = Cost including freight
COP = Cost of Production
CP = Crude protein
CSF = Classical Swine Fever
DDGS = Distillers dried grain solubles
DHE = Dragon Head Enterprises
DWt = Dressed weight = Carcass weight (CWt/CWE)
DOC = Day old chicken
DWE = Dressed weight equivalent
EBITA = Earnings before interest, tax and amortisation
EU = European Union
FCR = Feed conversion ratio
FS = Final stock
FMD = Foot and mouth disease
GAHP = Good Animal Husbandry Practice
GDP = Gross Domestic Product
GM = Gross margin
GGP = Great grandparent stock
GP = Grandparent stock
GoC = Government of China
HE = Hatching eggs
HPAI = Highly pathogenic Avian Influenza
HQ = Headquarters
IFC = International Finance Corporation
JV = Joint Venture Company
kg = kilogram
km = Kilometer
LWt = Live weight
LTD = Long term debt
LYD = Landrace Yorkshire Duroc
m = Million
MDM = Mechanically deboned meat
MT = metric tonnes
MMT = Million metric tonnes
MIS = Management information system
MOA = Ministry of Agriculture
Pa = per annum
PCV2 = Porcine Cirovirus Type 2
PED = Porcine Endemic Diarrhoea
POL = Point of lay
PPP = Purchasing Power Parity
PRRS = Porcine Reproductive and Respiratory Syndrome
PS = Parent stock
QA = Quality assurance
QSR = Quick Service Restaurant
ROI = Return on investment
SBM = Soybean meal
SH = Slaughter house
China Pork and Broiler Value Chain 2

SOE = State owned enterprise
STD = Short term debt
spp = Species
Sqm = square meter
t = Tonne = 1000 kilograms = MT
tpa = tonnes per annum
tpd = tones per day
tpm = tonnes per month
USD = United States Dollar
USDA = United States Department of Agriculture
VAT = Value added tax
RMB = China Reminbi/Yuan = CNY
WBG = World Bank Group
WHO = World Health Organisation
Exchange rate. 1USD = CNY 6.2 = HKD 7.75 Where historical sales are quoted outside USD, any conversions to USD
are at this rate unless specified otherwise.
Every attempt has been made to provide accurate data, but since there is huge variability in data sources there may be
inconsistencies and errors, but these should not distract from the core purpose of this report. Since both the pig and
broiler industries in China have a huge range of production systems the use of “average” data poses issues, as do terms
like “small”, “medium” and “large”.
This report is confidential to IFC. It contains information that is not for release to third parties without the consent of
IFC.

INDEX
1 EXECUTIVE SUMMARY 8
2 SUMMARY MATRIX - TEN YEAR OUTLOOK 10
3 INTRODUCTION 11
4 BRIEF COUNTRY OVERVIEW 11
5 CONSUMPTION OF PORK AND BROILER MEAT IN CHINA 11
6 DESCRIPTION OF THE PORK VALUE CHAIN 14
7 PORK PRODUCTION IN CHINA 19
8 DESCRIPTION OF THE BROILER VALUE CHAIN 27
9 BROILER PRODUCTION IN CHINA 31
10 THE CHINA FEED SECTOR 40
11 FEED RAW MATERIAL SUPPLY 45
12 PORK AND BROILER RETAIL MARKET IN CHINA 48
13 KEY PRODUCERS OF FEED IN CHINA 49
14 PIG SECTOR COMPANIES 61
15 BROILER SECTOR COMPANIES 72
16 LISTED COMPANIES 81
17 ANIMAL HEALTH SECTOR 82
18 PORK AND BROILER DEMAND DRIVERS IN CHINA 84
19 CHINA EXCHANGE RATE 87
20 CHINA GOVERNMANT ROLE 87
21 ENVIRONMENT ISSUES 90
22 E-COMMERCE 91
23 WASTE – CHALLENGES AND OPPORTUNITIES 95
24 OPPORTUNITIES FOR IFC 97
25 SWOT 99
26 APPENDIX. FEED PRODUCTION BY PROVINCE 101

LIST OF TABLES AND FIGURES
Table 6-1 Overview of key genetic pig companies 15

Table 6-3 Largest pig breeding/growing companies in China 15
Table 6-4 Slaughter capacity of leading pork processors 17
Table 6-5 Top 10 pig slaughter and processing companies in 2014 17
Table 7-1 Pig sector volumes 19
Table 7-2 Top pork producing province in 2013 19
Table 7-3 Pig industry structure 20
Table 7-4 Production cost of backyard farms in 2013 24
Table 7-5 Production cost of large pig farms in 2013 24
Table 7-6 Pork Competitiveness 27
Table 9-1 Key Livestock Assumptions, National average for the white broiler sector 33
Table 9-2 Key Pricing Assumptions 34
Table 9-3 China broiler feed prices 34
Table 9-4 Breakdown of Broiler Production Costs including margins (Rmb/kg DWt) 34
Table 9-5 Broiler Sector Efficiency Issues 38
Table 10-1 Commercial feed market size (MT) 40
Table 10-2 Estimated pig feed usage 41
Table 10-3 Estimated broiler feed usage 41
Table 10-4 Feed production by provinces in 2013 42
Table 10-5 Pig feed production by 10 largest provinces in 2013 (MT) 42
Table 10-6 Broiler feed production by 10 largest provinces in 2013 (MT) 43
Table 10-7 Feed mill number by feed type for the 10 largest provinces in 2013 (MT) 43
Table 10-8 Top 20 feed companies in 2013 44
Table 11-1 Cost breakdown of feed 46
Table 11-2 Grain imports and exports 46
Table 12-1 Top 15 supermarkets 48
Table 13-1 New Hope (Liuhe) business overview 2012-14 50
Table 13-2 Haida business overview in the past few years 50
Table 13-3 DBN business overview 2012-2014 51
Table 13-4 DBN feed business 2012-2014 ((USD’000) 51
Table 13-5 Zhengbang business overview 2012-2014 52
Table 13-6 Tongwei business overview 2012-2014 53
Table 13-7 Tangrenshen business overview in the past few years 54
Table 13-8 Tiankang business overview 2012-2014 55
Table 13-9 Tianbang business overview 2012-2014 (USD’000) 56
Table 13-10 Kangdaer business overview 2012-2014 (USD’000) 57
Table 13-11 Jinxinnong business overview 2012-2014 (USD’000) 58
Table 13-12 Zhenghong business overview 2012-2014 (USD’000) 59
Table 13-13 Public feed company performance in 2014 60
Table 13-14 Pig and Broiler involvement by “Feed Companies” 60
Table 14-1 Wens sales 2012-2015Q1 61
Table 14-2 Yurun business overview 2012-2014 64
Table 14-3 COFCO business overview 64
Table 14-4 Shunxin (Beijing Shunxin Agriculture Co., Ltd) performance 2012-2014 65
Table 14-5 Muyuan business overview 2012-2014 65
Table 14-6 Longda’s 4 slaughter bases overview 66
Table 14-7 Longda’s business overview 66
Table 14-8 Longda’s sales revenue breakdown by sales channel 67
Table 14-9 Chuying business overview 67
Table 14-10 Xinwufeng (Hunan New Wellful Co., Ltd) performance 2012-2014 68
Table 14-11 Luoniushan Co., Ltd performance 2012-2014 69
Table 14-12 Delisi Food performance 2012-2104 70
Table 14-13 Dakang business overview in the past few years 70
Table 14-14 Summary of selected pig sector players 71
Table 15-1` Sunner poultry performance 2009-2014 74
Table 15-2 Dachan performance 2012-2014 75
Table 15-3 Dachan margins by sector 76
Table 15-4 Huada performance 2012-2014 77
Table 15-5 Dayoo performance 2011-2013 78

Table 15-6 Summary of margins from selected broiler companies 81
Table 16-1 Share price movements of listed companies 81
Table 17-1 Major diseases in pigs and chickens in China 82
Table 20-1 Minimums for processors and distributors by region for DHE status 88
Table 20-2 Examples of subsidies the State has given to the top pork processing DHEs (ex Rabobank) 88
Table 20-3 Tariffs 89
Table 22-1 Production websites members and reported visitor rates 93
Table 23-1 Summary of Government policy and regulations related livestock manure treatment 96
Table 25-1 SWOT 99
Table 26-1 Feed Production By Province 2013 MT 101
Table 26-2 Broiler feed production by province in 2013 (MT) 102
Table 26-3 Feed mill number by province and by feed type in 2013 103
Figure 4-2 China’s population density 11

Figure 5-1 Chinese meat production in 2014 12
Figure 5-2 China Meat Production 12
Figure 5-3 Consumption of pork and broiler meat in selected countries 12
Figure 5-4 China Pork Production 2000-2014 13
Figure 5-5 China Broiler Meat Production 2000-2014 14
Figure 6-1 Pork Value Chain 14
Figure 6-2 Slaughter capacity of leading pork processors 17
Figure 6-3 Packed pork supply market shares 18
Figure 7-1 Pig Density in China 20
Figure 7-2 Pig supply shares 21
Figure 7-3 Production contribution by farm size China vs USA 21
Figure 7-4 Pig and pork prices 22
Figure 7-5 Live pig prices versus feed price 22
Figure 7-6 Live pig/pig feed price ration 23
Figure 7-7 China Pig Feed Prices 2012-2015 23
Figure 7-8 Pig farm profitability – Average net income per pig (AAC data) 25
Figure 7-9 Pork Sector Efficiency Issues 25
Figure 8-1 Broiler Value Chain 28
Figure 8-2 PS Farm numbers 29
Figure 8-3 White and Yellow Broiler numbers 29
Figure 9-1 Broiler Consumption 31
Figure 9-2 Major Broiler Production Provinces 32
Figure 9-3 Broiler Density by Province 32
Figure 9-4 Cost per kg Broiler to Consumer in Retail Market (RMB/kg DWt) 35
Figure 9-5 Margins on Sales for Each Subsector in Broiler Value Chain (%) 35
Figure 9-6 Broiler farm profitability 36
Figure 9-7 DOC prices 2012-2015 36
Figure 9-8 Live broiler and DOC prices 2013-14 37
Figure 9-9 Live broiler prices ex farm 37
Figure 11-1 Corn prices USA and China 47
Figure 11-2 Prices of pig and broiler feed 47
Figure 13-1 New Hope locations 49
Figure 13-2 Haida feed business 2009-2014 (USD’000) 51
Figure 13-3 Zhengbang feed business (only) in the past few years (USD’000) 52
Figure 13-4 Tongwei feed (only) business 2001-2014 (USD’000) 53
Figure 13-5 Tangrenshen feed (only) business 2010-2014 (USD’000) 55
Figure 13-6 Tiankang feed (only) business 2003-2014 (USD’000) 56
Figure 13-7 Tianbang feed business 2006-2014 (USD’000) 57
Figure 13-8 Kangdaer feed only business 2001-2014 (USD’000) 58
Figure 13-9 Jinxinnong feed business 2011-2014 (USD’000) 58
Figure 13-10 Zhenghong feed business 2001-2014 (USD’000) 59
Figure 14-1 Wens business 2012-2014 (USD’000) 62

Figure 14-2 Gross margin of Wens by business type 2012-2014 (USD’000) 62
Figure 14-3 Shineway business overview 2012-2014 63
Figure 14-4 Shineway business (USD’000) 63
Figure 14-5 Muyuan pig production 66
Figure 14-6 Longda gross margin by product type 67
Figure 14-7 Chuying livestock business 2012-2014 (USD’000) 68
Figure 14-8 Chuying revenue breakdown by products in 2014 68
Figure 14-9 Chuying pig production in the past few years 68
Figure 15-1 Sunner business overview (USD’000) 74
Figure 15-2 Dachan revenue and margins 75
Figure 15-3 Dayoo operative revenue 78
Figure 15-4 Dayoo profit by product 78
Figure 18-1 Urbanisation 84
Figure 18-2 Broiler consumption versus GDP in selected countries 85
Figure 18-3 Pork consumption versus GDP in selected countries 86
Figure 18-4 COFCO pork and chicken consumption predictions 87
Figure 22-1 Example of Huinong e commence platform 91
Figure 22-2 Example of www.zgslsc.com website platform 92
Figure 22-3 Example of Tianzow’s website for selling breeding stock 92
Figure 22-4 Examples of popular swine websites (www.chinapig.cn and www.zhue.com.cn) 93
Figure 22-5 Examples of live poultry and pig trading websites 93
Figure 22-6 Consumer targeted pork and poultry e commerce (www.Too.Too.com & www.JD.com) 94
Figure 22-7 An example from JD.com promoting international food available in China 95

1 EXECUTIVE SUMMARY

1
China has a population of 1.4 billion with a GDP of USD10,226 billion or USD7,525 per capita, a huge increase
from the USD 2,000 per capita in 2004. 4.5% of GDP is attributed to livestock with half of this attributable to the
pork sector. Annual GDP growth is around 7% but is expected to reduce due to the size and growth of the economy
and the impact of the recent economic downturn. The urbanization rate is 54% and expected to increase to 60% in
2020.
 Current Chinese consumption of pork is 52MMT (42 kg per capita), or 75% of total meat production, while broiler
meat consumption is 14.1MMT (10.3 kg per capita). China has the second highest per capita pork consumption in
the world, while broiler meat consumption is relatively low by world GDP per capita related standards. Projections
are that pork consumption will drop 5.3% to 55 MMT in 2015, based on higher prices and declining economy. This
is also due to rationalization of China’s pork supply resulting in millions of small producers exiting the industry.
 The majority of livestock production is in the east and north-east and feed industry capacities mirror this.
Guangdong, Shandong, Henan, Liaoning, Hebei and Hunan produce 48% of the countries feed. New Hope is the
dominant feed miller in China but with only 7.8% market share.
 Total commercial feed production in China was 193 MMT in 2014 (inclusive of concentrates and premix). There
were 14,079 feed companies in China at the end of 2013, 408 of which are foreign feed companies. There is over
capacity in the sector and the GoC is closing feed mills. Less than 30% of pigs are fed full feeds purchased from
commercial mills, while most broiler feed is sourced from mills. Protein concentrates are widely used especially for
pig feeds where farmers mix them with local/own grain. As the pork industry intensifies, farmers will switch from
concentrates to full feed, that will require a doubling of feed production, much of which will be produced in existing
capacities, but more capacity, and funding, will be needed. Industry observers believe that larger pig farms will
emerge with their own feed milling capacity. This will place pressure on feed mills that are currently relying on full
feed sales to small farms.
 75+% of feed raw material costs in China, come from locally produced raw materials compared with only around
25% in Indonesia and Vietnam. China produces 226MMT of corn and imports 3MMT, while importing 71MMT
of soybeans. The cost of animal feed in China is high, largely because the GoC sets grain prices (high). Due to the
intervention in grain pricing, China pork and broiler production costs are the highest in the world.
 Sichuan is the largest pork producing province, accounting for 9% of China’s total pork production, followed by
Henan and Hunan province. In 2014, the top ten pig slaughter and processing companies slaughtered 8.5% of
China’s 735 million pigs. The largest processor (Yurun) only slaughters 1.9% of the pigs. This is very different to
most countries but is a reflection of China’s size and the large volumes of pigs produced.
 Live pig production is dominated by backyard production but this is decreasing as the industry restructures into
more efficient production through the establishment of larger breeding and growing farms. But there is limited
integration in the pork sector as most slaughter houses buy in the free market and are reluctant to invest in livestock
production with less than 1% of supply coming from integrators farms.
 There is more integration in the broiler sector, although most broiler growing farms are independent and small,
with limited company owned farms within integrations, but contract growing is increasing with concurrent
increases in farm size. The broiler sector has been plagued with disease and food safety issues and growth has not
been as rapid as might have been expected. Industry growth will be dependent on larger integrators investing to
modernize the sector, with investment in contract growing being a key requirement within the system.
 China is a market for fresh meats with historically wet markets being the preferred source for purchasing chicken
and pork but that is now changing with GoC closing many wet markets in response to food safety concerns. The
developed retail sector (supermarkets, fast food chains etc.) are developing but the cold chain is not well advanced
and that must be a priority before alternatives to wet markets can be implemented and live production relocated to
more sustainable regions. Historically QSR drove increases in poultry consumption but have since lost their
novelty appeal and have also been impacted by food safety scares (especially KFC) and that has impacted the
growth of broiler sales and severely impacted the overall image of the broiler sector.
1National Bureau of Statistic of China

 Lack of bio-security and disease is a major threat to the pig and broiler sectors in China. Small farms have no
biosecurity, use little/no vaccination and are prone to disease. Disease control is compromised by lack of
biosecurity, lack of veterinary staff, lack of vaccines and farmer ignorance of how to prevent diseases. Much of this
can only be addressed by replacing existing growing facilities with new ones (but land availability and waste
management issues impede this) or relocating livestock production (and cold chain development impedes this).
 There is significant scope for improvement in bio-security (especially), nutrition, genetics, management and farm
production efficiencies to reduce costs and to move to more intensive production and all it implies. The
intensification of the contract-growing sector is the next step in China for livestock production, but integrators are
cautious in investing due to cyclical prices and difficulty of obtaining suitable land, and pork processors seem the
most reluctant to invest in livestock production. Also entrepreneurs are involved in many businesses, tend to shift
investment, and pig production is losing its luster, so finding serious investors may be a challenge and linkages to
integrators will be essential for their identification.
 On consumption per GDP/PPP basis, pork consumption is extremely high, but has stabilized in the last two years
and expected to drop 5% in 2015. An analysis of pork and broiler meat demand, relative to GDP/PPP suggests that
pork consumption may grow at 1-3% per annum while broiler consumption may grow up to 5% per annum if the
industry modernizes its production systems and enhances its image, but this is unlikely and 1-3% growth per
annum may be more realistic for broilers. The low growth rate in pork consumption is due to the current very high
rate of consumption while the image of the broiler sector is impacting demand for chicken.
 There is huge surplus capacity for pig slaughter so investment opportunities will be few in this sector. However,
investment may be required for further processing to extend the shelf life, and to develop the cold chain for fresh
meat distribution that will be required if wet markets are to close. The poultry sector requires further investment to
increase automation and to reduce contamination through human handling
 In both the pork and broiler sectors there will be a shift to larger more modern growing farms and this is where the
vast majority of capital will be required. The development of the pig-growing sector seems to be focused on
1000-5000 sow units but with little appetite from pork processors to invest in livestock production. Optimum
broiler farms are 20-200,000 bird capacity. Independent investors will be required with supply chain linkages to
integrations. Access to land is a major barrier to expansion and modernization across both the pig and broiler
livestock supply chains.
 The broiler sector is under going a transition from an inefficient producer of chickens with major bio-security,
health and food safety issues. The only road forward for the sector is to modernize livestock production hardware,
bio-security and production systems with investment in growing facilities (own and contract) being the priority.
Like for the pig sector, individual investors will be required to link with integrations as contract growers and some
integrators are likely to develop their own growing farms, especially in NE China.
 The pig and broiler sectors both have significant environmental issues that range from wastewater to heavy metal
contamination, to anti-biotic use, to NPK loadings, to food safety issues. Waste management, and associated land
requirement, is a major impediment to pig farm expansion particularly, thus limiting farm size, but from a
management and bio-security viewpoint this is positive as very large farms pose special risks.
 The structure of both the pig and broiler sectors has significant implications on how IFC will approach investment
in these sectors as national market share is not a criterion for investment as is usual in probably all other countries.
Thus IFC targets will largely be regional or even provincial players in both sectors and often could be at the
livestock supply level (contract growing) rather than the funding of integrators per se. This poses challenges for
IFC in promotion, obtaining market intelligence and developing investment strategies.
 E commerce is emerging as an important channel for inputs into the pig and broiler supply chain. Pork and poultry
trading is in its infancy but processors are developing e commerce platforms that will increase their market share as
the cold chain improves.
 There are potential roles for IF AS linking to IFC IS investment (direct or indirect) via waste management and food
safety.

2 SUMMARY MATRIX - TEN YEAR OUTLOOK
 Largest 20 companies control 40% of industry.

Feed 2015  Largest market is small pig farms.
 60% have no investment in live production
 Largest 20 companies control 80% of industry.
 Largest market is medium sized farms and internal integration
2025
 Many larger pig farms will have their own feed mills
 80% have investment in live production
Requiring funds  Opportunities for these players to move into live production
 Feed businesses that have strong premix capability
Example Companies
 Diversified with plans or already invested in live production
 TRS, Well Hope, TWINS, DBN, Zhengbang, Jinxinnong, Tianbang
Pigs 2015  <5% large farms, 40% medium sized farms, 55% small pig farms
2025  30% large farms , 60% medium sized farms, 10% small pig farms
 More live production in the medium – large sized farrow to finish farms
Requiring funds
 2-5000 sow units will be the likely model
 MuYuan type farmers that want to expand and can secure long term supply
Example Companies
agreements
 Huanshan, Shennong, Chuying, Baodi, Longda, CP, Giant Star, Cargill, Tie Qi
Li Shi
Broiler 2015  Integrated production controls 30% of production

2025  50+% of poultry production integrated and increasing
 Transform live production to larger modern broiler growing farms
Requiring funds
 20-200,000 bird units the likely model
 Re organisation of industry and live production
Example Companies  Players that will make it happen and have track record
 Will be larger players
 Sunner, Fengxiang, Dachan, Chinwiz, Huamei, Spring Snow
Slaughter  Largest players slaughter only 8.5%

2015
/Processing  <5% of pork comes from integrated production production
 90% of pork is traded from larger independnet farms
 10% of pigs from 100% integrated production.
2025
 Reduction in fregional slaughter houses
 More developed cold chain
 No need for slaugher houses as already have excess capacity
Requiring funds  Maybe some for further processing development
 Development of cold chain
Example Companies  All pork and broiler processors, wholesellers, retailers
 5% of pork is sold in modern retail outlets

2015
Retail  e commerce is emerging
 50% of pork is sold in modern outlets
2025  e commerce is an important channel
 Wet market still remains an important channel
Requiring funds  Possibly integrators developing fresh retail
Example Companies  All pork and broiler processors

3 INTRODUCTION
The International Finance Corporation has requested a review of the China pork and broiler meat sectors to assist them
understand the sectors and enable them to develop a roadmap for engagement with both sectors. The Terms of
Reference for the assignment were to provide an overview of broiler meat/pork and food security in China, and include
an analysis of the demand/supply balances for broiler meat/pork.
4 BRIEF COUNTRY OVERVIEW
China has a population of 1.4 billion with a GDP of USD10,226 billion2 or USD7,525 per capita, a huge increase from the
USD 2,000 per capita in 2004. The population is concentrated in the Guangdong, Shandong, Henan, Hebei, Jiangsu and
Hunan province. The livestock production closely follows the same locations.
Figure 4-1 China’s population density
4.5% of GDP is attributed to livestock with half of this attributable to the pork sector. Inflation is 1.2%. Annual GDP
growth is around 7% and expected to stay at that level in the medium term. GDP growth will be a key driver of
increased demand for meat products. In addition, only 10% of the population3 is over 65 years of age with a significant
proportion of the population being in the emerging spending category. China has a 95% literacy rate, ahead of Vietnam,
Indonesia and Malaysia, and the urbanization rate is 54% and expected to increase to 60% in 2020. All of the above will
fuel spending power that will impact food demand, with changing eating habits and an increased demand for QSR meals
etc.
China is a Communist country with the government supporting the intensification and modernization of the livestock
industry. Despite significant foreign investment, local producers dominate livestock production.
5 CONSUMPTION OF PORK AND BROILER MEAT IN CHINA
The livestock industry in China has been demand driven (increased purchasing power and a very young population
entering the workforce), production driven (expansion of large scale pig farms) and supply driven (development of feed
mills). Pig production dominates due to cultural preferences and there is now increasing investment in pig breeding
operations. Commercial broiler production is becoming more and more consolidated. With the steady increase in pig
production, feed milling has dominated industry development with continued investments in feed mills to supply the
growing demand for pig and broiler feed, layer and aqua feed, all in increasingly intensified systems.
Pork and aquaculture production dominates over chicken and beef in China with annual production levels being showed
as follows.

3Population growth is 0.5%. Average life expectancy is 75 years.

Figure 5-1 Chinese meat production in 2014
Local production MMT4 Imports MT5 Exports MT6
Aquaculture 47.0 4,281,000 4,163,300
Pork DWt 56.7 564,000 91,516
Chicken DWt 11.9 442,528 173,461
Beef DWt 6.9 317,062 6,494
Figure 5-2 China Meat Production
China Meat Production MMT

60
Pork Beef Broiler
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
In 2014, pork production accounted approximately 75% of total meat production.
Current Chinese consumption of pork is 42 kg per capita7 while broiler meat consumption is 10.3 kg per capita. This
compares to selected countries is as follows.
Figure 5-3 Consumption of pork and broiler meat in selected countries
Pork and Broiler Meat Consumption by Country

60,0 (kg/capita/year)
Broiler kg/cap Pork kg/cap
50,0
40,0
30,0
20,0
10,0
0,0

5China Custom
6China Custom
7
This figure is based on production statistics while consumption figures are more like half of this. See 18.3 on statistics

China has the second highest per capita pork consumption in the world (after Canada) while broiler meat consumption is
relatively low by world standards, due mainly to the strong preference for pork, high farmed fish consumption and also
issues of food safety related to HPAI in poultry
5.1 Consumption and production of pork in China
Pork is traditionally the preferred meat in China. Current consumption of pork is 42kg per capita in 2014. China
produced approximately 57 MMT in 2014, showing an increase of 3% from 2013.There is evidence8 that there was
difference in pork consumption between rural and urban populations; the pork consumption of urban resident was 21 Kg
in 2012, or 47% higher than rural residents, where consumption was 14 kg. Note these figures are much less than
production figures demonstrating that China statistics are not consistent. See Section 19.3
Figure 5-4 China Pork Production 2000-2014
In 2014, Chinese consumption of pork (based on production statistics) was 56.7 MMT produced from 735m pigs (564,00
MT imported, mainly from USA, Germany and Spain) or 42 kg per capita. China exported 91,516 tonne pork in 2014,
mainly to Hong Kong.
5.2 Projected consumption of pork in China and impact on imports
Projections9 are that pork consumption will drop 5.3% to 55 MMT in 2015, based on higher prices and declining
economy. This suggests that any replacement will be taken up by lower cost poultry or higher cost beef, lamb and fish.
Since the end of 2013, China’s pork supply has been rationalised, with millions of small producers exiting the industry
and the industry increasing efficiencies. This has resulted in a supply shortfall and rising prices. Given the high cost of
pork production in China, the rising prices have made imports more attractive and Rabobank expect this to lead to 1.9
MMT of imports10 in 2015, up 45% over 2014, and continue in 2016 as the sow herd reduction in 2013/14 will result in an
ongoing supply shortfall. This will see high prices for piglets/weaners with breeding herds benefiting.
High internal corn prices are stressing profitability for many producers, leading USDA to reduce the 2015 pig forecast to
672 million head, down about 60 million head from 2014 levels. Pig producers have been hit hard by low pork prices
and high feed prices. The pig to corn price ratio has remained below the profitability breakeven indicator of 6:1 for
almost all of 2014. The extended period of losses has drained farmers’ cash reserves, forcing them to cull sows and
reduce herd sizes. Disease outbreaks have put further pressure on pork production.
8
National Bureau of Statistic of China 2012
9
Rabobank Industry Note #505 - August 2015. WBG assumes production will drop to 56MMT.
10
Source of imports will be EU, Canada and US with ractopamine-free supplies available in Europe, Canada and the USA and Canada and the Eu
likely to have currency advantages

5.3 Consumption and production of broiler meat in China
In 2014, Chinese consumption of broiler meat was 14.1MMT per annum or 10.3 kg per capita, with 173,461MT being
exported mainly to Hong Kong. China imported 442,528MT chicken meat and its products, mainly from Brazil and
U.S.A. with much of this being chicken feet and wings.
There are large differences in chicken meat consumption between rural and urban populations with official statistics
showing urban consumers consume twice the broiler meat of rural populations.
Figure 5-5 China Broiler Meat Production 2000-2014
China Broiler Production

15 12%
10%
8%
10
6%
4%
2%
5
0%
MMT China % change
-2%
0 -4%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Growth rate has been low due to biosecurity and food safety issues and a crackdown on corruption resulting in less
dinners.
6 DESCRIPTION OF THE PORK VALUE CHAIN
The pork value chain consists of breeding and growing farms, slaughter and processing and distribution to the retail
markets, all supported as necessary, with the key input being feed. The pork value chain is shown in a simple
diagrammatic form.
Figure 6-1 Pork Value Chain
The above diagrammatic representation has many variants, the most common being small farrow to finish farms where
the parent stock (PS) and growing function is on the same farm. A 2010 census11of pig farm size was as follows, farms
producing less than 100 pigs annually accounted 48% of China’s total pig production, 100 to 9,999 pigs occupied 45%,
11
China Livestock Statistic Yearbook, 2011

farms >10,000 pigs occupied 7% of farms. While this statistic is dated by almost 5 years, it clearly shows that the
Chinese pig industry is undeveloped relative to international benchmarks.
6.1 Breeding
90% of pigs in China are homebred and from small breeders. This is expected to reduce to 75% by 2020 as modern
breeding companies increase market share as part of the industry modernization which offers huge opportunities for
breeding companies. On the downside is that growing facilities must improve to take advantage of the improved
genetics and this investment will take time.
Within commercial production systems, Great Grandparent (GGP) farms produce Grandparent (GP) stock for supply to
multiplier (Parent Stock – PS) farms to produce commercial weaners. The GGP and GP typically have purebred female
lines (mainly Large White and Landrace breeds) along with purebred male lines (typically Duroc and Pietrain). The GP
farm may cross the female lines to produce Large White x Landrace crosses for use on the PS farms to produce
commercial pigs which are typically sold as 7-20kg weaners to growing farms where they are grown to around
110-115kg live weight.
In 2013, there were 7,642 breeding farms in China with total sow population of 4.9 million12. Henan, Guangdong and
Hubei are the largest pig breeder producing provinces, which has 34% of China’s total pig breeder population. The
major breeders are tabulated.
Table 6-1 Overview of key genetic pig companies
PIC is the largest pig genetics company in the world and supplies Jinluo, Yurun, COFCO, Shennong, CP and Luhua.
Hypor supplies Muyuan, Longda and New Hope (Liuhe) and Genesus supplies Ruyun, Baodi, Muyuan, Chuying,
Zhengbang and Wens. Yurun source genetics from Danbred and Topigs and New Hope from Liuma Waldo.
In 2013, there are 3,962 boar stations in China with total boar population of 111,531. The total semen production was
68 million doses.
6.2 Growing
In China there are three types of growing farms, namely farms within integrations, medium-large independent farms,
and small individual farms. The latter two grow pigs independently or as contract growers. When growing is undertaken
within integrations then the integrator controls the full commercial (PS) breeding cycle along with the growing cycle (as
in Wens, COFCO, Muyuan etc). The largest 30 commercial breeding/growing operations are spread across China as
shown in the following table.
Table 6-2 Largest pig breeding/growing companies in China
12
China Livestock Statistic Yearbook, 2014

Under contract farming, the farmer uses the company’s breed, feed and veterinary products and is paid a growing fee in
a guaranteed off-take agreement. Independent farms that don’t operate under any contract buy weaners and feed and sell
in the open market taking all market risks (off-take and price).
The average kill weight in China is commonly 100-120kg LWt. The concurrent average feed conversion in growing
pigs (100kg) in China is 3.5-4.0:1, versus 2.8:1 internationally, heavily influenced by the large number of small farmers
where FCR can be >4:1 due to poor genetics, high mortality and substandard feed. A high FCR results in high feed costs
and can drive lower kill weights, so some small farmers sell lighter pigs, but demand for heavier, even fatter pigs is high
in China.
Commercial feeds are only around 30% of the total pig feed fed in China (see 10.2). Small farms rely heavily on local
feedstuffs and buy commercial feeds for young pig and concentrates for growing pigs. Thus creep feeds and higher
priced concentrates are key products and account for some feed millers to be specializing in young pig feeds. Anyou is
an example for this. Most pig farmers buy feed through distributors, while larger farmers will buy direct
Some breeding farms will sell excess weaners to the market and this is via a specialist trader who buys the pigs from the
breeder i.e. he takes ownership (usually the breeder does not know where the pigs are going to). The trader then sells to
small sized farms as large grower farms usually deal direct. The trader margin is CNY 10 per kg for weight between 15
and 25kg (current price is CNY 600 per 25 kg weaner).
6.3 Slaughter and Distribution of Pork

In 2014, Chinese consumption of pork was 56.7 MMT produced from 735m pigs (564,000 tonnes imported, mainly
from USA, Germany and Spain) or 42 kg per capita. In 2010 35% of pigs were slaughtered by hand, 45% half
mechanized and 20% mechanized.
Given government incentives to scale up and consolidate the sector, large meat companies are moving towards the north
and west of the country to be closer to grain supplies as well as to establish a broader marketing network. CP Group,
New Hope, Wen’s and Zhengbang are all shifting in that direction.
Though consolidation of meat processing companies has been taking place since before the PRRS outbreak in 2006, it
accelerated in 2007 as the government closed down many medium and small pork processors and slaughterhouses. In
2014, China had 3,786 large slaughter and processing companies. The average utilization rate was less than 30%. 388
companies reportedly lost money in 2014. In addition there are 14,000 small slaughterhouses.
One result of concerted policy and financial support for industrializing and scaling up the pork sector is overcapacity in
pork slaughter and processing. The top Chinese slaughter houses use less than half of their processing capacity. This
indicates that companies are expanding much more rapidly than actual market development and pig farm expansion. It
also means that there is increased competition amongst the top firms for sourcing pigs, another reason that Shineway’s
deal with Smithfield could be lucrative, bringing whole carcasses from the U.S. to process in China. In spite of over
capacity, top firms continue to announce further expansion plans.
There is huge surplus capacity in pig slaughter in China. New Hope is the only company with efficient capacity
utilization. Thus there is no need fro capital for slaughter per se.

Table 6-3 Slaughter capacity of leading pork processors
HQ Slaughter Capacity Actual Slaughter Capacity Utilization

Shuanghui Henan 30 13.3 44%
Yurun Jiangsu 56 13.8 25%
Jinluo Shandong 20 6.7 34%
COFCO Beijing 10 6 60%
New Hope Shandong 9 8.5 94%
Truein Henan 8 4 50%
Tangrenshen Hunan 6 2.6 43%
Kinghey Hebei 5 2 40%
Gaojin Sichuan 4 1.6 40%
CP Hubei 3 1 33%
Figure 6-2 Slaughter capacity of leading pork processors
In 2014, the top 10 pig slaughter and processing companies slaughtered 63 million head pigs or 8.5% of China’s pigs
slaughtered (735m). The largest processor (Yurun) only slaughters 1.9% of the pigs. This is very different to most
countries but is a reflection of China’s size and the large volumes of pigs produced
Table 6-4 Top 10 pig slaughter and processing companies in 2014
Company HQ Structure Slaughter (m) Market share

Yurun Jiangsu Public 13.8 1.9%
Shineway Henan Public 13.3 1.8%
New Hope Sichuan Public 8.5 1.2%
Jinluo Shandong Public 6.7 0.9%
Zhongpin Henan Private 5.3 0.7%
Wens Guangdong Private 4.9 0.7%
Chuying Henan Public 3.7 0.5%
Baodi Tianjin Private 3.0 0.4%
Tangrensheng Hunan Public 2.6 0.4%
Gaojin Sichuan Public 1.6 0.2%
Sub-total - - 63.4 8.6%
Grand total 735.0 100.0%
Gross margins on pig slaughter were reported as ranging from Rmb20-120 (USD3-19. per pig for 2013-14
Figure 6-1 Slaughter margins

Source BGAgri Database
The top 5 companies in the packaged pork sector supply 17.5% of the output versus 29.8% in the USA
Figure 6-3 Packed pork supply market shares
Less than 20% of the pig farms are large pig farms and integrators, with the majority of pig farms being middle and
small farms. Pig farms mainly sell pigs to pig deals (buyers), and then buyers sell pigs to slaughter houses
6.4 Likely developments

 There is 19,000 registered processors at the municipality level and it is difficult to see these leaving as small
cities of 10,000 people rely on these small slaughter houses as there a no other suppliers of meat and in these
cities people buy their meat every day
 Large suppliers can supply to tier 4 cities but will need the cold chain to develop for more extensive
distribution and that does not exist yet
 Despite GoC talk of closures of wet markets, at least 50% of meat will be sold in wet market, like in Hong
Kong and Taiwan that still have them
 Taiwan could be the model of how China could look (small and large farms, modern retail and wet markets)
6.5 Import/Export
In 2014, China imported 564,000 tonnes pork, a decrease of 3% from 2013. Imports were from U.S.A. (21%), German
(19%), Spain (16%), Denmark (12%) and Canada (9%). China exported 91,516 tonne pork in 2014, mainly to Hong
Kong (71%), Kyrghyzstan (12%), and Macao (5%).

7 PORK PRODUCTION IN CHINA
7.1 Size of the Pork Industry in China
Pork dominates the Chinese meat market driven by culture and diet. Pork production was 75.6 MMT in 201413. This is
based on production of 735m pigs so assumes an average kill weight of around 10314kg with a DWE yield around 75%.
Table 7-1 Pig sector volumes

Total live weight produced MMT 75.6
Total CWE15 produced (75%) MMT 56.7
Total edible16 meat (57%) MMT 43.0
Total pigs killed (at 100+kg live weight) Million 735
Productive sows (15-2017 pigs per sow pa) Million 37-49 (sources vary hugely)
The pig industry is dominated by backyard production but this is decreasing the industry restructures due to the impact
of disease (diseases such as PRRS, FMD and swine cholera are difficult to control in backyard production), realization
of the impact of improved housing and livestock management, increase in improved genetics, environmental
implications and ultimately the impact of improved nutrition on profitability. This is resulting in a shift from backyard
production to more professional farming.
In recent years (especially 2011), growth has been buoyed by high prices, a Government subsidy for productive sows
(RMB100/sow) and an insurance subsidy for fattening stock (20 percent of a pig’s value if the cause of death is related
to a disease outbreak). However changing economics (especially a reduced economy and pork demand) has seen prices
and margins drop. As a result of reduced margins, millions of small producers have exited the industry, and the Chinese
pig herd has declined. Between November 2013 and May 2015, the total Chinese pig herd dropped by an astonishing
81.4 million head (17.4%), while the breeding herd declined by 10 million head (20.1%).
The implications of the changing landscape of the sector are significant on supply/demand relationships, imports,
investment, industry restructure and industry efficiencies, but the drop in sow numbers will have a lower impact than it
would first appear, as the lost sows are all from small farmers with low sow productivity.
7.2 Location
The top 10 provinces produce 63% of China’s pigs while the top 560 counties (of 2,356 counties) produce 80% of China
pigs. However the 10 largest pork companies only produce 8.5% of China pork. Sichuan is the largest pork producing
province, account 9% of China’s total pork production, followed by Henan and Hunan province. With pressure on
margins pig production is intensifying in the search for efficiencies that demand locations rich in feed, land and markets
Table 7-2 Top pork producing province in 2013

Province Pork production (MMT) Market Share (%)
Sichuan 5.1 9.3
Henan 4.5 8.3
Hunan 4.3 7.8
Shandong 3.9 7.2
Hubei 3.3 6.0
Guangdong 2.8 5.1
Yunnan 2.8 5.0
Hebei 2.7 4.8
Guangxi 2.6 4.8
Anhui 2.5 4.6
13
National Bureau of Statistic of China
14
Government statistics suggest farm weights are110-115kg but there will be many sucking pigs that will reduce the average
15
CWE will depend on definition of head and feet on/off
16
Depends on how head/feet/offal are treated along with yield of various breeds
17
Depending on which figure is chosen

Sub Total 34.5 62.9
Total 54.9 100
Figure 7-1 Pig Density in China
7.3 Structure
Besides differing farm types (backyard, commercial), there are two basic pig farm structures in China. The first consists
of government-operated breeder farms that supply commercial farms with breeding stock. The local county farms are
usually single-site 500 to 1,000 sow breeder farms. These farms typically operate on a single-site farrow-to-finish farm
system and are usually located in pig-dense areas; therefore, there is limited age-group separation and there is
limited/absent bio-security. The production farms supplied from government pig breeder farms are typically small
commercial or backyard farms with between 5 and 40 sows and on-site finishing.
The use of Landrace, Large White and Duroc breeds means that genetic potential and production efficiencies are
potentially of international standards, but there is still a lot of cross breeding and on farm performance is compromised
by high young pig mortality, commonly above 10%. Small-scale producers (produce less than 100 pigs annually)
dominate the industry. In 2015 one can assume that there has been a significant shift (as small farms exit the industry)
and an attempt has been made to quantify this in the following table where we could expect now more that 35% of farms
produce more than 1,000 pigs per annum with some 5000 farms producing more than 10,000 per annum. The
emergence of farms like Muyuan (2m pigs per annum) heavily impact these figures.
Our attempt to calculate the output of the pig industry by farm size follows and is a representation of the current
structure and show the vast majority of pigs are supplied by small farmers.
Table 7-3 Pig industry structure
Pigs produced per annum No. of Farm Average assumed Pigs produced %
1-49 49,402,542 4 197,610,168 27%
50-99 1,619,877 50 80,993,850 11%
100-499 827,262 120 99,271,440 13%
500-999 175,652 550 96,608,600 13%
1,000-2,999 65,369 1500 98,053,500 13%
3,000-4,999 13,355 3500 46,742,500 6%
5,000-9,999 7,137 6500 46,390,500 6%
10,000-49,999 4,567 15000 68,505,000 9%
50,000 202 50000 10,100,000 1%
52,115,963 744,275,558 100%
The second type of farm structure in China is that of private farms such as the IFC funded Muyuan and the Wens Group
that operates a set of approximately 60 breeder farms supplying over 5,000 separate finisher sites in the south, close to
slaughter facilities. There has also been growth in larger farms in the central and north-east provinces (New Hope in

Sichuan, COCO nd CP in Inner Mongolia) including large groups investing in the industry from outside of the industry
and increasing investment from integrators. These expansions are driven to a large extent by land availability with
bio-security a major consideration.
The private firms, despite their relative size, only produce a small proportion of China’s pigs. A USB analysts report
states that the top 5 pig producers supply only 1.64% of China pigs versus 23% in the USA.
Figure 7-2 Pig supply shares
7.3.1 Production systems

Small farms still supply the majority of the country’s pork. These farmers feed significant quantities of vegetables,
potato, rice products and cassava. Biosecurity is absent, there is little vaccination, genetics are inferior and productivity
is low. Any profit within the system is usually nothing more than a return to labour. This system is not sustainable in its
current form and there is a move to professionalise the sector. 2013 data from PRC MoA shows the production
contribution by farm size, with a USA comparison that is a direct mirror image. Other sources believe that medium sized
farmers area greater percentage
Figure 7-3 Production contribution by farm size China vs USA
Large company owned farms are developing with the support of the Government based on the realization that they are
much more, improve food safety issues and environmental issues are better addressed. IFC client Muyuan is one of
these.
Major challenges in modernising the industry are management expertise (performance management, records,
interpretation and skill of people in farms) to drive a move from small farms to large scale farms, manure and waste
management (government concerns & this is slowing growth)
COFCO grower farms holds 2000 grower pigs producing 6,000 pigs per year (3 turns on the grower shed) requiring
75-100 ha of land to handle the manure. Under the COFCO contracting system this generates about CNY 200,000 to
300,000 per year of contracting fees for the family (payment between CNY 33 and 50 per pig under their scheme). This
is an ideally size for COFCO and the family farm is easy to control at this size and the family makes good money. So it
is the land size that will drive the size and the number of contractors they have.
Sources believe that in China, pig integrator sell feed, weaners, vaccine or other animal health products to contract
farms, and then buy back 100kg pigs from contract farms with higher price than average marketing price but this model

is not the real contracting business, rather than an organise supply chain where working capital and all costs are with the
grower. The ratio of contract farms will increase from the current 10% to 30%-50% in future as this model can improve
the efficiency of growing pigs.
7.4 Pork Sector Production Costs and Margins

7.4.1 Pig Prices
The main driver of live pig price is supply/demand balance. Chinese pig prices have declined in the last 2 years due
increased supply (investment and efficiency driven) and slowing economic growth. This has pressured farmers’
margins, which have been periodically negative from mid-2012 to mid-2013, and were in pressured from the beginning
of 2014 through Q1 2015. As a result of reduced margins, millions of small producers exited the industry, and the
Chinese pig herd declined. Between November 2013 and May 2015, the total Chinese pig herd dropped by 81.4
million head (-17%), while the breeding herd declined by 10 million head (-20%). Rabobank believe that the
Chinese pig supply will remain pressured for at least another year, due to low breeding herd numbers and lack of capital
for expansion, and while the sector will develop, 2016 volumes will be less than 2014, suggesting prices for weaners and
live pigs will increase, although by how much will depend on the Chinese economy.
Monthly prices for live pigs and piglets are graphed in Figure 6.4. This shows the significant fluctuations over this time.
Figure 7-4 Pig and pork prices
The relationship between feed price and live pig prices is graphed in Figure 6.5 and show that while feed prices were
relatively stable. Live pig prices fluctuated, such that feed price is not an indicator of live pig price.
Figure 7-5 Live pig prices versus feed price

The USA uses a live pig/corn price ratio as an indicator of pig farm profitability with a ratio of 6:1 being the normal
range. Feed cost is higher than corn cost so a live pig price to feed price ratio of around 4.2:1 would apply in China,
supported by the figures presented in Figure 6.6.18
Figure 7-6 Live pig/pig feed price ration
7.4.2 Pig Feed Prices

Pig feed prices are graphed in Figure 6.7
Figure 7-7 China Pig Feed Prices 2012-2015
18
Gross margins not undertaken to confirm this. Plus there is huge variability in farm profitability due to variation in efficiencies.

7.4.3 Cost of production
China produces a lot of information on cost of production on small, medium and large farms. This done by province but
the validity of a lot of this information is open to question. However it seems that some broad comparisons can be made
as follows.
The data shows that average live weight is around 115kg. One can assume that sucking pigs and lighter weight porker
systems are not included. Small farms costs are higher than larger farms on the basis of higher labour costs.
Table 7-4 Production cost of backyard farms in 2013

BACKYARD Unit 2008 2009 2010 2011 2012 2013
Pig weight Kg/Head 112 113 112 113 115 116
Price per kg LWt CNY/kg 13.85 11.22 11.97 17.29 15.18 15.06
Total cost CNY/kg 11.75 10.45 11.16 13.95 15.46 15.97
Piglet plus feed CNY/kg 10.08 8.70 9.03 11.28 11.94 11.84
Labor CNY/kg 1.67 1.75 2.14 2.68 3.52 4.15
Net profit CNY/kg 2.10 0.77 0.81 3.34 -0.28 -0.92
Net profit % ％ 15% 7% 7% 19% -2% -6%
Table 7-5 Production cost of large pig farms in 2013

LARGE FARMS Unit 2008 2009 2010 2011 2012 2013
Pig weight Kg/Head 109 110 110 112 114 115
Price per kg LWt CNY/kg 14.39 11.35 11.91 17.21 15.10 14.97
Total cost CNY/kg 11.60 10.17 10.64 13.13 13.93 14.06
Piglet plus feed CNY/kg 10.94 9.48 9.81 12.09 12.69 12.65
Labor CNY/kg 0.64 0.67 0.80 1.02 1.21 1.38
Net profit CNY/kg 2.79 1.17 1.27 4.09 1.17 0.90
Net profit % ％ 19% 10% 11% 24% 8% 6%
These two tables show that margins on larger farms are greater than on small farms mainly due to lower labour costs
(economies of size) although feed costs are marginally higher due to the use of by-products on small farms. However
this data does not tell the full story as the profitability of large farms (and small) can be highly variable due to
bio-security, genetics, feed and management. For example Muyuan will be much more profitable than the farms quoted
in GoC statistics.
AAC data for pig farm profitability is graphed.

Figure 7-8 Pig farm profitability – Average net income per pig (AAC data)
Since farm margins vary greatly through out China, “averages” have limited meaning and IFC would need to undertake
due diligence on margins for any investment
7.5 Pork Sector Efficiency Issue
Production efficiency of the China pork production system can be monitored and costs and margins quantified as above.
All of these can be benchmarked against international players but a summary of the issues in the Chinese pork industry
is warranted for a greater understanding of the issues that face the industry and what interventions are required by the
stakeholders to develop the industry.
Figure 7-9 Pork Sector Efficiency Issues
Issues and remedies

Profitability
Pig farming is low in asset turnover (1-1.5 sales/assets) - compared to feed milling where
asset turnover is 10-13 times with net return on assets very low. As a result of
supply/demand cycles there is significant cyclicality in farm profitability and the transient
nature of small farmer volumes has the largest impact on that
Remedy. Establish efficient pig production units with economies of scale and size. GOC to
tighten up on bio-security and farming systems that not sustainable
China breeding companies import GPP/GP from Europe and USA and have world class
Genetic supply
genetics in modern GP farms. The challenge is to upgrade countrywide genetics to take
advantage of modern breed phenotypes while retaining local breed phenotype advantages.
AI is being used to fast track this along with promotion of using genetically superior gilts as
PS replacements
Remedy. Promote (GoC and industry) modern genetics and replacement programs so that
modern breeds become more dominant resulting in higher efficiency levels and lower costs.
This must be undertaken in conjunction with improved bio-security, housing and feeding
management. This will be driven by intensification of the industry.
Feed is manufactured in modern feed mills with international economies of size, quality and
Feed supply
efficiency standards. However most feed is bagged that results in higher costs of production
and transport. Feed quality ex feed mills is world standard, but use of local ingredients in
home milling scenarios may be compromising productivity.
Many pig farms use home milling resulting in poor nutrition.
Remedy –modernization and development of larger farms using bulk feeds. Move to full
feeds ex feed mills or greater inclusion of concentrates where concentrates are used
Around 20% of the value of feed raw materials are imported. GoC imposes floor prices on
Feed cost
grains that raise feed costs to the highest in the world. Bagging costs and transport costs all
contribute to raising production costs.
Remedy – corn price is a GoC policy issue

Many farms are small and often located in areas with sub-optimum access. This results in
Farm infrastructure
 Inability to take advantage of economies of size/scale
 Inferior bio-security and animal health management
 Lower capital costs but with poorer livestock performance
 The need to use bagged feed at a higher cost
 Inconsistent and suboptimal operating procedures
 Higher production costs
Remedy – development of larger farms with better bio-security and more efficient livestock
performance to reduce production costs and improve yields – and enabling the use of bulk
feeds. Construction of farms in more isolated areas offering greater bio-secuity
Inadequate bio-security has compromised the pig industry with outbreaks of FMD, PRRS,
Bio-security
and pig cholera. While the threat of additional zoonotic diseases exists, inadequate
bio-security will impact ongoing livestock performance. The majority of farms do not
vaccinate adequately
Remedy – intensify the industry with vastly improved bio-security procedures and improved
vaccination. Enhanced regulation by GoC
Live pig performance on most pig farms are well below international standards. Whole herd
Farm management
FCR in China is quoted at up to 4.5:1 some 50% worse than international standards.
Remedy – address bio-security, health, housing, genetics, water, feed, management issues,
staff training and SOPs. Intensification of the industry that results in large professional
farms. Since efficient farms (Muyuan) have significantly higher margins, these systems will
be sustainable and drive sector development.
The majority of pigs are are collected by traders and killed in small slaughterhouses with
Post Farm
poor food safety standards. Trader margins increase costs to consumers, at the expense of
the farmers.
Remedy – there needs to be incentives to move to modern slaughter and enhanced food
safety standards. A move to intensification of the industry will reduce the influence and cost
of middle men
Quality premiums
There are no (or few) premiums for live pig quality (yield and back fat)
Remedy – As branding develops introduce premiums for quality in live pig payments
China has issues with arsenic contamination, along with heavy metals and N/P/K
Environment
contamination of soils.
Remedy – control use of arsenicals in pig feeds, monitor heavy metal use and develop
improved feed formulations with more balanced amino acids to reduce N/P/K excretion
Many pigs are slaughtered in in-adequate facilities with no attention to food safety issues.
Food Safety
While a lot is spoken of this it is not known what the economic impact may be as lack of
food safety has been inherent in Chinas culture, but this is rapidly changing.
Remedy – industry to improve slaughter facilities. GoC to establish and impose standards,
certify facilities, monitor and control.
The sustainability of the industry is dependent on many influences, the impact of which
Sustainability
varies considerably between countries. Location, environment and disease are key issues for
China, but even issues like animal welfare could emerge to have a significant impact on the
industry as the pig industry is so dominant and sow crates are major welfare issue.
Remedy –GoC and industry to take a proactive stance in addressing emerging issues.
Majority of pig farmers are inefficient and small scale. There is a need to develop more
intensive livestock farms but this needs capital, technical knowledge and land for
Development expansion.

Remedy – GoC supporting integrated production models with licensing, business
approvals, banks with funding. Industry move to more contract growing of pigs. Land is an
issue and difficult to obtain. If China wishes to grow the industry they need land and the
best area is the North East of China - less people and more land. Need GoC policy on where
the production will go.
Large integrators do not seem to have funding issues. There may be issues for funding
2000-5000 sow units
Access to Funding
Remedy – If required Bank funding for medium sized companies
Access to Land For the industry to modernize more land needs to be made available for pig production.
Access to land for pig farming is becoming increasing difficult
Remedy – GoC to establish and implement clear land use guidelines and environmental
standards for new pig farms
Waste Management Increasing pig farm sizes result in increasing volumes of pig waste, an organic fertilizer that
is valuable for as an alternative to chemical fertilisers. Pig waste is often seen as having
little value and is not managed and used in a sustainable method.
Remedy – GoC to establish zero discharge levels and to encourage grain farmers to use pig
waste and develop a sustainable model
7.5.1 International Competitiveness

China pork production costs are the highest in the world, resulting in high live pig and pork prices. As of August 2015
live pig prices (USD/kg) were as follows19
Table 7-6 Pork Competitiveness
August 2015 USD/kg LWt

China 2.80
USA 1.22
Canada 1.13
Mexico 1.34
Brazil 0.91
Russia 1.69
Spain 1.41
Vietnam 2.09
This shows that COP of pork in China is higher than in all countries because raw material prices are higher mainly due
to Govt. intervention in corn and wheat prices, but also reliance on imported feed ingredients such as SBM and low
on-farm efficiencies. Improved efficiencies are dependent on a complete modernization and intensification of the sector,
which is being undertaken. The lower cost of USA/Canadian pork will offer export opportunities for these countries
while China supply is reduced and Shineway will benefit from the US supply.
8 DESCRIPTION OF THE BROILER VALUE CHAIN
Faster growing, foreign sourced, white-broilers are quickly replacing domestic yellow-feathered breeds. In 2011, about
59 percent of China’s broilers were white-feathered chickens. The remaining 41 percent of China’s broilers were
yellow-feathered domestic breeds, which have lower weight and longer growing periods. Because white-feathered birds
are much cheaper and easier to process, they dominate the market in the north and are used widely throughout the
19
ex Genesus weekly report

country. In the south there is a strong taste preference for yellow-feathered birds, which are traditionally stewed or
cooked in soup. Because white-feathered chickens are cheaper, demand for yellow-feathered birds is expected to
gradually decline, eventually becoming a niche market. However many yellow-feathered chickens are also raised on
intensive farms, like those contracted with Wens Food Group, a private Chinese company that is the largest producer of
broilers in China.
The broiler value chain consists of breeding and growing farms, slaughter and processing and distribution to the retail
markets, all supported as necessary, with the key input being feed. The broiler value chain is shown in a simple
diagrammatic form.
Figure 8-1 Broiler Value Chain
8.1 Grand Parent /Parent Stock Breeding Farms

The commercial white-broiler breeding sector in China relies on the supply of imported Grand Parent Stock (GP)
mainly from Cobb, Ross and Arbor Acre. The Beijing Poultry Breeding Company (BPBC) is an exclusive distributor of
Cobb Vantress’s GPs.
Note. The current ban on USA sourced GP stock is expected to result in great shortage of commercial birds from late
2016 through 2017. It is reported that Chinese breeding companies have managed to source grandparent stocks from
European market but supply volumes are not known.
The PS farms rear the birds until point of lay (22 weeks of age) and then enter the laying phase to around 64 weeks of
age. Males are placed with the females at around a 1:10-12 ratio to ensure adequate fertility of the eggs. Each female will
lay about 170 eggs in their 64 week cycle. This cycle is then repeated when the producer puts another flock of birds into
sheds to begin the process again. The hatching eggs are incubated and hatched in hatcheries within the PS operation (a
21 day process), or as standalone units throughout the country, to produce the final stock (FS) commercial broiler
DOC’s that are sold to broiler farmers. Since the length of the cycle for both GP and PS is over a year, the PS progeny of
a GP import will be producing commercial broilers up to 2.5 years later. Generally, parent farms are either owned by
integrated companies, or specialised breeding companies.
The PS hatching eggs are incubated and hatched in a hatchery. Hatcheries are specialised buildings that may be part of
the breeding farm or may be an independent operation to which hatching eggs are delivered. Incubation takes about 21
days, and is often a two-step process. Initial incubation is undertaken in machines known as setters. Inside the setter,
temperature and humidity are closely maintained. Blowers or fans circulate air to ensure uniform temperature, and
heating or cooling is applied. The setter phase lasts about 18 days when the eggs are transferred to hatchers. On hatch
day (day 21) the chicks are removed, inspected and vaccinated. The hatchability of eggs should be in the range around
83%. Chicks are then sorted (often by sex for broilers and always for layers), counted, and placed in chick boxes for
delivery to broiler farms. Day-old chicks (DOCs) are then delivered to the broiler farms or to wholesale agents by
(usually) air conditioned chick trucks.

China had 1,633 PS broiler farms in 2012, with approximately 92 million birds. Shandong had 248 PS broiler breeder
farms holding approximately 17% of China’s total PS broiler breeder
Figure 8-2 PS Farm numbers
Figure 8-3 White and Yellow Broiler numbers

China saw a slight decrease in White Feather GP’s in 2013 and larger decrease on Yellow Feather GPs that could
indicate an increased preference for cheaper white feather meat.
8.2 Broiler Growing Farms

Commercial broiler DOC’s are grown in either company farms owned by the large integrators (few), contract farms or
independent farms. 95% of farms (some 24million) are small family units. Average farm size is small at 1-2,000 birds
capacity. Some 25,000 farms have farm size of >50,000 birds. Birds are grown to a live weight of 1.7kg (for QSR) up to
2.5kg for further processing. Mortality on broiler farms is around 10% (very high) but very variable due to the
bio-security issues. Average feed conversion ratio (FCR) is around 1.80-1.90:1 for a 2kg bird, with significant variation
throughout the country, based on mortality impact on FCR, widely differing housing, animal health and management
practices.
Facilities used for broiler growing are often of very low quality. There is a total lack of biosecurity on growing farms.
Ventilation is poor, with any pad cooling systems compromised by shed design and management (e.g. opening side
vents). Whole shed brooding appears to be common with coal fired heating of the house. Cage rearing is reported to be
used by 5% of Shandong farmers, posing an animal welfare issue. Feed is supplied from nearby feed mills, delivered in
bags (limited bulk feed in China) to farms usually by contract truckers. The farmer supplies any litter (many birds are on
elevated slates), water, power and gas.
Contract farming is common but not as developed in the rest of the world as establishing and managing a fully vertically
integrated model requires substantial management expertise, financial capital and ability to acquire land, which is a
major constraint for expansion. These factors are slowing the development of a modern poultry industry (along with
current profitability and food safety issues).
In China there are four broiler growing models in China

1. Model 1. Broker/trader model
 Broker/trader has a good relationship with the hatchery, the feed mill and the animal health company
 The Broker/trader supplies the DOC, feed and medication to the farmer on the famers account
 The farmer grows the birds and sells to market and once he sells he pays the broker
 The Broker/trader supplies credit and perhaps some technical know how
 Historically brokers made a lot of money but now less because the market is not so good and the larger farmers
go directly to the hatcheries/feed mills for supply
 The margin for the broker ranges between 5 and 10%
2. Model 2.
 Usually direct with an integrator but sometimes there is a broker to deal with the local villages etc
 Integrator suppliers DOC, feed and medication to grower
 Grower agrees to sell back at a fixed price that they agree at the start of the contract
 But this is a risk as sometimes the grower will sell in the open market when the price is higher than the agreed
price as they do not respect the contract
3. Model 3
 Same as above but the price for the broilers if not fixed and flexible and will be at market price on day of
collection. This way the grower gets market price and it is safer as the integrator can get the birds back and does
not have to worry that they are sold in the open market
4. Model 4
 Like the western system, the integrator supplies DOC, Feed and medication and the grower gets a contract fee
based on body weight and FCR etc.
 Not same as US as do not have bonuses for performance and do not have league ladder that allows ranking for
additional bonuses
8.3 Slaughter
When the birds are large enough, they are transported to processing plants for slaughter. These are either specialised
chicken slaughterhouses with strict food safety rules and with waste treatment facilities, or backyard slaughter
operations associated with the wet market. In modern plants the slaughter process is fully automated with plants in
China processing up to 10-15,000 birds per hour. When chickens arrive at the commercial processing plant they are
stunned, killed, bled, scalded, plucked, gutted, washed, chilled, weighed, portioned (or sold as whole birds), packed,
chilled or frozen. They may be deboned and used for further processing (cooked, sausages etc.) in an adjacent section to
the processing plant, or on another specialised site.
The number of modern slaughterhouses and processing plants is increasing. This trend is enabling production of higher
quality birds that are distributed through the cold chain and have a shelf life of up to 10 days. The rise of further
processing is being driven by the development of supermarkets and by supply-driven demand for shelf stable and frozen
products, not to mention food safety demands. Meanwhile, small slaughter operations in the backs of houses supply wet
market traders with dressed birds. The sustainability of such operations is in doubt because of food safety concerns.
8.4 Agents/Distributors/Contactors.
Most livestock products in China are distributed by small traders. Outside large cities (such as Guangzhou, Shenzhen,
Shanghai and Beijing), the cold chain is still fragmented, supporting wet markets as the major distribution channel.
However, the biggest future shift seems to be the expansion of organized retail in marketing poultry products—taking
away the share from wet markets. These outlets are capitalizing on food safety concerns as a way to increase their
market share. With wet markets closing, the retail market for frozen and prepared products will be the growth area if
consumer preferences change.
ANZ predicted that by 2020, organized retail will be marketing 33 percent of all poultry products, compared to only 8
percent in 2011. The share of wet markets in the distribution channel is predicted to decline from 77 percent in 2010 to
45 percent in 2020.
Large supermarkets and QSRs prefer sourcing “high-quality” products from suppliers that have control of the value
chain and provide product traceability. Over time, organized retail and QSRs will shift the supply chain away from
wholesale markets (where more independent smaller-scale farmers market their products) to large-scale integrators.
8.5 Quick Service Restaurants
There has been a rapid growth in QSR in China with McDonalds (who serve bone in chicken ex 8 piece cut) with KFC

and McDonald’s increasing their outlet numbers in China to 4,000 and 1,500, respectively (2012), with KFC
dominating 39% of the fast food market in China. KFC’s largest chicken suppliers are Dachan Food, Fujian Shengnong
and Shandong Xiantan supplying more than 50 percent of all KFC’s chicken supplies.
In 2012, the economic slowdown negatively impacted QSR performance, reflecting the strong relationship between
QSR growth and economic growth. 2013 KFC China sales and profits were significantly impacted by news of avian flu,
resulting in a 15% decline in KFC China’s same-store sales for the full year. 2014 KFC China sales and profits were
effected by OSI scandal from July, resulting in same-store sales at KFC China decreasing by 14% in the company’s
third quarter. These food safety concerns are driving more control over the value chain, thereby concentrating power in
the hands of the larger integrators
Chicken is a negative brand right now and consumers are not buying. QSR was responsible for the growth, but QSR are
at the centre of the scandals and this is an issue (OSI, KFC, New Hope, AI). Also the novelty of QSR has worn off as
going to KFC was an event that was fun and exciting, but now it is just fast food and expensive fast food. Thus, some
observers believe that QSR growth rates may have peaked and the retail market for frozen food or further processed
food is expected drive growth going forward. The market for frozen whole chicken is evenly divided between branded
and private label products, but frozen chicken has not been widely accepted as it is more difficult to cook.
8.6 Wet Markets
In response to H7N9 outbreaks, live bird markets were temporarily closed in many cities yet Guangdong Province
(where 50 people died in 2015) managed to keep them open. Consumers continued to purchase live birds until all the
live bird markets within the province were shut down (February 2015). In other regions, live bird sales are gradually
reducing in wet markets with chilled poultry products accounting for almost half of the total poultry supply in Shanghai.
However, in smaller cities and rural areas, live bird markets remain the major distribution channel for poultry.
8.7 Modernisation of the broiler industry

Economics are so bad there is no cash to invest, so funding is an issue. Government does not see poultry in the national
interest as it does pork as pork is the national meat and therefore GoC is more conscious about support, via subsidiaries
etc, so moderation needs to be done by responsible companies.
Contract growing is limited but the industry believe that contract growing is essential because for expansion
and producing the volume of birds needed. However past actions from growers and integrators have left a bad
image as contracts are really just an extension of the backyard production with no biosecurity, poor
management, poor housing and environment, and high cost of production. Contract farming is needed to
change all of these. However it has not happened due to lack of finance, poor trust between stake holders,
economics of the industry, price volatility, land availability, environmental regulation cost and little ROI for
the investment in the environment and an overall lack of vision and GOC and industry level.
IFC has an opportunity to invest in the farm sector to improve the industry, and modernise it to reduce cost
and improve food safety. This will need to be done in conjunction with industry leaders as the farm sector
will need to be controlled by them via contracts, technical support etc. There seems limited scope to
investment in processing and further processing
9 BROILER PRODUCTION IN CHINA

9.1 Size Of The Industry
China produces 13.120 - 17.121MMT of broilers (DWt) equating to some 10.3kg per capita per annum
Figure 9-1 Broiler Consumption
20
WBG Indexmundi
21
China statistics

China Broiler Consumption
16
14
12
10
8
6
4
MMT China MMT WBG Per capita kg
2
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GoC states that 11904m birds were produced in 2014. If we assume 17.1MMT of DWt was produced at a 75% yield
then this would infer that the average weight of broilers was 1.92kg –which would be expected.
9.2 Location
Broiler production is spread across the country but 63% of production is in 8 provinces, with Shandong province being
the largest producer at 15% of China’s production. Shandong is a corn, soya and peanut growing area, has a favorable
climate and is relatively close to Beijing and major eastern coast markets. In addition an export industry (for Japan) was
established in the 1990’s thus establishing quality production systems.
Figure 9-2 Major Broiler Production Provinces
Major Broiler Provinces - Million birds pa

2000
1500
1000
500
Broiler production density is shown in the following figure, where Shandong, Henan and Guangdong dominate with
less production in the interior provinces
Figure 9-3 Broiler Density by Province

9.3 Broiler Sector Growth
After several years of successive food safety scandals and bird flu China's poultry sector's expansion is being held back
by the country's recession. The impact of half a decade's cumulative damage is now showing up in official broiler
statistics with production volumes having fallen for a third consecutive year, to 13.025 MMT down 5.4% or 700,000
tonnes from 2012's peak of 13.7 MMT. The only thing keeping both production and consumption from falling further is
China's pork market, where record third quarter pork and piglet prices are boosting the consumption of cheaper broiler
meat.
Given that numerous economic indicators imply that Chinese consumer demand is falling more steeply than anticipated,
2016's estimated l3.l MMT of production and l2.87 MMT of consumption could be scaled back. Neither
does the industry's performance look any better from a long-term perspective. After rising 96% over l8 years, from
5.1kg in l994 to 10.0kg in 20l2, per capita chicken consumption has fallen back to 9kg
The industry's damage is mostly self-inflicted with integrators being caught using illegal antibiotics or meat processors
exposed as re-using stale chicken parts, so a key to expansion will be getting its act together.
Current margins are very modest so the scope for higher returns and industry expansion is limited. Also there is a ban on
US GP imports so even if prices and profits become more favourable, it will be difficult chicken production to take
advantage of the situation. However, given China’s low consumption rate for broilers, there is a huge opportunity fro
the industry, if they get their act together.
9.4 Broiler Sector Production Costs and Margins
9.4.1 Methodology
From the placement of day old parent stock to the final sale of commercial white broilers to the consumer, we broke the
value chain into input and output activities. We then used our own broiler production model and local data to calculate
outputs and costs of live bird production. Data on post-farm costs were taken from interviews. We made breed standard
assumptions for the inputs (feed) and outputs of parent stock farms (total eggs, hatching eggs) and hatcheries
(hatchability). Farm and hatchery costs were estimated on the basis of Asian benchmarking.
Table 9-1 Key Livestock Assumptions, National average for the white broiler sector
Broiler
22
Hatching eggs per breeder 166
Hatchability 82%
Broilers mortality 10.0% (very conservative to recognize HPAI)
Broiler FCR 1.9:1
Broiler kill weight (LWt) 2.00kg
22
Within integrations PS farms

Table 9-2 Key Pricing Assumptions
While prices and margins vary significantly between months, a base case used is as follows.
Broilers
Liveweight (kg) 2.0

Dressing % 75
DOC price (RMB/DOC) 2.2
Average broiler feed cost (RMB/kg) 3.4
Broiler price ex farm (RMB/kg LWt) 8.5
Broiler price retail (RMB/kg DWt) 17
In identifying margins in the value chain one must standardize definitions. Due to an inability to get standardize
financial data we therefore define margin as the margin between production costs and sale price, effectively the gross
margin and before SG&A, finance and tax costs. Our base case analysis is for white broilers sold fresh in retail. Since
costs and prices vary this analysis is dependent on the data used and is illustrative only.
9.4.2 Broiler feed prices
Broiler feed prices have risen due to commodity price increase and imposition of corn price floor by GoC. Current
prices are in the region of RMB3.4/kg (USD548/MT).
Table 9-3 China broiler feed prices
9.4.3 Cost and Margins for Broilers

The cost and margin structure of broilers starts with the purchase of the PS DOC, through the PS farm onto the hatchery
producing the commercial DOC to the broiler farm. Non feed PS farm costs and margins 23 are based on consultants
estimates, given the reported livestock performance. Broiler farm operating costs and margins are calculated before the
bird leaves the farm from where it then has costs associated with trader margin, transport, slaughter, and retail margin.
The costs have been taken for a 2015 scenario when farm margins were very low.
We have broken down the component costs of broiler production to wet market sale to consumer as follows, as RMB per
kilogram dressed weight and each of these as a percentage of the total cost.
Table 9-4 Breakdown of Broiler Production Costs including margins (Rmb/kg DWt)
23
Realising that these will only apply at a point in time.

Rmb/kg DWT Percent
DOC cost/margin 1.65 9.7%
Feed cost/margin 8.79 51.7%
Farm cost/margin 1.20 7.1%
Trader cost/margin 0.93 5.5%
Slaughter cost/margin 2.43 14.3%
Retail margin 2.00 11.8%
17.00 100.0%
The DOC cost is 10 percent of the final dressed weight price, while grower feed cost is 52 percent,24 farm production
costs and margins are 7 percent, trader costs and margins are 5 percent, slaughter costs and margins are 14% while retail
margins are 12% of the total retail price.
Figure 8-5 shows the buildup of costs by activity and time, from the PS farm, through the feed mill and broiler farm to
the market. Costs are provided for each activity and cumulated.
Figure 9-4 Cost per kg Broiler to Consumer in Retail Market (RMB/kg DWt)
18,00
16,00 Rmb/kg DWt Cummulative
14,00
12,00
10,00
8,00
6,00
4,00
2,00
0,00
The breakdown in margin on sales by activity is as follows:
The margins shown in Figure 8-3 are total margins (RMB/bird) by activity. The margins, as a percentage of sales are as
follows (Figure 8.4). Neither of these takes account of the investment or risk involved, so any RMB or percentage figure
cannot be judged in isolation.
Figure 9-5 Margins on Sales for Each Subsector in Broiler Value Chain (%)
Activity Margin on sales

DOC 16.0%
Feed 8.2%
Farm 4.6%
Trader 7.2%
Slaughter 12.7%
Retail 11.8%
24
But higher if we include the feed component of the DOC cost.

Figure 8-6 shows that percentage margins vary across the supply chain and are not high, with the base price to farms
based on the last 3 years average. The fact that the feed, farm, trader, and retailer are making between 4 percent and 12
percent margins also suggests these are highly competitive sector. The higher margin for PS farms is justified on the
basis of their high investment and risk but is lower than expected suggesting a competitive market. The tarder margin (in
this case gross margin) will vary a lot depending on what is offered re feed credit etc.
Broiler farm profitability (CNY /bird ex BG Agri) has been squeezed by higher grain costs and declining prices with
June 2015 losses of Rmb2.40/bird
Figure 9-6 Broiler farm profitability
China Livestock Statistic Yearbook, 2014 Margin and Cost statistic of China Agricultural Products shows total cost of
broiler production, including cost of raw material and services, labor cost, land cost to be as follows.
9.4.4 Day Old Chicken Prices

Broiler DOC prices can be volatile due to supply/demand relationships. In 2014, DOC prices varied from a low
RMB0.5/DOC to RMB3.5/DOC. Such variances are not uncommon in DOC prices where supply/demand relationships
are not controlled. The average of around Rmb1.8/DOC is USD0.30 is average to low by international standards.
Figure 9-7 DOC prices 2012-2015

9.4.5 Broiler Prices
The weak pork price in 2014 drove down the market of the white meat chicken. Data is available for live chicken ex
farm and wholesale prices for live birds. Prices for 2012-15 were as follows.
Figure 9-8 Live broiler and DOC prices 2013-14
Live prices are ex GoC where they quote price per bird. Assuming a 2kg LWt bird we have converted to
price/kg LWt which are similar to another source below.
Figure 9-9 Live broiler prices ex farm
2015 H1, market demand for poultry products was sluggish due to concern for HPAI. Many live bird markets are closed
and consumers need time to adjust to fresh and chilled poultry. In addition, the slower economic growth is a major factor
for sluggish demand. Live price decreased by 10-20%, compared with 2014, and DOC prices fell by 40%. Farmers and
breeding companies are making losses at the current price level.

Due to the recent HPAI outbreaks, the mortality rate increased and the gross margin of broiler farming was the lowest in
five years. Slaughterers face the same challenge. Fujian Sunner, the largest white bird player reported a loss of USD 30
million in 2015 Q1 due to the decreasing market price. However poultry prices at retail level have been stable
suggesting that the poultry retail market is not very price sensitive, and downstream players have strong bargaining
power against suppliers.
Although the ban on US poultry imports is not expected to impact China’s market significantly in 2015, the continuous
strong pig price and the low broiler GP inventory is expected to jointly push up poultry price into 2016 and 2017.
Following the 22% drop in breeder imports in 2014, the industry has reached agreement to reduce PS imports and self
regulate the sector.
9.5 Broiler Sector Efficiency Issues
Production efficiency of the China broiler production system can be monitored and costs and margins quantified as
above. All of these can be benchmarked against international players but a summary of the issues in the Chinese broiler
industry is warranted for a greater understanding of the issues that face the industry and what interventions are required
by the stakeholders to develop the industry.
Table 9-5 Broiler Sector Efficiency Issues
Issues and remedies
China imports GP broilers of international standard, producing PS housed in modern

DOC supply
facilities and supported by modern hatcheries that produce breed standard production.
The GP and PS farms are operated with good biosecurity and management. Costs are
elevated only by the high feed costs. Supply of DOC’s is more variable than in countries
with fully integrated operations as long term planning is much more difficult and DOCs
are an end product rather than an input as they would be in an integration. This also
impacts the choice of breed, where DOC suppliers prefer high reproductive performance
at the expense of growth efficiencies. Arbor Acre (AA) from Aviagen (the parent
company that produces Ross broilers genetics) is a popular breed. GP imports have been
banned from USA since January 2015 due to HPAI in USA and that has impacted supply
of PS/DOCS
Since many PS farms/hatcheries are independent of integrations, relying on external
sales, DOC quality is often compromised with a result impact on growth rates, FCR,
mortality and cost.
Remedy. As there is more integration there will be improved supply/demand management
for DOC’s and also better decisions made in breed selection
Feed is manufactured in modern feed mills with international economies of size, quality
Feed supply
and efficiency standards. Equipment is now supplied by major Chinese companies such
as Jiangsu Muyang and Zhengchang who now sell equipment internationally against
strong companies such as Buhler. However most feed is bagged that results in higher
costs of production and transport.
Remedy – more integration will enable bulk supply of feed.
Around 20% of the value of feed raw materials are imported, which, a priori, would
Feed cost
suggest that China has an advantage in feed cost versus countries such as Vietnam and
Indonesia that import 75% of value . However this is not the case as GoC imposes floor
prices on grains that raise feed costs to the highest in the world.
High raw material costs, bagging costs and transport costs all contribute to raising
production costs.
Remedy – Grain process are in the hands of the GoC so it would take a major policy
change to reduce feed costs
Farms are small and often located in areas with sub-optimum access. This results in
Farm infrastructure
 Inability to take advantage of economies of size/scale
 Inferior bio-security - a major issue

 Low capital costs but with poorer livestock performance
 The need to use bagged feed at a higher cost
 Inferior environment with controlled environments the exception rather than the
rule
 Some broilers are farmed in cages raising animal welfare issues
 Inconsistent and suboptimal operating procedures
 Higher production costs
Remedy – industry development of larger farms with better bio-security and more
efficient livestock performance to reduce production costs and improve yields – and
enabling the use of bulk feeds. The development of contract growing that links farms to
technical advice will assist.
Inadequate bio-security has severely compromised the poultry industry and resulted in
Bio-security
the HPAI epidemics of the last decade. Most growing farms have no bio-security. While
the threat of additional zoonotic diseases exists, inadequate bio-security will impact
ongoing livestock performance and costs. In addition, there is a major concentration of
broilers in Shandong province that only increases the bio-security issues. The low priority
on bio-security is difficult to understand but is related to low margins in the sector and the
absence of strong integrators
Remedy – vastly improved bio-security procedures throughout the industry. This will be
best addressed with development of new broiler growing facilities and systems
throughout the industry
PS farm management issues include controlling Mycoplasma’s and rearing body weights.
Farm management
Live bird performance on broiler farms are below international standards. FCR in China
on white broilers is quoted at 1.8:1 (and more likely to be above that) on a 2.0 kg bird, but
will be highly variable due to the variability in housing and management Feed cost will be
10+% above genetic potential, thus increasing live bird costs.
Remedy – address bio-security, health, housing, water, feed, management issues, staff
training and SOPs. Role for GoV advisers and industry
Many birds pass through a myriad of traders and associated slaughter operations before
Post Farm
they reach the market. Margins are taken at all levels within this system. Issues with this
system are quality and food safety
Remedy – Establishment of full integrations will assist quality and food safety
The industry is spread across China with fresh birds being produced locally for a
Industry Geography
fresh/live bird market. There is limited processing of birds with shelf life more than one
day that can be placed in a cold chain distribution and send inter-provincially. This results
in supply/demand relationships being totally controlled within a region, as product cannot
be transported beyond relatively very short distances.
Remedy – industry to develop processed birds with a shelf life, along with a cold chain,
that would enable birds to be transported much longer distances, thereby reducing price
variability between provinces. However this would require a significant improvement in
infrastructure to reduce transport costs (along with the development of the cold chain)
and the cost of birds within the cold chain are significantly higher, so it is more likely that
provincial price differences will remain.
A large number of birds are slaughtered in backyard facilities with no attention to food
Food Safety
safety issues, while birds slaughtered in modern facilities of integrators will be reaching
international standards. There are also deficiencies in the distribution system to wet
markets and within wet market retail.
Remedy – industry to improve slaughter facilities, distribution and retail outlets and
impose standards. Private sector to develop modern slaughter facilities. GoV to establish
standards and implement regulations
The sustainability of the industry is dependent on many influences, the impact of which
Sustainability
varies considerably between countries. Environment and disease are key issues for China

but even issues like animal welfare can emerge to have a significant impact on the
industry.
Remedy – GoV and industry take a proactive stance in addressing emerging issues.
Majority of broiler farmers are inefficient and small scale with poor facilities and
inadequate bio-security There is a need to develop more intensive growing farms but this
Development needs capital, technical knowledge and land for expansion.
Remedy – supporting integrated production models with licensing, business approvals,

funding etc. Industry move to more contract growing of broilers
Access to Land For the industry to modernize more land needs to be made available for live production.
Remedy – GoC to establish and implement clear land use guidelines
Waste Management Increasing farm sizes will result in more concentration of broiler shed wastes
Remedy – GoC to establish policies and guidelines for waste management
Short term funding does not appear to be a problem within the industry. Large integrators
are well funded. The developing intensification of the sector seems to be being
Access to Funding undertaken by well-funded players with access to bank finance. Since the growing cycle
is much less than for pigs, the need for LTD products is less, but still present
As more integrators move away from current low quality supply (to improve food safety
and reduce cost of production) to in-house production and modern contracting facilities,
there will be a greater need for capital to find this expansion
Remedy – bank funding for developing live supply
9.6 International Competitiveness

Current cost of production of white broilers is around RMB8.5/kg LWt (USD1.37/kg LWt). This compares with
Indonesia where costs mid 2014 were around USD1.20/kg LWt. The ex farm broiler prices (Feb 13) in Bangkok were
USD1.19/kg. This shows that China white broiler prices are higher than surrounding countries, a function of raw
material costs, infrastructure and farm productivity.
10 THE CHINA FEED SECTOR
Feed represents the most significant cost in pork and broiler meat production. Feed in China is either from commercial
feed mills or mixed on farm, where local pig farmers use local ingredients like corn, rice, rice polish, peanut, and potato,
along with protein concentrates or premix produced by the commercial feed companies. This poses some confusion
when stating tonnages as concentrate will be used (at say 5-20%) to produce some 5-20 times the tonnage of full feeds.
Most broiler farmers use commercial feed.
10.1 Feed milling process
Feed mills are large operations that have raw material storage capacity (often in silos). They have grinders for grinding
grain, mixers for mixing feeds, steam conditioners and presses for pelleting feeds, coolers, crumbles, packing facilities,
finished product stores and load-out facilities. Pig and broiler feeds come in "mash", "crumble", and "pellet" forms.
They are designed to provide a perfectly balanced diet for each type of stock. Feeds contain such ingredients as corn,
wheat, soybean meal, peanut meal, fishmeal, minerals and vitamins. The crude protein content is usually around 16-18%
for pigs and 20-22% for broilers. The finished products are packed into polypropylene woven bags or in limited cases,
delivered in bulk.
10.2 Size of the sector
Total commercial feed production in China was 193 MMT worth RMB115,458 million in 2014 (inclusive of
concentrates and premix), showing an increase of 2% from 2013. There were 14,079 feed companies in China at the end
of 2013, 408 of which are foreign feed companies (including 136 feed companies invested by companies from Hong
Kong, Taiwan and Macao).
Table 10-1 Commercial feed market size (MT)

Species Pig Layer Broiler Aqua Ruminant Others Total
Compound Feed 66,292,868 24,252,353 46,186,464 18,328,047 5,591,173 2,428,050 163,078,955
Concentrate Feed 14,069,483 4,702,274 2,820,498 71,582 2,097,564 223,477 23,984,878
Premix Feed 3,750,944 1,394,542 463,864 242,599 261,747 223,530 6,337,226
Total 84,113,295 30,349,169 49,470,826 18,642,228 7,950,484 2,875,057 193,401,059
Note. Concentrates are used by home mixers who add it at say 5-20% of their mix. Thus 23MMT of concentrate would
result in 150-250MMT of full feed, mainly produced by small pig farmers. ADM state that their premix/concentrate is a
4% product thus making 25:1 MMT of feed
A review (following) suggests that <30% of pigs are fed full feeds purchased from commercial mills, while most broiler
feed will be sourced from mills. Thus, commercial full feed is only part of the overall feed supply scenario.
Given that data exists for pork and broiler production, one can extrapolate the feed requirement to produce this based on
assumed production efficiencies, as follows
Table 10-2 Estimated pig feed usage

PORK
Total pork production MT DWt 55,000,000
Total pork production MT LWt25 76,000,000
Whole herd FCR Ratio 4+:1
Total feed required MT 304,000,000
Commercial feed reported MT 66,292,868
Concentrate feed reported MT 14,069,483
Premix MT 3,750,944
Total feed produced ex mills MT 84,113,295
If we assume the whole herd FCR for China is 4.0:1 then that would infer that 304 MMT of feed is required for the pork
sector (or if the FCR was 3.5:1 then some 266 MMT. Official statistics state there is 66MMT of commercial feed and
14MMT of concentrate that would mean an additional 140MMT of feed if used at 10% inclusion for a total pig feed at
farm level of 206MMT. This means that the quoted pig feed production is only supporting some 68% of what China says
it is producing if the FCR is 4:1 (which would be expected if the concentrate is used at 10% inclusion). This is consistent
with Brian Lohmar hypothesis (US Grains Council) who uses Chinese consumption data to conclude that China pork
production is only 31MMT or 56% of what China says it is and would be consistent with concentrate inclusions of
around 14%. This also supports the conclusion of Yu X. and D. Abler – see Section 18.3. However, a review of oil seed
crushing volumes (Section 10.2) suggests that total feed use in China, based on protein meals, is closer to 400MMT.
This suggests that there are huge volumes of pigs being fed home produced feeds like potato, and this is well known in
provinces like Sichuan.
This has significant implications on analyzing where the feed industry is heading. If China is producing 55MMT pork
per annum and the feed production figures are correct, it means that only 25% of China’s pigs are being fed full
commercial feeds. Thus, as the industry intensifies, and farmers switch from using concentrates to all feed being full
feed, this will require 266MT of full feed (assuming a whole herd FCR of 3.5:1) or an additional 182MMT of feed –
which is 2.16 times the current pig feed volumes. Alternatively if China is only producing say 31MMT, in which case
145MMT of full feed would be required, or 1.7 times the current production, if all farmers move to full feed. In both
scenarios, the use of some concentrates will remain but there would still seem to be a need for more feed milling
production, much of which will be produced in existing capacities, but more capacity, and funding, will be needed. But
sources believe that China pig farms make their own feed and have their own feed mills and be like a “mini” Wens and
be integrated on the feed side.
A similar analysis can be undertaken for broiler feeds as follows.
Table 10-3 Estimated broiler feed usage

BROILER
25
Assuming 72% yield (58% meat yield)

Total broiler production MT DWt 17,100,000
Total broiler production MT LWt26 22,800,000
FCR (including PS feed) Ratio 2.25:1
Total feed required MT 51,300,000
Commercial feed reported MT 46,186,464
Concentrate feed reported MT 2,820,498
Premix MT 463,864
Total feed ex mills MT 49,470,826
This shows that the stated broiler production will require 51.3MMT, while commercial broiler feed is 46MMT along
with some concentrate that would 14MMT feed, for a total of 60MMT. It thus appears that if the broiler production
figures are correct that the FCR is poorer (and/or other poultry such as quail and duck are included within the broiler
statistics (quite likely)
The industry will aim to convert farmers from using concentrate to compound feed and specifically to use more
improved “weaner” feeds
10.3 Location
China's feed industry was attractive to new entrants but is now characterised by high competitor rivalry and excess
capacity. The largest manufacturers have been successful in securing production facilities across the country and
establishing national distribution networks.
Location of Chinese feed mills is driven by the availability of grain and access to markets. This results in the majority of
production being in the east and north-east and industry capacities mirror this. The top 6 provinces of Guangdong,
Shandong, Henan, Liaoning, Hebei. Hunan produce 48% of the countries feed.
Table 10-4 Feed production by provinces in 2013

Province Production (MMT) Province Production (MMT)
Guangdong 22.5 Jilin 4.7
Shandong 20.7 Shaanxi 4.4
Henan 12.9 Yunnan 3.7
Liaoning 12.9 Inner Mongolia 3.0
Hebei 11.5 Shanxi 2.9
Hunan 10.8 Beijing 2.7
Sichuan 10.3 Tianjin 2.6
Guangxi 10.2 Hainan 2.0
Jiangsu 9.8 Chongqing 2.0
Fujian 7.7 Xinjiang 1.6
Heilongjiang 6.8 Shanghai 1.6
Jiangxi 6.7 Gansu 1.4
Hubei 6.3 Guizhou 0.8
Zhejiang 5.6 Ningxia 0.7
Anhui 4.9 Qinghai 0.1
While Shandong has the largest livestock production, Guangdong has less corn/wheat production than Shandong
Table 10-5 Pig feed production by 10 largest 27 provinces in 2013 (MT)
Province Total Feed Compound Concentrate Premix

Guangdong 10,433,279 9,706,576 324,565 402,138
26
Assuming 75% yield
27
Feed production for pigs for all provinces is appended

Hunan 7,724,184 6,510,464 631,738 581,982
Henan 7,375,396 5,792,737 1,397,850 184,809
Sichuan 6,316,224 5,203,651 920,879 191,693
Shandong 6,132,961 4,822,237 1,108,139 202,585
Guangxi 5,720,900 5,405,348 235,291 80,261
Jiangxi 4,863,325 4,216,537 195,802 450,986
Fujian 4,179,292 3,654,959 246,759 277,573
Liaoning 3,495,912 2,027,880 1,364,543 103,489
Zhejiang 2,868,564 2,701,247 58,161 109,157
Table 10-6 Broiler feed production by 10 largest 28 provinces in 2013 (MT)

Shandong 11,306,427 11,178,360 26,697 101,370
Guangdong 6,700,653 6,643,885 11,036 45,732
Liaoning 3,854,269 2,718,123 1,119,604 16,542
Guangxi 3,580,169 3,526,479 27,708 25,982
Henan 2,955,838 2,811,455 125,346 19,037
Jiangsu 2,446,749 2,425,367 2,281 19,101
Anhui 2,342,748 2,331,859 3,052 7,837
Fujian 1,843,989 1,841,823 - 2,166
Sichuan 1,829,684 1,812,330 1,168 16,186
Hebei 1,249,077 1,067,551 171,808 9,718
Table 10-7 Feed mill number by feed type for the 10 largest provinces in 2013 (MT)
Province Compound Feed Concentrate Feed Premix Feed Total
>10 tonne/hr <10 tonne/hr
Hunan 182 122 1291 183 1,778
Shandong 588 207 661 290 1,746
Liaoning 559 300 648 89 1,596
Hebei 452 393 404 199 1,448
Heilongjiang 169 389 647 229 1,434
Henan 315 520 305 121 1,261
Guangdong 345 187 141 324 997
Sichuan 174 231 443 142 990
Jiangsu 288 179 224 210 901
Jilin 263 100 309 19 691
Total all China 5,015 4,249 7,279 2,971 19,514
Within the feed sector there has been a significant use of concentrate feed, driven by demand from small-scale pig
farmers who use local grain. This trend will reverse once pig production systems are modernised. Smaller mills are
consolidating as they lack funding (especially the high working capital needed) and the technical expertise to compete
with the larger players. They also suffer from lack of economies of size and scale. Margins have been decreasing in the
feed sector as raw material prices, labour costs; power and transport costs have increased.
10.4 Market Shares
New Hope is the dominant feed miller in China with 7.8% market share. The 20 major feed companies shares are tabled.
These companies have production of 89MMT or 47% of the total commercial feed market
28
Feed production for broiler for all provinces is appended

Table 10-8 Top 20 feed companies in 2013
Production Market
Company HQ Structure
(MMT) Share (%)
New Hope Group Sichuan Public 15.0 7.8
CP Beijing Public 9.0 4.7
Twins Group Jiangxi Private 9.0 4.7
Wen’s Food Group Guangdong Private 8.0 4.1
Haid Group Guangdong Public 4.8 2.5
Zhengbang Group Jiangxi Public 4.4 2.3
East Hope Group Shanghai Private 4.3 2.2
China Whiz Shandong Public 4.1 2.1
Tongwei Group Sichuan Public 4.0 2.1
Dabeinong Group Beijing Public 3.9 2.0
Yuetai Group Hunan Private 3.0 1.6
Tieqilisi Group Sichuan Private 3.0 1.6
Tangrenshen Group Hunan Public 2.1 1.1
Doyoo Group Henna Private 2.0 1.0
West Hope Group Sichuan Private 2.0 1.0
Da Chan Food Tianjin Public 2.0 1.0
Wellhope Agri-Tech Liaoning Public 1.8 0.9
Yangxiang Guangxi Private 1.7 0.9
Jiuding Hunan Public 1.5 0.8
COFCO Beijing Private 1.1 0.6
Jiada Private 1.0 0.5
Evergreen Group Guangdong Private 1.0 0.5
Zhenghong Hunan Public 1.0 0.5
Zhucheng Trading Shandong Private 1.0 0.5
The leading young pig feed manufacturers in China are Anyou, Muhe (high quality but limited to a central China focus),
Shuangbaotai (creep feed emphasis, ISO/HACCP but small product range), Puai (ISO accredited, high quality feeds,
historic price leader, use external experts), Yangxiang (north China focus, good research links, ISO accredited, and
DKSH. Each company has its own product range, locations, distribution, pricing policy and approach to technical
services. DKSH and Anyou are viewed as the high quality and are able to sell at the highest price.
10.5 Marketing and distribution system of feed companies
For compound feed, large feed mills mainly sell products directly, because compound feed have low margin. For
concentrate and premix, large feed mills mainly sell products through agents, because concentrate and premix feed have
high margin.
Product is typically sold to distributors for cash. They turn offer credit on concentrates of 1-2 months but usually sell full
feeds for cash. Margins vary on product type and can be up to Rmb500-1000/MT for premix/concentrates. Distributors
often store product (1-2 weeks stock). Distributors are supported with training and client seminars and exclusive
agencies can exist.
Small and middle feed mills sell feed mainly through indirect channel, including distributers (Tier 1) and agents (Tier
2), the percentage of agents is about 70-80% while distributors is about 20-30%. Small and middle feed mills prefer
agents because they believe sell feed by agents can increase products competitiveness. For piglet feed, the gross margin
taken by agents is up to 30%, net margin taken by agents is up to 20%. For growing pigs feed, the gross margin taken by
agents is 10-15%, net margin taken by agents is 3-5%. Generally agents add CNY 500-1000/tonne to the original price.

For pig feed, distributors give 4-5 months credit days to pig farms. For layers, distributors do not give credit days to
layer farms. For broilers, most of broiler farms are integrators.
For broiler, 50% of the broiler farms are within integrators now, and the ratio of household broiler farms has
decreased. There are many regional cooperatives in China, they in charge of supply feed, DOC and take back broiler for
household broiler farms.
CP tier 1 agents account for more than 80%, tier 2 agents accounting for less than 20% of sales. Tier 2 agents will
become less and less, because feed sales is become more and more competitive now. Only remote regions which have
transportation difficulties have tier 2 agents.
For Cargill compound pig feed, agents take 200 CNY/Tonne and gross margin about 7%, for concentrate pig feed,
agents take 500-1000 CNY/tonne and gross margin about 12% and for premix pig feed, agents take 1500 CNY/Tonne
and gross margin about 21%
For compound pig feed, agents take 80-100 CNY/tonne and gross margin about 3%, for concentrate pig feed, agents
take 500CNY/tonne and gross margin about 8.1% and for premix pig feed, agents take 1500 CNY/tonne and gross
margin about 21%
Da Bei Nong tier 1 agents play a dominant role in agents structure, there are tier 2 agents in regions which have small
farms and have transportation difficulties. If the gross margin for agents is 15%, tier 1 agents will take 6%, tier 2 agents
will take 9%. In recent 3-4 years, the livestock market is very weak, so the margin decreased, these result in the feed
sales structure changed, tier 1 agents increased in these years, many tier 2 agents have changed to tier 1 agents. AB Feed
state 99% of their feed agents are tier 1. Only remote regions with transportation difficulties have tier 2 agents.
10.6 Likely developments in feed milling

There will be several developments impacting the development of the feed sector
 As farm efficiencies improve due to genetics, bio-security and management, then FCR and feed tonnage will
reduce to produce the same volume of meat. This will be significant in the pig sector where consumption levels
are high and not expected to increase significantly.
 The development of large farms and/or contract growing will drive the demand for complete feeds This could
be led by the integrators but independent large farms like Muyuan are likely.
 Co-operative models are a huge biosecurity and production risk so it could be difficult for the parent
companies to roll out an effective supporting platform for their farmers. AG FEED the NASDAQ listed feed
company that had 30,000 sows in these types of relationships went broke but maybe have learnt from these
lessons
 Large pig farms (like Muyuan) will have their own large feed mills and they will out source speciality feeds
and therefore it will be the 500 to 2000 sow segment that the feed millers will supply or their own integration.
 The change to complete feeds will see complete feeds replace concentrates and for every tonne of concentrate
replaced, there will be a demand for some 5-10 MT of complete feed.
 China is now the world's largest feed-miller, but the industry has been under pressure as it responds to a
slowdown in animal production, improved efficiencies and high Chinese prices for raw materials. A Chinese
market analysis group, Nongbo29, estimated that China's output of manufactured feed fell 5 percent to 183
MMT during 2014.
 The MOA reportedly shut down 30 percent of the licensed feed mills during 2014 via a re-licensing program.
This follows years of complaints about excess capacity in the feed industry. While China's feed industry
includes a number of large, sophisticated companies, thousands of small, low-tech mills stayed in business
until the MOA stepped in to take away their licenses.
 The industry needs to focus on feed efficiency and reducing feed waste. China does not take feed waste
seriously. Industry sources believe there is USD 20 per pig available.
11 FEED RAW MATERIAL SUPPLY
The cost of animal feed in China is high, largely because the GoC sets grain prices (high). The main volumes of raw
materials are corn, wheat, rice polish, wheat bran, sorghum, DDGS, peanut meal and soybean meal (SBM) with high
value ingredients being amino acids and vitamin premixes.
29
http://dimsums.blogspot.co.nz/2015/01/chinas-feed-output-declined-in-2014.html

With the total raw material requirement for all feed (commercial and home) in China being around 350MMT, and
around 140MMT for commercial feeds, we need to explore feed formulation, sourcing and cost impacts.
11.1 Feed formulation
Commercial feeds for both broilers and pigs are formulated to least cost by the use of commercial linear programming
algorithms. To give the reader a feel for what raw materials are used, typical (example only) growing diets for broilers
and pigs look something like the following30.
Table 11-1 Cost breakdown of feed

Ingredient Typical feeds (%)31 % of cost
Corn/wheat/barley 50-55 40.7%
Rice bran/Wheat Bran 5-15 3%
Soybean Meal 15-28 33%
Meat meal/Fishmeal 2-6% 5%
CGM/DDGS 0-4 2.0%
Rapeseed/Peanut Meal 2-5 2.5%
Methionine 0.1-0.3 3%
Lysine 0.1-0.3 3%
Oil 1-3 3%
Lime 0.50-5 0.5%
DCP 0.5-1.5 3.5%
Salt 0.15-0.3 0.1%
Min & Vitamin Premix 0.2 0.7%
Total 100 100%
In volume terms, corn and SBM are the key ingredients used account for around 80% of feed formulation. Corn is
basically used as an energy source (supplemented with rice polish and oil) while SBM is used as the main protein source
(along with CGM, rapeseed and the amino acids, lysine, threonine and methionine).
The cost of any ingredient varies depending on commodity prices, but relativities in costs are relatively constant so we
can make assumptions of if impact on cost of various ingredients, as outlined in the table above, where we can see corn
is some 40% of feed ingredient cost and SBM around 33%.
11.2 Raw material sources
China produces32 226 MMT 33of corn (up from 100MMT fifteen years ago), 125MMT wheat, 209MMT of rice, The
record production is the result of high government set prices and subsidies, and has resulted in excess stocks and large
fiscal and environmental costs. Trial subsidy reforms in cotton and soybeans have resulted in large numbers of farmers
cutting acreage in these crops in favor of high government guaranteed prices for corn.
China imports significant quantities of grains, but are small relative to local production, as follows.
Table 11-2 Grain imports and exports
30
With variance due to raw material availability, price and diet specification.
31
A review of both pig and broiler feeds was undertaken and the result on percentage cost was so similar the table reflects an average
typical feed, biased towards pig feeds.
32
USDA Attache Reports
33
China corn yields are 60% of USA as planting density is less, there is limited rotation and farm scale is very small. 40% of the corn
comes form NE China and 34% from the Yellow River delta

Wheat Barley Corn
Import Export Import Export Import Export

2010 1,218,782 1 2,367,534 13,412 1,572,392 127,315
2011 1,248,821 39,794 1,775,563 6,277 1,752,735 135,996
2012 3,688,637 0 2,528,275 4,580 5,206,744 257,261
2013 5,507,050 2520 2,335,436 1,075 3,264,552 77,625
2014 2,972,023 958 5,412,954 114 2,599,345 20,004
China’s total grain imports in 2014-15 are forecast at a total of 16 million tonnes, being 3MMT.corn 5.8MMT of
sorghum, 5.4MMT barley and 2.6MMT of wheat. Corn is imported at a 1% tariff but mainly goes to SOE’s. All imports
now need to be registered, so are controlled as to not upset local pricing. In addition China imports 4.4MMT of DDGS
from the USA and 7MMT of sorghum, mainly from USA.
China produces 11MMT of soybean (down from 17MMT ten years ago), rapeseed 14.9MMT, peanut 16.7MMT,
cottonseed 9.5MMT. Domestic soybean production continues to fall as a result of lower per unit profits compared with
grain crops. 71MMT of soybean was imported in 2014, up from 63MMT in 2013. Imports of SBM are insignificant.
Reports of booming imports of feed raw materials during 2014 appear inconsistent the Chinese feed industry's
depressed state. However, the imports are substitutes for China's expensive domestic corn crop which is being stored in
government warehouses. GoC purchased 70 MMT of the 2013/14 corn crop and are expected to purchase more this
year. This year Ukraine is the main source for corn, followed by USA.
China is the largest producer of amino acids (lysine, methionine and threonine). Mineral and vitamin premixes, toxin
binders, enzymes, acidifiers, anti-mold products, antioxidants and pigments are sourced worldwide but China is usually
the preferred supplier.
11.3 Raw material costs
20% of feed ingredient costs come from imported raw materials (mainly SBM ex the crushing industry so it is an
indirect import for feed production). This compares with Vietnam and Indonesia where 67% of feed costs are from
imported raw materials. That said, China has artificially high corn prices so feeds are higher than in Vietnam or China,
despite a much lower reliance on imports. Current China corn price versus U.S. No.2 Yellow, FOB Gulf of Mexico is
graphed.
Figure 11-1 Corn prices USA and China
11.4 Feed prices
Prices of pig and broiler feed follow each other with variation within categories based on protein concentration etc.
Figure 11-2 Prices of pig and broiler feed

11.5 Key raw material suppliers
With some 300MMT of feed being used by livestock and aquaculture, there are many raw material suppliers involved
with most corn being sourced locally and SBM being sourced from Chinese processors.
12 PORK AND BROILER RETAIL MARKET IN CHINA
Currently, further processed and packaged meat product account approximately 10% of China’s total meat products,
and low temperature meat product account approximately 3-5% of China’s total meat products. It is forecasted that the
further processed and packaged meat product account approximately 17.5% of China’s total meat products, and low
temperature meat product account approximately 10% of China’s total meat products in 2015 – due to changing life
styles.
12.1 Wet market
China is a market for fresh meats with historically wet markets being the preferred source for purchasing chicken and
pork but that is now changing with GoC closing many wet markets in response to food safety concerns. But industry
sources state that it will be a long time before wet markets close.
12.2 Developed markets
The developed retail sector includes hypermarkets and supermarkets, fast food chains, along with local, western food
and hotel restaurants. The top supermarket chains in China are as follows.
Table 12-1 Top 15 supermarkets
Supermarket Sales Revenue Growth Rate Store Number Growth Rate

（10,000 CNY）（%）（%）
Lianhua 5,004,726 8.2 3,932 4.2
Carrefour 3,381,912 14.1 134 19.6
RT-Mart 3,356,700 31.1 101 18.8
China Resources Vanguard 3,344,200 39.8 2,698 10.1
China Resources Suguo 3,035,800 15.1 1,802 2.5
Wal-Mart 2,782,197 30.6 123 20.6
NGS 2,667,544 20.7 3,330 3.2
Wu-Mart 2,080,098 9.7 726 1.1
A Best 1,749,260 4.4 105 5
Trust-Mart 1,640,000 17.1 104 3
Hualian 1,501,219 -3.9 1,946 -7.7
Wenfeng Great World China 1,410,139 4.4 913 7.3
Liqun Group 1,386,877 13.3 866 3.1

TESCO 1,350,000 8 61 10.9
Lotus 1,300,000 10 76 8.6
Supermarket sales in 2015 have been under pressure with the economic situation more difficult and the purchasing
power of population declining.
An issue in China has been the development of branded added value meat products where vouchers have been sold for
their purchase. Reports suggest that branded product sales have reduced on the back of the crackdown on corruption.
12.3 Other
The reduce demand for meat in China is also caused by a crack down on corruption which has been a real issue across
the industry. Demand has reduced due to less dinners and less business travel (and thus less diners).
13 KEY PRODUCERS OF FEED IN CHINA

China’s pork and broiler meat production was historically SOE dominated. However foreign investment (notably CP in
the 1980’s) led the way for local Chinese to develop the sector with SOE’s taking a less dominant role. Local companies
now dominate the feed sector with New Hope being the largest.
As in other countries, sector players often start as feed millers and then integrate into breeding and processing. Thus
many “feed” companies have feed, pigs and poultry. The key commercial players in China’s feed industry (where feed
is the greatest contributor to sales and margins) are:
13.1 New Hope (Liuhe)
New Hope Group (NHG) is a leading agribusiness group in China with over 30 years experience from Sichuan abased
beginnings in 1982. The Group has operations in agribusiness, chemicals and resource industries, real estate and
infrastructure, and finance and investment. Through its acquisition in Shandong Liuhe Group (SLG), the largest poultry
producer in China at that time, it became further integrated and is now the leading agri-group in China. New Hope
Liuhe (NHL), the Group’s agribusiness arm, has operations in feed production, livestock / poultry breeding, livestock
slaughter, meat and dairy processing, and agri-byproducts. It is the largest feed producer in China with annual
production capacity of around 30 MMT and a market share of approximately 8%. NHL is an IFC client
NHL was founded in 1998 (formerly under the name Sichuan New Hope Agribusiness Co) and is listed on the Shenzhen
Stock Exchange. NHL has 235 feed mills, 4 feed joint ventures, 73 slaughtering and meat subsidiaries, 1 slaughtering
and meat products joint venture, 79 livestock farming share-holding subsidiaries and 2 livestock farming joint ventures,
and has subsidiaries in 26 provinces of China, Vietnam, Indonesia, Cambodia Bangladesh and 5 other countries. NHL
had a market capitalization of USD3.6 billion as of July 2014
Figure 13-1 New Hope locations

NHL 2014 sales were USD 11.3 billion with a gross margin of 6.2% and a net profit of USD 326 million. 71% of the
revenue was from their feed business. Total feed sales volume in 2014 was 17.0 MMT, (from a capacity of 26.6MMT)
showing a 14% increase from 2013. 67% of feed sales are poultry and 33% pig feed. The gross margin of the feed
business was 6%.
Meat product sales were 2.2 MMT with a value of USD 3.4 billion or 31% of company revenues. The meat sales volume
increasing 7% from 2013. The gross margin on meat was a surprisingly low 3%. The operating revenue of livestock
farming business was USD319 million, an increase of 3% from 2013, and the gross margin was approximately 6%.
NHL cooperated with Wens in opening frozen poultry meat retail stores in Shanghai in 2013 and plan to have 400 retail
stores in Shanghai
Table 13-1 New Hope (Liuhe) business overview 2012-14
2012 2013 2014

Category
(Million USD) (Million USD) (Million USD)
Sales Revenue 11,813 11,193 11,292
Gross Profit 633 659 670
Feed Sales (MMT) 16.9 15.4 15.7
Feed Revenue 7,806 7,435 7,810
Feed gross margin (%) 6.2 6.8 6
Operating Income (EBITDA) 194 201 185
Net Profit (After Tax) 275 306 326
Total Assets 3,984 4,859 5,387
Total Liabilities 1,647 2,155 1,857
Total Equity 2,337 2,704 3,530
Gross Profit % 5.36% 5.88% 5.93%
Operating Income (EBITDA) 1.64% 1.80% 1.64%
Net Income % 2.33% 2.74% 2.88%
New Hope is an IFC client so is well known to them

13.2 Hubei Haida Feed Co., Ltd
No. 1 South Of Tuanjie Ave., Dongxihu, Wuhan, Hubei, China
Haida 2014 sales were USD 3.4 billion with a gross margin of 9.8% and a net profit of USD 87 million. 92% of its
revenue was from feed sales, 6% from feed raw material trading, 2% others. In 2014, total feed sales volume was 5.5
MMT, up from 2013 when they sold 4.8 MMT feed, including 40% aqua feed, 32% poultry feed and 28% pig feed.
Haida started producing pig feed in 2010, and has increased to 1.36 MMT in 2013, thus assisting their rapid growth
rate.Total feed production capacity is approximately 11 MMT. 67% of sales are in Huanan and 28% Huazhong.
Table 13-2 Haida business overview in the past few years
2014 2013 2012

Category
Sales Revenue 3,402 2,892 2,492
Feed Sales(MMT) 4.4 4.8 5.5
Feed Revenue 2,487 2,887 3,396
Feed gross margin (%) 9.3 8.4 9.8
Total Assets 1,236 1,192 990

Total Liabilities 526 534 500
Total Equity 699 639 472
Gross Profit % 9.4 8.5 9.8
Operating Income (EBITDA) % 5.5 6.0 6.0
Net Income % 2.9 1.9 2.6
Figure 13-2 Haida feed business 2009-2014 (USD’000)
Haida
4000 10%
3500
3000 10%
2500
2000 9%
1500
1000 9%
500
0 8%
2009 2010 2011 2012 2013 2014
Revenue Operating Profit Gross Margin
13.3 DBN
DBN 2014 sales were USD 3 billion with a gross margin of 22% and a NPAT of USD 128 million. 94% of its revenue
was from feed sales, and 2% from animal health. In 2014, total feed sales volume was 5.5 MMT, showing a 11%
increase from 2013 of 3.9 MMT feed, including 88% pig feed, 6% ruminant feed, 4% aqua feed and 2% poultry feed. 39%
of revenue comes from Huadong, 27% Zhingnan, 14% Huabei showing that they are primarily focused in the north of
China. DBN also have a genetic agreement with Genetiporc, a leading North American genetics company (now
acquired by PIC) for the China market.
Table 13-3 DBN business overview 2012-2014

2014 2013 2012
Category
Sales Revenue 2,975 2,687 1,716
Feed Sales (MMT) 2.4 3.9 4.3
Feed Revenue 1,583 2,577 2,772
Operating Income (EBITDA) 165 156 1,475
Total Assets 1,702 1,324 921
Total Equity 1,016 854 691
Gross Profit (%) 22 21 21
Operating Income (EBITDA) (%) 5.6 5.8 6.4
Net Income (%) 4.3 4.6 6.4
Table 13-4 DBN feed business 2012-2014 ((USD’000)

DBN
3000 30%
2500
2000
1500 20%
1000
500
0 10%
2010 2011 2012 2013 2014
Feed Revenue Feed Operating Profit Gross Margin
In the first half year 2013, the company sold 1,297,300 tons of pig feed, representing a growth of 45.58% year-on-year.
In particular, sales of high-end weaner feed and piglet feed with higher gross profit increased 56.76%
13.4 Zhengbang Group
Established in 1996, the Zhengbang Group is the largest agricultural enterprise in Jiangxi Province. Zhengbang group
has over 35,800 employees, with more than 315 branches and sub branches. It's subsidiary, Jiangxi Zhengbang
Technology Co (JZT), was listed on the Shenzhen Stock Exchange Ranked in China's top 500 companies.
JZT produces and markets feed and feed additives, as well as aquatic, livestock and poultry products. It has 65 feedmills
throughout China focusing mainly on pig feeds. Feed products include complete feeds (4.6MMT in 2014 from 10MMT
capacity), concentrates (4%) and premixes (2%). The company's swine production includes breeding, (80,000 sows)
growing and processing which has been a strategic focus. The company also manufactures and sells pharmaceutical
products.
JZT 2014 sales were USD 2.7billion with a gross margin of 5.8% and a net profit of USD 6.6 million. 87% of its revenue
was from feed sales (USD2.3 billion), 9% from pig farming, 4% from other sources
Table 13-5 Zhengbang business overview 2012-2014

2014 2013 2012
Category
Sales Revenue 2,659 2,513 2,198
Feed Revenue 1,583 2,577 2,772
Net Profit (After Tax) 7 -5 13
Total Assets 1,179 965 720
Gross Profit (%) 5.8 5.4 5.8
Net Income (%) 0.2 -0.2 0.6
Figure 13-3 Zhengbang feed business (only) in the past few years (USD’000)

Zhengbang Feed Only
2500 10%
2000 8%
1500 6%
1000 4%
500 2%
0 0%
2007 2008 2009 2010 2011 2012 2013 2014
13.5 Tongwei
Tongwei has 35 feedmills in China producing aqua, pig and poultry feed. 2014 sales were USD 2.5 billion with a gross
margin of 12% and a net profit of USD 53 million. 93% of its revenue was from feed sales, 7% from food and animal
farming, and 0.2% from animal drug. In 2014, Total feed sales volume was 4 MMT, showing a 12% increase from 2013.
In 2013, total feed sales volume was 3.9 MMT, including 2.2 MMT aqua feed (56%) and 1.7 MMT livestock feed (44%)
Table 13-6 Tongwei business overview 2012-2014

2014 2013 2012
Category
Sales Revenue 2,485 2,450 2,176
Feed Sales (MMT) 3.71 3.94 4
Feed Revenue 2,027 2,260 2,299
Total Assets 997 873 732
Gross Profit (%) 11.3 9.8 8.5
Operating Income (EBITDA) (%) 3.3 2.6% 1.5
Net Income (%) 2.1 2.0 0.7
Figure 13-4 Tongwei feed (only) business 2001-2014 (USD’000)

Tongwei Feed - business only
2500 20%
2000
15%
1500
10%
1000
5%
500
0 0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
13.6 Cargill
33 feed mills in China. Feed production: 2 MMT. Invested USD 250 million to build integrated broiler production base
in Chuzhou, Anhui. The fully-integrated production base covers each stage of the poultry supply chain, including
chicken breeding, raising, feed production, hatching, slaughtering and processing. The production base include 1
hatchery, 12 breeder farms, 43 broiler farms, 1 feed mills, 1 slaughter house and 1 further processing factory The facility
has the capacity to process approximately 65 million chickens per year, as well as 176,000 metric tonnes fresh meat
products, and 30,000 tonnes cooked food products annually. Feed mill capacity in the base: 0.36 MMT. Hatchery
capacity: 70 million commercial DOC annually. The base start operating since 2013. 2014 broiler production: 39.75
million heads
13.7 Tangrenshen or TRS Group

Li Yu Industrial Park, State-Level Hi-tech Development, Zhuzhou 412002
86+0731-28591298 http://en.trsgroup.com.cn/
Hunan headquarters. Tangrenshen has 30 feed mills throughout China producing mainly pig feeds. 2014 sales were
USD 1.6 billion with a gross margin of 9% and a net profit of USD 13 million. 95% of its revenue was from feed sales 4%
from meat, 0.8% from live pig and 0.08 from animal health. In 2014, total feed sales volume was 1.96MMT, showing a
2% increase from 2013, with sales of USD1.08 billion (up 1.4% on 2013)
As at 2012 the company owned 12 feed mills, 4 pig breeding farms and 5 meat product affiliates in Hunan province.
TRS acquired Shandong Hemei in 2014. TRS has a joint venture pig genetics business with Hamrock Whitesire, a
leading US purebred breeder and as established a good reputation in the industry.
Table 13-7 Tangrenshen business overview in the past few years

2014 2013 2012
Category
Sales Revenue 1,624 1,149 1,084
Feed Sales (MMT) 1.96 2.1 2
Feed Revenue 970 1,041 1,536

Gross Profit (%) 9.1 9.6 9.9
Net Income (%) 0.8 1.8 2.6
Figure 13-5 Tangrenshen feed (only) business 2010-2014 (USD’000)
Tangrenshen Feed business

1800 20%
1600
1400 15%
1200
1000
10%
800
600
400 5%
200
0 0%
2010 2011 2012 2013 2014
13.8 Well Hope

Shenyang headquarters. 30 feedmills mainly in north China selling 1.8MMT. Well Hope 2014 sales were USD 0.6
billion (doesn’t tie in with tonnage) with a gross margin of 9.3% and a net profit of USD 34million. 93% of its revenue
was from feed sales, 7% from food and animal farming, and 0.2% from animal drug.
Well Hope, has inked international joint ventures with Nexus Feeds, India’s largest aquafeed supplier, and also inked a
JV with the Hua Yu Group to form a joint venture in Russia. Hua Yu is based in Heilongjiang, which shares a border
with Siberia. Royal De Heus Group, the Dutch feed company, owns a minority share in Wellhope, which is a listed
company. De Hues is an emerging player in SE Asia, particularly in Vietnam. Planning expansion in south China
13.9 East Hope
Shanghai headquarters. Have 110 feedmills throughout China producing maonly pig feed. 4.3MMT sales per annum
13.10 Dabeinong
Beijing headquarters. 1000 feed mills throughout China. Produce 3.9MMT per annum. 90% of sales are pig feeds..
13.11 Yangxiang
Guangxi headquarters. 15 feed mills mainly located in South China, including Henan, Guangxi, Hebei, Liaoning,
Guangdong, Hunan
13.12 Tiankang
Tiankang 2014 sales were USD 0.65 billion with a gross margin of 9.3% and a net profit of USD 34 million. 72% of its
revenue was from feed sales, 18% from animal health and 9% from agriculture product processing. In 2014 total feed
sales volume was 0.89MMT, showing a 12% increase from 2013
Table 13-8 Tiankang business overview 2012-2014

2014 2013 2012
Category
Sales Revenue 648 601 537

Feed Sales (MMT) 0.77 0.81 0.89
Feed Revenue 363 424 447
Gross Profit (%) 19.7 16.9 15.8
Net Income (%) 5.2 4.6 3.2
Figure 13-6 Tiankang feed (only) business 2003-2014 (USD’000)
Tiankang Feed business

500 25%
450
400 20%
350
300 15%
250
200 10%
150
100 5%
50
0 0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
13.13 Tianbang
Tianbang has 7 feed mills located in Anhui, Gansu, Inner Mongolia, Nanjing, Hubei, Shanghai and own 2 GGP farms in
Anhui and Jiangxi and 2 GP farms. plus 5 company owned commercial growing farms and lots of contract farms in
Jiangxi, Guangxi, Anhui, Fujian, Shanghai and Jiangsu with capacity 0.5m. Seeking funding for system especially
contract growing. Potential IFC client
2014 sales were USD 0.42 billion with a gross margin of 14% and a net profit of USD 5.2 million 74% of its revenue
was from feed and feed and feed raw material, 16% from animal farming and 6% from biological products and 2 % from
food. In 2014, Total feed sales volume was 0.38MMT, showing a 32% increase from 2013 where total feed sales volume
were 0.29 MMT, including 0.15MMT aqua feed (52%) and 0.14 MMT livestock feed (48%). Tianbang has the China
franchise of Choice Genetics and is using these internal genetics to improve their livestock and develop an external sales
avenue.
Table 13-9 Tianbang business overview 2012-2014 (USD’000)

2014 2013 2012
Category
Feed Sales (MMT) 0.28 0.29 0.38

Gross Profit (%) 12.7 14.0 14.0
Net Income (%) 1.2 5.6 5.6
Figure 13-7 Tianbang feed business 2006-2014 (USD’000)
Tianbang Feed business

350 20%
300
15%
250
200
10%
150
100
5%
50
0 0%
2006 2007 2008 2009 2010 2011 2012 2013 2014
13.14 Kangdaer
Kangdaer 2014 sales were USD 0.35 billion with a gross margin of 7% and a net profit of USD18 million. 57% of its
revenue was from feed. In 2014, feed sales volume was 0.4MMT with a value of USD 202 million, including USD 158
million compound feed (44%), USD 41million concentrate feed (12%) and USD 3 million premix feed (0.8%). 38%
sales are in Sichuan and 34% in Giangdong.
Table 13-10 Kangdaer business overview 2012-2014 (USD’000)
2014 2013 2012

Category
Gross Profit (%) 24.8 10.9 10.5

Net Income (%) 5.3 -0.6 1.9
Figure 13-8 Kangdaer feed only business 2001-2014 (USD’000)
Kangdaer Feed business

250 25%
200 20%
150 15%
100 10%
50 5%
0 0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
13.15 Jinxinnong
Jinxinnong is a specialised pig feed company. In 2014, Total feed sales volume was 0.5MMT with a value of USD 316
million, including USD 218 million pig compound feed (68%), USD 59 million pig concentrate feed (18%) and USD 17
million pig premix feed (5%). Gross margin was 14% and a net profit of USD 9.8 million. Sales are concentrated in
Hunan, NE China and Huadong
Table 13-11 Jinxinnong business overview 2012-2014 (USD’000)
2014 2013 2012

Category
Feed Sales (MMT) 0.48 0.5
Feed gross margin (%) 12.6 12.1 14.1%
Gross Profit (%) 14.2 11.8 12.1
Net Income (%) 3.1 2.1 3.0
Figure 13-9 Jinxinnong feed business 2011-2014 (USD’000)

Jinxinnong Feed business
350 20%
300
15%
250
200
10%
150
100
5%
50
0 0%
2011 2012 2013 2014
13.16 Zhenghong
Zhenghong has 20 feedmills throughout China. 2014 sales were USD 0.29 billion with a gross margin of 7.6% and a net
profit of USD4.2 million. 98% of its revenue was from feed and 2% from animal farming. In 2014 total feed sales
volume was 0.51 MMT showing a 5% decrease from 2013. 50% od sales are in Hunan and 195 Anhui, 12% Shanghai.
Table 13-12 Zhenghong business overview 2012-2014 (USD’000)
2014 2013 2012

Category
Feed Sales (MMT) 0.51 0.53 0.51
Operating Income
(EBITDA) 2 2 3
Gross Profit (%) 8.0 7.1 7.9
Operating Income
(EBITDA) (%) 0.8 0.7 1.0
Net Income (%) 1.4 -1.3 0.2
Figure 13-10 Zhenghong feed business 2001-2014 (USD’000)

Zhenghong Feed business
350 25%
300
20%
250
200 15%
150 10%
100
5%
50
0 0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Table 13-13 Public feed company performance in 2014

Company Sales Value Sales Feed/total Growth rate Net profit Gross
(Million USD) volume revenue on volume (Million margin
(MMT) (%) (%) CNY) (%)
New Hope (Liuhe) 11,290 15.7 71 2 326 6.2
Haida 3,403 5.54 92 16 87 9.8
DBN 2,968 4.3 94 11 128 20
Zhengbang 2,661 4.61 87 4.3 7 5.8
Tongwei 2,484 3.99 93 1.2 53 12
Tangrenshen 1,629 - 95 - 13 9.1
Well Hope 1,468 - 73 - 40 11
Tiankang 645 0.89 72 9 34 9.3
Tiangbang 419 0.38 62 32 5 14
Kangdaer 339 0.40 58 7 18 7
Jinxinnong 323 0.50 99 5 10 14
Zhenghong 290 0.51 87 -5 4 7.6
Margins for “feed” companies vary widely as many have processing or breeding activities (CP, DBN). DBN mainly
produce piglet premix which produce much higher margins. Haida mainly produce aquaculture feed, a market that is
increasing. Tianbang acquired Agfeed in 2013 hence the high growth rate. A list of feed companies follows with
identification of their involvement in pig and/or broiler production.
Table 13-14 Pig and Broiler involvement by “Feed Companies”

14 PIG SECTOR COMPANIES
A summary of leading “pig” sector companies follows.
14.1 Wens
Privately owned (Wen Pengcheng) Guangdong Wen's Foodstuff Group. Wens is one of the largest pig and poultry
integrator in China. It was found in 1983 focusing on chicken and pig breeding. Business includes feed, genetic pigs and
poultry, commercial pig and poultry farming, animal health, fertilizer, slaughter and processing. At the end of 2014,
Wens had 15 GGP pig farms, 47 GP pig farms and 141 PS pig farms and 17,800 contract commercial pig farms. The pig
breeder inventory was 939,900 heads at the end of 2014, including 21,000 head GGP. Mainly south of China, -
Guangdong, Guangxi and Jiangxi. No company owned commercial pig farms and have approximately 17,800 contract
farms. Slaughtered 4.9 million heads pig in own facilities. Don’t need funding
Wens 2014 sales were USD 6,135 million with a gross margin of 12.6% and a profit of USD 471 million. 49% of its
revenue was from their pig business. The slaughter pig sales was approximately 12.2 million heads in 2014, accounting
1.7% of China’s total pig production in 2014. Wen's provides piglets to farmers under contract and procures the finished
pigs for sale to slaughterhouses, similar to the model pioneered in its long-established poultry business. The firm's
output is significantly higher than the national average, with about 23 piglets per sow reaching the market per year,
according to Wen. 60% of sales in Hunan.
Table 14-1 Wens sales 2012-2015Q1
2012 2013 2014 2015Q1

Sales GM Sales GM Sales GM Sales GM
USD m (%) USD m (%) USD m (%) USD m (%)
Broiler 2,873 8.9 2,657 -2.7 2,762 15.6 628 17.8
Pig 2,199 19.5 2,706 16.8 3,011 10.0 801 3.1
Others 316 8.0 306 4.4 355 11.6 80 32.8
Total 5,388 13.2 5,668 7.0 6,129 12.6 1,508 10.8

Figure 14-1 Wens business 2012-2014 (USD’000)
Wens business overview

%
7000 16%
6000 14%
5000 12%
10%
4000
8%
3000
6%
2000 4%
1000 2%
0 0%
2012 2013 2014 2015Q
Revenue (USD m) EBITA (USD m) EBITA %
Figure 14-2 Gross margin of Wens by business type 2012-2014 (USD’000)
14.2 Shineway or Shuanghui

Henan Shuanghui Investment & Development Co., Ltd is a subsidiary of global meat producer and processer, WH
Group (formally known as Shuanghui Group or Shineway Group). Parent company, WH Group is the world's largest
pork company, from production, slaughtering, processing to distribution. The Shuanghui Group, listed on the Shenzhen
Stock Exchange in 1998 as Henan Shuanghui Investment & Development Co., Ltd. Based in Luohe, as China's lead pork
producer, it produces fresh, frozen, high and low temperature meat products, chemical products. It also is engaged in
logistics and provides technical services as well. Shineway Group has 70,000 employees, and more than 20 meat
processing plants across 31 provinces. It has a partnership with German retail and wholesale chain, Metro Group and
with DHC (Da Chong Hong Holdings) enhancing logistics for cold chain distribution.
2014 sales were USD 7,335 million with a gross margin of 20% and a net profit of USD 652 million. 55% of its revenue
was from processed meat products, and 43% from fresh meat sales. Sales included 1.7 MMT pork, with a value of USD
7219 million, including 43% of frozen product, 34% HTMP and 21% LTMP
In the largest acquisition in China's history, Shuanghui International acquired American pork producer Smithfields in
2013 for $4.7 billion.
Shuanghui Investment & Development plans to vigorously expand the breeding business and improve the upstream pork
industry chain, and the number of self-produced pigs will have hit 1.832 million heads as of the end of 2015.

Figure 14-3 Shineway business overview 2012-2014
2012 2013 2014

Category
Sales Revenue 6,404 7,250 7,370
Gross Profit 1,152 1,409 1,469
Total Assets 2,693 3,185 3,546
Total Equity 2,025 2,420 2,639
Gross Profit (%) 18.0 19.4 19.9
Net Income (%) 7.3 8.6 8.8
Figure 14-4 Shineway business (USD’000)
14.3 Yurun Group:

http://www.yurun.com.hk/
10 Yurun Road  Jianye District  Nanjing 
China Yurun Food Group Limited (“Yurun Food”) is one of the leading meat product manufacturers in China. It is listed
in Hong Kong. It offers a wide range of pork products, including chilled pork, frozen pork, low temperature meat
products (LTMP) and high temperature meat products (HTMP). The products are marketed under a number of brands,
including Yurun, Popular Meat Packing, Furun and Wangrun, Furun.
Chilled pork and LTMP are the key drivers to the overall business development of Yurun. In 2014, due to the drop in pig
price, sales of chilled pork was USD1.956 billion (2013: USD2.132 billion), representing a decrease of 8.3% over last
year, and accounting for approximately 76% (2013: 75%) of the total turnover of Yurun.
2015H1 results show a decrease in sales as slaughter volume decreased as the company concentrated on margins in a
period when pork demand dropped. However this has been unsuccessful and the GM dropped from USD86m in 2014H1
to USD32.9m in 2015H1 with an operating loss of USD5.9m.

Table 14-2 Yurun business overview 2012-2014
2013 2014 2015 H1

Category (Million USD)
(Million USD) (Million USD)
Sales Revenue 2,766 2,472 1,236
Operating Income 34 21 -74
Net Profit (After Tax) 5 7 -93
Total Assets 3,477
Total Liabilities 1,419
Total Equity 1,016
Gross Profit (%) 3.5% 5.1% 4.2%
Operating Income (%) 1.2% 0.8% -5.9%
Net Income (%) 0.2% -7.5%
Yurun states they are currently transferring the focus of development from the butchery trade to the breeding industry.
their genetic agreement with TOPICS was cancelled and the agreement was not positive for TOPICS.
14.4 COFCO
Web: http://www.cofco.com/cn/index.html
Address: 19F,COFCO Fortune Plaza, No.8, Chao Yang Men South St., Chao Yang District, Beijing, China
Chairman: Mr. CHI Jingtao
COFCO Corporation (COFCO) is Chinese state-owned company, headquartered in Beijing. COFCO has more than 180
factories in China, 2.3 million points of sale cover 952 cities across China. COFCO sustained ranked in American
magazine "Fortune" Global 500 companies, and has become No.1 of top 100 Chinese food firms ranking.
COFCO Meat was established in 2009 and is a modern industrialized agricultural enterprise engaged in feedstuff
processing, livestock and poultry breeding, slaughtering, further processing, cold chain logistics, distribution, imports
and exports. COFCO has 28 pig breeding bases in Hubei, Tianjin, Jiangsu, Jilin and Inner Mongolia, and the live pig
breeding capacity has reached 1.5 million. Meanwhile in Shandong, Jiangsu built 38 broiler breeding bases. 20 feed
mills with annual production capacity over 3 MMT, planning to expand to 8 MMT. 6 slaughter and processing bases in
Shandong, Jiangsu, Hubei and Guangdong
Womai (www.womai.com) is a B2C e-commerce website launched by COFCO. COFCO are committed to building
China's largest and safest food shopping website that allows you to enjoy more convenient shopping and safer food.
Currently, Womai sells products such as snacks, imported food, oils & grains, prepared products, biscuits, cakes, fresh
food, infant food, fruit juice, wine, tea, seasonings, instant food, breakfast, kitchen supplies, etc. It is a preferred food
online shopping website for white-collar, housewife and youngster.
In 2014, COFCO and Japanese shareholder invested CNY 746 million in COFCO meat, and KKP, Boyu Capital, Hopu,
and Baring Fund etc. invested CNY 280 million in COFCO meat
Table 14-3 COFCO business overview

2012 2013 2014 Mar-15
Total Asset (USD billion) 43.030 45.860 70.935 72.227
Long Term Debts (USD billion) 6.483 6.953 10.916 9.633
Total Debts (USD billion) 17.418 18.032 33.327 33.558
Operating Revenue (USD billion) 31.654 29.822 39.569 15.170
Total Profit (USD billion) 1.168 0.730 0.497 0.038
EBITDA (USD billion) 2.241 1.920 2.253
Operating Profit Margin (%) 11.74 11.35 8.24 6.52
ROE (%) 6.09 2.43 0.77 --

14.5 Shunxin (Beijing Shunxin Agriculture Co., Ltd)
Based in Beijing, Shunxin Agriculture is one of Shunxin International (Hong Kong ) Group Limited's 23 subsidiaries. It
listed on the Shenzhen Stock Exchange in 1998. Shunxin Agriculture is engaged in liqueur, meat processing, flowers,
fruits, real estate and construction, tourism, pharmacy and medicine. It breeds, slaughters, processes and sells pigs under
the Pengcheng brand. Under the Niulanshan brand, it brews and distributes spirits. Shunxin Agriculture is also engaged
in boar breeding.
Slaughters 3 million pigs annual, the largest single slaughter house in China. Currently occupies greater than 45% of the
Beijing market for fresh products. Shunxin also has the largest single cold storage facility in the North China area, at
40,000 tonnes. Shunxin has over 200 breeding bases in China.
Table 14-4 Shunxin (Beijing Shunxin Agriculture Co., Ltd) performance 2012-2014
USDm 2014 2013 2012

Net Sales 1,529 1,463 1,345
Net Profit (after tax) 58 32 20
Total Assets 2,507 2,224 2,013
Total Liabilities 1,671 1,712 1,531
Gross Profit % 33.67% 31.20% 26.82%
Operating Income % 18.16% 14.46% 11.62%
Net Income % 3.79% 2.18% 1.51%
14.6 Muyuan
Headquartered in Neixiang, Nanyang City, Henan Province, Muyuan Foodstuff Co., Ltd. (“Muyuan”) an existing IFC
client, is one of the largest pig production companies in China, Mr. Qin Yinglin is the Chairman of Muyuan. IFC
invested US$9.8 million for 5.66% of equity stake in the Company in August 2010. In December 2012, IFC disbursed a
loan of US$20 million equivalent and also funded a 2013/14 expansion. Muyuan has 100,000 head breeding stock,
including 8,000 head GGP, and produce 0.3 million head two-way cross sows. The production capacity of three-way
cross sows was 3 million heads and plan to expand to 4.7 million heads. The Company also has a 40% stake in a
slaughterhouse, Longda Muyuan Slaughter House established with Shandong Longda Group Limited one of the top 10
pork processors and marketers in China.
Muyuan sees their competitive advantage as being totally integrated in the livestock side from GGP through GP, PS and
commercial stock. Feed is produced from their own mill (capacity 0.98 MMT) located in an area with favorable grain
prices and also to ability to utilize local wheat. With strict bio-security, they have excellent production efficiencies thus
having low production costs that result in higher margins than most China farms
In 2014, Muyuan produced 1.86 million head pigs, the sales revenue was USD 419 million with a net profit USD 13
million. 99% of its revenue was from commercial pigs, 0.7% from piglets and 0.3% from breeding pigs.
Table 14-5 Muyuan business overview 2012-2014
2012 2013 2014

Category

Gross Profit (%) 28.1 19.8 7.7
Net Income (%) 22.1 14.9 3.1
Muyuan production has shown dramatic increases in recent years as shown
Figure 14-5 Muyuan pig production
14.7 Longda
Fully integrated pig business, including pig breeding, feed, commercial pig farming, slaughter and processing. 9% pig
production comes from company owned pig farms. 4 slaughter bases with total capacity of 3.3 million head pigs
contribute nearly 90% of its revenue and 70% of the gross margin. Small cooked food processing capacity: 21,000
tonnes annually, all live pig are come from company owned pig farms, and the Capacity Utilization is less than 60%. At
the end of 2014, Longda has 3,034 franchised outlets, mainly located in Shandong and Hebei, franchised outlet are the
most important distribution channel. Mainly sales products in Shandong, and the sales channel including franchised
outlet, food processing companies,
Table 14-6 Longda’s 4 slaughter bases overview

Subsidiary Capacity Live pig source Main products Sales coverage
（10,000 head）
Yantai Longda 130 Company +contract farm Fresh and frozen meat Eastern of Shandong
Liaocheng Longda 55 Contract farm Fresh and frozen meat Western of Shandong, Henan and
Hebei etc
Longda Muyuan 100 Company owned farm Frozen meat Food processing companies
nationwide
Junan Longda 45 Contract farm Fresh and frozen meat Southern of Shandong, Shanghai
and Nanjing etc
In 2014, the total sales revenue was USD 565 million, with a net profit of USD 16 million. The gross margin was 8.4%
Table 14-7 Longda’s business overview

USDm 2009 2010 2011 2012 2013 2014
Operating Revenue 238.45 328.38 349.54 409.67 509.41 572.02
Operating Cost 213.02 293.49 311.71 373.35 466.25 523.82
Operating Profit 12.95 17.73 19.17 17.33 18.47 16.54
Net Profit 14.18 18.21 18.76 17.38 18.76 16.70

Selling Expenses 6.94 9.59 10.75 11.82 13.20 16.33
Administration Expenses 4.34 6.43 7.56 7.97 10.47 14.19
Financial Expenses 0.95 0.80 0.46 0.43 0.62 0.48
Gross Margin % 10.7 10.6 10.8 8.87 8.47 8.43
Net Margin % 5.95 5.55 5.37 4.24 3.68 2.92
Table 14-8 Longda’s sales revenue breakdown by sales channel

Distribution channel Share (%)
Franchised outlet 37
Food Processing Companies 24
Supermarkets 16
Wholesalers 15
Cash-and-carry 8
Figure 14-6 Longda gross margin by product type
14.8 Chuying Agro Pastoral Group

Chuying was founded in 1988 by Hou Jianfang and focuses on pig breeding while also processing pork. It was listed in
Shnzhen in 2010. Based in Zhengzhou, Chuying Agro-Pastoral Group Co., Ltd is engaged in the livestock, poultry and
grain industries. It breeds and sells commodity piglets, boars, pigs. In the poultry industry, Chuying has PS farms and
sells hatching eggs, Chuying’s integrated business includes feed, genetic pigs, commercial pig farming, slaughter and
processing. Capacity is quoted at 1.65 million weaner production (say 80,000PS sows) and 320,000 growing pigs. Have
100,000 pig capacity for Tibetan pigs
Table 14-9 Chuying business overview
2012 2013 2014

Category
Operating Income (EBITDA) 59 25 -21
Net Profit (After Tax) 49 12 -31
Total Assets 721 1,011 1,168
Gross Profit (%) 31.1 25.0 11.6
Operating Income (EBITDA) (%) 23.0 8.3 -7.4
Net Income (%) 19.1 4.0 -10.8

Figure 14-7 Chuying livestock business 2012-2014 (USD’000)
Figure 14-8 Chuying revenue breakdown by products in 2014
Chuying Revenue Breakdown by product 2014

200 63%
(USDm)
150
100
17%
13%
50
3.4% 0.7% 0.2% 1.8%
0
Live Pig Grains Fresh and Poultry Cooked Vegetable Others
Product Frozen Product Food
Product
Figure 14-9 Chuying pig production in the past few years
14.9 Xinwufeng (Hunan New Wellful Co., Ltd)

Based in Changsha, Hunan Province, Xinwufeng is the largest inland port exporter of live pigs to Hong Kong and
Macao. It is listed as Hunan New Wellful Co., Ltd. It has 11 PS farms and over 700 farming house cooperatives. Annual
output is over 60 million pigs. Xinnwufeng has 2 meat sales subsidiaries, and 2 feed production subsidiaries. It has 7
other subsidiaries in different business.
Table 14-10 Xinwufeng (Hunan New Wellful Co., Ltd) performance 2012-2014
USDm 2014 2013 2012

Net Sales 210 182 167

Operating Income (EBITDA) -12 -4 0.16
Net Profit (after tax) -8 2 3
Gross Profit % 2.40% 7.49% 9.38%
Operating Income % -5.76% -2.17% 0.11%
Net Income % -3.76% 1.21% 2.03%
14.10 People's Food (Jinluo)

Established in 1994, Linyi Xincheng Jinluo Meat Products Co. Ltd is a conglomerate mainly engaged in the production
of meat products. The company has total assets of about RMB 4 billion and 20,000 employees, and boasts its pig and
chicken slaughtering and meat processing lines mainly in the production bases in Shandong, Heilongjiang, Jilin, Inner
Mongolia, Hunan, Sichuan and Henan. Jinluo was listed on Singapore Stock Exchange on March 2001 as People’s Food
Holdings Limited but now delisted. In 2011, the company’s sales revenue was 3.4 billion RMB, with over 1 billion
RMB is assets, and profits of 152 million RMB. The company’s sales network spreads throughout China with 42 sales
offices. It also has more than 3,300 direct retail stores and 9,000 distributors nationwide. At the same time, the company
has developed an e-commerce system that allows customers to search and order new products online.
14.11 Luoniushan Co., Ltd
Haikou Agriculture & Industry & Trade Luoniushan Co., Ltd produces PS and broiler chicken, eggs, and PS and
commercial pigs. Operations include meat and food processing, flour milling, and extend into marketing and logistics. It
is based in Hainan, and listed on the Shenzhen Stock Exchange in 1997. Former names: Haikou Agriculture & Industry
& Trade (Luoniushan) Co Ltd, and change in 2013 to Luoniushan Co., Ltd.
2500 employees. Annual production is 60,000 PS sows, 600,000 commercial pigs, 5.6 million kgs of eggs, 100 million
Wencheng commodity eggs, 800,000 first generation Wenchang Breeder Chick and 15 million Wencheng commodity
breeder chicken. Jointly owns a meat-processing plant, and flour mill.
Table 14-11 Luoniushan Co., Ltd performance 2012-2014
USDm 2014 2013 2012

Net Sales 162 279 137
Operating Income (EBITDA) -7 29 0
Net Profit (after tax) 8 4 3
Gross Profit % 14.77% 19.77% 17.49%
Operating Income % -4.17% 10.35% 0.13%
Net Income % 5.07% 1.42% 2.45%
14.12 Delisi Food

www.delisi.com.cn
Changcheng Town, Zhucheng City, Shandong Province, 262216
Phone: 86-536-633-9032

Shandong Delisi Food Co., Ltd. engages in live pig slaughtering primarily in China. It is also involved in the processing
and distribution of meat products, egg products, rice and flour food, and water food products. The company is
headquartered in Zhucheng
Table 14-12 Delisi Food performance 2012-2104
USDm 2012 2013 2014

Sales Revenue 318.484 330.919 261.677
Gross Profit 37.129 36.145 37.194
Operating Income 8.113 5.823 5.935
Net Profit (After Tax) 7.839 6.371 5.677
Total Assets 251.145 265.516 263.355
Total Liabilities 35.468 42.177 52.710
Total Equity 215.677 223.339 210.645
Gross Profit (%) 11.7% 10.9% 14.2%
Operating Income (%) 2.5% 1.8% 2.3%
Net Income (%) 2.5% 1.9% 2.2%
14.13 Dakang
Small business that sold 46,600MT of feed 2014 and sold 144,000 pigs. 41% of their business is meat sales, 27% live
pigs and 27% feed.
Table 14-13 Dakang business overview in the past few years
Item 2012 Rmb m 2013 Rmb m 2014 Rmb m March-2015 Rmb m

Total Asset 195 214 1,061 1,036
Operating Revenue 114 161 94 25
Operating Profit -2.9 -2.2 0.5 0.2
Total Profit -3.1 0.8 3.7 0.4
EBITDA 4 14 22
Gross Margin (%) 6.0% 7.7% -0.8% -5.9%
14.14 Sichuan Gaojin Food Co., Ltd –

www.gaojin.com.cn
Sichuan Gaojin is a private joint venture that runs pig-breeding and purchasing, slaughtering, fragmenting, freezing
processing, fresh pork chain stores, can food producing, pork deeply-processing and marketing. It is the biggest pork
processing enterprise in Sichuan, and it has been Sichuan’s number 1 producer for the past three years. Annual capacity
is 2.5 million head. It is also well-known for exporting pork and processed pork products/ Sichuan Gaojin has been
approved as an important agricultural industrial leading enterprise of China, employing more than 3,000 staff, 40% of
which have higher education qualifications.
14.15 Sichuan Ju Xing Group –
http://www.scjxjt.com.cn
Established in 1994, Sichuan Ju Xing Group mainly focuses on large scale farming, with 20 subsidiaries. It is also
involved in other industries such as forage, food, chemicals, and new energy. It has invested over RMB 250 million to
pig and chicken feeding, processing 500,000 head annually.
14.16 Tie Qi Li Shi Group
http://www.tqlsgroup.com/index.aspx
With total 51 subsidiaries national wide and over 6,000 employees, Tie Qi Li Shi Group is a hi-tech company
specializing in forage, agri-food, and animal husbandry. With an integrated pig industry chain, it provides over 120,000
breeding pigs and processes more than 800,000 pigs annually.

14.17 Chuan Jiao Ltd. –
http://www.chuanjiaogroup.com/
With a total capital of RMB 72.6 million and 108 staff, this is one of the leading pork suppliers in Chengdu.
14.18 Sichuan Wuyou Ltd. –
http://www.wyjt.cn/home
Sichuan Wuyou is a group consisting of businesses involved with forage production, pig breeding and slaughtering,
pork processing, and more. Its annual processing capacity is over 600,000 head.
14.19 Sichuan Kang Hong Animal Husbandry Technology Ltd. –
http://www.khnongye.cn/kh/zh/web/index.asp
Established in 2006, its business varies from pig breeding to processing, producing over 1 million head annually with
processing capacity of 75,000 tons
14.20 China Baodi Group:
http://www.chinabaodi.com/
Baodi is one of China’s biggest producers of meat products being involved in pig and broiler production and processing.
It is active in over ten provinces (from Hubei up to Heilongjiang) its 46 subsidiary companies employ over 5,000 people.
In its production areas, it aims to integrate the entire production chain, to secure food quality and safety. In addition to
breeding and production, Baodi is also active in chilled meats processing and logistics.
From 2015, Baodi plans to establish 25 large-scale boar-breeding farms, 40 large-scale commercial-pig-breeding farms,
500 professional breeding bases, 15 large-scale integrated industrial parks and 10 agricultural and byproduct logistics
centers to produce 1.5 million boars and 15 million commercial pigs, slaughter more than 30 million pigs, produce
200,000 tons of low-temperature meat products, and process 800,000 tons of plasma protein and more than 300 million
chickens every year. By this way, the Company will be developed into the largest meat conglomerate and an integrated
industrial group w in China.
14.21 Chongqing Huamu Group Company –
http://www.chinaswine.org.cn/content-60-2337-1.html
Huamu is one of seven Chongqing-based meat slaughtering and processing companies to have an export license. It
employs about 2000 people and processes 400,000 pigs a year. In 2013, it received a subsidy for industrial development
from the Chongqing municipal government.
14.22 Dazheng Meat Food Company -
http://chongqing.mofcom.gov.cn/aarticle/sjqiyeml/200506/20050600122552.html
Chongqing Dazheng is the successor of Chongqing Meat Products United Processing Annual pig processing capacity is
600,000 pigs/year
14.23 - Chongqing Jinpu Food Co.,Ltd.
http://www.21food.cn/company/show-cqjinpufood.html
Chongqing Jinpu is one of Chongqing’s home-grown market leaders. Founded in 2003, the company has developed into
a major player with an annual turnover of 3-4 billion RMB and over a 1000 employees.
is oriented towards the global market, and its swine herd of 3 million head is imported from Germany. Production
equipment has also been internationally acquired.
14.24 - Chongqing Qianjiang Food (Group) Co.,Ltd.
http://www.hrm.cn/company/16-45138.html
Chongqing Qianjiang ranks no. 6 out of Chongqing’s strongest agricultural producers. It is a model slaughtering and
processing company and Chongqing’s top exporter in terms of foreign currency income.
14.25 Tianzow
Known to IFC (pre-appraisal at least). CEO Yuping stated they didn’t understand IFC very well. 30 GGP and GP farms
in 16 provinces with 750,000 female GP capacity. O Ryan impressed in 2013 visit.
14.26 Summary of margins
Table 14-14 Summary of selected pig sector players
2013 2014

Shineway Sales Revenue (USDm) 7250 7370
Gross Profit 19.4% 19.9%
Operating Income 11.2% 11.2%
Wens Sales Revenue (USDm) 5675 6130
Gross Profit %
Yurun Sales Revenue (USDm) 2766 2472
Beijing Shunxin Sales Revenue (USDm) 1463 1529
Longda Sales Revenue (USDm) 509 572
Gross Profit 8.47 8.43
Desili Food Sales Revenue (USDm) 330 261
Muyuan Sales Revenue (USDm) 330 420
Hunan New Wellful Sales Revenue (USDm) 182 210
Operating Income -2.17% -5.76%
Margins vary significantly depending on what they are producing and what their efficiencies are. Shineway has
significant processing with higher margins, while Muyuan only sells livestock. Yurun’s profit could indicate that they
are more exposed to the live pig market with their profits being lower than Shineway in 2014 and their exposure was
at a level that their live production losses could not be covered by the low cost of pork going into their plants or
that their sales reduced volumes due to the impact of the redction in corruption that had bouyed sales via vouchers etc.
15 BROILER SECTOR COMPANIES

Integrated broiler companies only control some 30+% of China’s broiler production but this is increasing as shown
where it increased from 19% to 27% in four years up to 2013.

Wens is the largest producer, followed by New Hope and Sunner. Details of major broiler companies follow with fuller
(including financial) details of Wens under Pork companies and New Hope under Feed Companies.
15.1 Wens
A Private company with sales of USD6.2 billion in 2014. See Pork Companies for full details
Wens is the largest broiler producer in China. It produced 848 million yellow feather broiler birds in 2013. Their
operating model is a fully integrated business with a combination of company owned and contract farms. Fully
integrated business, including breeder farms, hatchery, grown up broiler farms, processing and feed
15.2 New Hope Limited (NHL)

See Feed Companies for full details
NHL 2014 sales were USD 11.3 billion
NHL produce approximately 800 million white feather broiler DOCs per annum. They have a fully integrated business,
including breeder farms, hatchery, growing farms, processing and feed. Broiler PS bases are in Shandong, Henan and
North East. They process some 400m birds which produced 690,610 MT chicken meat in 2012
15.3 Sunner
Heshun Industrial park, Guangze County, Nanping City, Fujian. Fu Guangming (CEO)
Sunner is a southern poultry operation, listed in Shenzhen, with sales in Huadong (34%), Fujian (25%) and Guangdong
(19%). 2014 sales were USD1.038 billion of which USD 980m came from poultry sales. The company is the largest
breeder, processor, and supplier of chicken products in China, and is a major supplier to KFC. KKR has agreed to pay
$400 million for an 18% stake
10 GP farms, all located in Fujian use GP Ross 308. Approximately 61 PS farms all located in Fujian. 7 hatcheries with
400 million HE capacity annually producing 330m DOC in 2014. Grown broiler production was 286m average
2.2-2.5kg LWt. High production cost, due to Nanping being in mountainous district, it is hard to find large flat land, the
cost is very high. State mortality 8-10%. In the future, the cooked product will account 50-60% of their total meat
production. Sell fresh/frozen 50/50. Don’t sell on credit. Few competitors in Fujian and Guangdong provinces, which
are their main focused market

Table 15-1` Sunner poultry performance 2009-2014
Revenue USDm Operating Profit USDm Operating profit %

2009 228 47 20%
2010 324 59 18%
2011 492 100 20%
2012 646 28 4%
2013 726 12 2%
2014 980 74 8%
This is an excellent example of the drop in margins in broiler companies in recent yearws.
Figure 15-1 Sunner business overview (USD’000)
15.4 Shandong Fengxiang Co., Ltd. 

Website: www.fengxiang.com 
Shandong Fengxiang Co Ltd, a private company, is one of the largest fully integrated chicken producers in China. The
business covers feed production, growing, breeding, slaughtering and meat processing. The company owns farms and
also contract production. Sales revenue in 2013 was USD 8 billion. One of the largest chicken meat exporters
in China exporting to Japan and EU (cooked products), Malaysia (frozen products)
The company has 22 breeder farms and produce 160 million white feather broiler DOC annually (plan to produce 200
million birds in 2015) and process 150m birds annually from 60 company owned broiler farms. Slaughter capacity is
200 million birds annually with feed production capacity of 1 MMT per annum. Production capacity of cooked chicken
meat is 60,000 tonne annually. Supply to KFC, McDonald's and Wal-Mart.
Fengxiang produce 180,000 MT manure annually and have invested more than CNY 80 million on building manure
processing facilities, and can produce 100,000 organic fertilizer annually
15.5 Dachan
Dachan Food (Asia) Limited is a conglomerate with operations in the People’s Republic of China (mainly NE China),
Vietnam and Malaysia. It was established by Mark Han Jia-Hwan (Taiwnese) who has a very hands on approach. The
Company’s shares have been listed on The Stock Exchange of Hong Kong Limited since 2007. The Board has strong
external directors but only meets formally 4 times per year. The is a leading fully integrated animal protein product
provider whose products range from feeds, poultry and advanced nutritional formulas for aquatic animals to processed
foods. Dachan owns 12 feed mills in the PRC, 2 in Vietnam and 1 in Malaysia.

In 2014 44.8% of sales were from meat and 43.2% from external feed sales while 12.0% was from processed foods.
Dachan is the largest chicken meat supplier to KFC in the PRC, as well as one of largest suppliers to the exclusive
chicken sourcing agents of McDonald.
Ex 2014 Annual Report. Due to the low pork prices and intensifying competition, the external sales volume of feeds in
China decreased slightly, and the average selling prices also decreased along with the raw material prices and the
income decreased as a result. However, due to the favourable market condition of the raw materials for feeds and the
strengthened distribution channels, both the gross profit margin and gross profit of external feeds improved. In the
South-east Asia market, external sale of feeds grew remarkably, the sales volume of the Group’s products and market
share of the Group were further enhanced, and the gross profit also greatly improved. The upstream business of the
meat segment had closer cooperation with the contract farmers and the revenue remained at the same level as that of the
previous year. However, the poor consumption sentiment towards raw meat and the high supply of feather chickens led
to decrease in meat prices, and caused the gross profit margin to turn negative. Turnover from processed food
decreased at a more significant rate. Although turnover and gross profit from professional catering, which was the core
development sector of the Group, continued to grow, since the sales volume of products to Western fast food chains was
weak as a result of an one-off incident, and export to Japan also faced keen competition, the sales volume and the gross
profit of the overall process food segment dropped. Compared with 2013, the Group invested greater resources to
establish distribution channels for its meat products and develop its products and more proactively implemented the
strategy of food productisation and the marketing expenses increased significantly. Influenced by all factors above, the
Group suffered a significant loss in general during the year 2014. In 2014, the level of gross profit margin of the feeds
business in the PRC increased by 1.8 percent as compared with 2013. Although the turnover decreased slightly as a
result of the depression in pig market and the competition in the Northeast region, the aggregate gross profit still
recorded double-digit growth. Due to the proper operation of merchandising strategy, the costs of corns sourced by the
Group were lower than the market price and brought a cost advantage to the Group. The recovery of Chinese egg
market enabled the Group to capitalise on its brand advantage in respect of egg or chicken feeds and achieved the
growth in terms of sales price and volume as well as gross profit. Besides, since the Group positioned sow and piglet
feeds as its marketing and research and development focus in 2014, sales volume of sow feeds, piglet creep and
conservation feeds continued to increase and the sales growth in Southwest region was particularly prominent.
Table 15-2 Dachan performance 2012-2014
USDm 2009 2010 2011 2012 2013 2014

Revenue 1,369 1,541 1,809 1,844 1,895 1,840
Gross Profit Margin 112 104
Operating margin -4.5 9.9
Net Profit 23 24 41 18 7.5 -15
Net Profit Margin 1.6% 1.5% 2.3% 1.0% 0.3% -0.8%
Total Assets 636 633
Total Liabilities 316 332
Total Equity 320 301
Gross Profit (%) 7.1% 6.9% 7.6% 6.4% 5.9% 5.7%
Operating Income (%) -0.2% 0.5%
Net Income (%) 0.4% -0.8%
Figure 15-2 Dachan revenue and margins

Dachan revenue and gross margin (Million USD)
2.000 8%
1.800 7%
1.600
6%
1.400
1.200 5%
1.000 4%
800 3%
600
2%
400
200 1%
0 0%
2009 2010 2011 2012 2013 2014
Revenue Gross Profit Margin
Table 15-3 Dachan margins by sector
2012 2013 2014

Meat 43.7% 43.1% 44.8%
External Feed 41.0% 41.6% 43.2%
Food Processing 15.3% 15.3% 12.0%
GMs for 2012-14 ranged from 8.3-10.1% for feed and 13-14.2% for processed food but <1% for meat
IFC undertook a promotion visit to Dachan circa 2003 but no project eventuated as the company went through some
re-structuring issues.
15.6 Shandong Nine-Alliance Group
  Website: www.qdjiulian.com 
Shandong Nine-Alliance Group, a private company, is a fully integrated business, including breeder farms, hatchery,
grown up broiler farms, processing, feed and export. Total assets USD500m and sales revenue in 2014 of USD1.2
billion including 100 subsidiary companies. Total employees are 10,000. Farms are company owned and contract. There
are 21 PS breeder farms that produce 160 million DOC annually. 4 feed mills have a production capacity of: 0.75 MMT
annually. 95 broiler farms produce 130 million birds. 3 slaughterhouses have a capacity of 160 million birds. There are
5 cooked food processing factories, which can produce 100,000MT cooked food
In 2014 Nine Alliance Group exported 50,000 MT of chicken meat products and 25% of China’s total export volume to
Japan and EU with capability to export chicken meat products to Japan, EU, USA, Canada, Chile, Russia, South Africa,
South Korea, Mongolia and Malaysia. Products sell to more than 100 medium and large cities throughout China wsith
recent expansion of their business in southern China, such as Guangdong and Guangxi
Company target is to invest USD5 billion to build 12 more production base with same capacity of Qingdao
Nine-Alliance, the broiler production will reach 1.3-1.5 billion birds annually, and sales revenue will reach CNY
100-150 billion
15.7 Huada
Beijing headquarters. Location: Beijing suburbs, such as Shunyi, etc
Breed used is Arbor Acre with 6 GP farms and 4 PS farms. DOC production was 330m in 2014 from which they
processed 286m birds. 80% contract grown to 2.5kg with FCR of 1.75:1 with mortality 5-10%. 90% sold frozen. Huada
had 150,000MT broiler processing capacity in 2012 with production of 124,000MT

Table 15-4 Huada performance 2012-2014
2010 2011 2012 2013

Operating income (USDm) 522 662 744 574
Operating margin (USDm) 49 88 75 36
Operating margin % 9% 13% 10% 6.3%
73% of 2013 sales were processed chicken and 30% from breeding operations.
15.8 Chinwiz Agribusiness
Established in 2004, Chinwiz is a private company with headquarters in Shandong. The owner is extremely wealthy and
known for making unpredictable investments. It is a fully integrated business, including breeder farms, hatchery, grown
up broiler farms, processing and feed. Total sales revenue in 2014 was USD2.4 billion from feed sales of 4.13 MMT and
broiler sales of 100 million birds. They have 51 feed mills located in Shandong, Hebei, Jiangsu, Henan, Shenyang,
Northeast producing mainly pig feeds
There are 13 breeder farms, 5 hatcheries that produce 60 million DOC annually. There are more than 170 broiler farms,
with each farm capable to produce 0.8-1 million birds annually. The company has 5 slaughter and processing facilities
with capacity of 400,000 birds daily. Feed is produced from approximately 52 feed mills, located in Shandong and
Henan.
Expansion plans are to build 50 production bases throughout China with an investment of USD300m in each production
base. Each base includes 1 feed mill with capacity of 0.3 MMT feed annually, 50-100 broiler farms, and each farm can
produce 1 million birds broiler annually, and one slaughterhouse, which can slaughter 0.3 million broilers daily
15.9 Munhe
A Public company established in 1985 in Shandong. A fully integrated business, including 23 breeder farms, 6
hatcheries producing 200m birds, growing broiler farms (with 20m bird production), processing and feed. Munhe
chicken meat production is 60,000 MT and feed production capacity is 0.4MMT. Solid organic fertilizer production is
50,000 MT, liquid organic fertilizer production 0.16MMT and electricity production by Biogas is20 million Kwh
USD 2014 2013 2012

Net Sales 191.36 160.70 192.12
Gross Profit 25.86 -15.53 1.40
Operating Income (EBITDA) 9.94 -31.79 -11.84
Net Profit (after tax) 10.11 -39.58 -13.28
Total Assets 353.19 296.33 332.65
Total Equity 192.29 182.15 221.37
SG&A 15.92 16.26 13.23
Gross Profit % 13.5% -9.7% 0.7%
Operating Income % 5.2% -19.8% -6.2%
SG&A % 8.3% 10.1% 6.9%
Net Income % 5.3% -24.6% -6.9%
15.10 Dayoo
6/F, Hengmei Business Building, No.22, Dongfeng Road. Du Wenjun(CEO)
Use Ross 308 and have 11 GP farms (Hebei, Beijing and Inner Mongolia). 70% PS DOC for external sale. PS produce
363 million egg, and 87% egg for internal sale. Currently 4 hatcheries, and plan to build a hatchery can produce 137
million DOC annually in Kaifeng. Produced 180 million DOC in 2014. Produced 137M broilers from own farms 60%,
contract farms 40%. Kill 1.8-2.2kg. State FCR is 1.8-2.0:1 with 10-15% mortality. Stated they expanded too fast, 2
production bases are still under construction and need lots of many investment. Cooked food production 28,000 tonnes
annually and plan to build another cooked food facility with capacity of 20,000 tonnes

Table 15-5 Dayoo performance 2011-2013
Operating revenue (USD) 2011 2012 2013 1Q

Frozen Chicken Meat 299.3 359.7 66.6
Feed 108.7 112.5 28.8
Ready to Eat Chicken Meat 50.4 58.1 11.1
Others 106.3 77.5 17.4
Total 564.6 607.9 123.8
Feed GM% 4.38 2.15 1.93
Frozen Chicken GM% 8.23 -0.54 -2.4
Ready to Eat Meat GM% 11.17 8.07 6.62
Total GM% 8.85 0.65 -2.31
Figure 15-3 Dayoo operative revenue
Operative revenue(Million USD)

700
600
500
400
300
200
100
0
2011 2012 2013 1Q
Others Ready to Eat Chicken Meat Feed Frozen Chicken Meat
Sales of feed was 230,000MT in 2012
Figure 15-4 Dayoo profit by product
Gross profit by product (%)

12
10
8
6
4
2
0
-2 2011 2012 2013 1Q
-4
Feed Frozen Chicken Meat Ready to Eat Meat

15.11 Chareon Phokphand (CP)
C.P Pokphand Co Ltd is the operating arm in China and Vietnam listed in Hong Kong (KKSE 0043) since 1988. 2014
sales were USD56.billion with a 15.9% gross margin. 61% of the revenue is from China. China feed sales were
5.7MMT. Revenue was US$3,435 million, a 1.5% drop from the previous year. Despite a decline in revenue, gross
profit margin for the Group’s China agri- food business climbed from 15.2% in 2013 to 17.0% in 2014. Swine feed
continued to be the most important component in the Group’s China feed business segment; it accounted for 50.0% of
revenue in 2014. Poultry, aqua and other feed products and premix accounted for 28.1%, 9.8%, 7.0% and 5.1%
respectively. The Group’s swine feed sales volume in 2014 increased by 0.5% to 2.74 MMT while revenue fell by 1.8%
to US$1,718 million. As for poultry feed, revenue dropped by 6.0% to US$965 million and sales volume decreased by
5.9% to 1.87 MMT. Revenue of aqua feed remained at US$338 million and sales volume dropped by 0.8% to 0.46
MMT
Food processing plants have been established in Qinhuangdao and Qingdao in 2014 as part of CPs strategy to diversify
and CP has formed a JV with Temasek Holdings to invest RMB1.7b to farm and process 300,000 pigs in NE China, with
a third to be shipped to Singapore
15.12 Zhucheng Trading
A private company with headquarters in Shandong. 2013 production was 100 million white feather broilers with a sales
revenue of USD 2.2 billion. Fully integrated business, including breeder farms, hatchery, growing farms (company
owned farm plus 1,100 contract farms), processing and feed. One of the largest chicken meat exporters in China with an
export value in 2012 of USD 139 million, mainly to Japan.
15.13 Xiantan
Web: http://www.sdxiantan.com/
Fully integrated business, including breeder farms, hatchery, grown up broiler farms, processing and feed
headquartered in Shandong. Operating company owned and contract farms. DOC production in 2014 was 88
million white feather broilers and feed production of 0.48 MMT. Xiantan has 2 slaughterhouses with capacity
of 89 million birds. Chicken meat sales volume is approximately 180,000 tonnes with key accounts being
Shineway and KFC (Kentucky Fried Chicken). Xiantan has announced they are de-listing
USD 2014 2013 2012

Net Sales 279.79 285.98 323.73
Gross Profit 20.02 13.56 25.44
Net Profit (after tax) 7.15 7.68 14.00
Total Assets 241.66 221.98 190.58
Total Equity 129.47 122.32 113.79
SG&A 11.42 11.06 12.40
Gross Profit % 7.2% 4.7% 7.9%
Operating Income % 3.1% 0.9% 4.0%
SG&A % 4.1% 3.9% 3.8%
Net Income % 2.6% 2.7% 4.3%
15.14 Yisheng
Web: http://www.yishenggufen.com
Address: No. 1,Nanyisheng Road, Konggang Road, Fushan District, Yantai, Shandong
A Public company based in Shandong established in 1990. Business include GP broiler farming, GP layer farming, PS
broiler farming, GGP and GP pig farming, feed, milk processing and animal health. Operating revenue in 2013 was USD
82 million, showing a decrease of 17% from 2012, in which 81% comes from poultry business, 9% comes from pig
business and 8.5% from dairy business. Has 53 company owned farms, including 21 GP broiler farms, 7 GP layer farms,
16 PS broiler farms, 1 nucleus pig farms, 4 hatcheries, 3 feed mills, 1 organic fertilizer factory.

Sales of poultry in 2013 was 160 million birds, showing an increase of 52.84% from 2012, which recorded at 105
million birds. The sharp increase of sales in 2014 is because, the company is expanding, and some of the newly build
facilities are put into operation in 2013.
USD 2014 2013 2012

Net Profit (after tax) 12.31 -35.11 14.21
Total Assets -1.52 -48.52 2.92
Total Liabilities 3.79 -46.56 1.81
Total Equity 294.27 252.13 246.11
SG&A 180.21 143.63 91.65
Gross Profit % 9.1% -43.3% 14.7%
Operating Income % -1.1% -59.8% 3.0%
SG&A % 10.1% 16.5% 11.6%
Net Income % 2.8% -57.4% 1.9%
15.15 Shenyang Huamei Livestock and Poultry Co., Ltd 

Website: http://en.syhmxq.com/ 
Address: No. 25, Xingnong Road, Puhexincheng, Shenbeixinqu, Shenyang, Liaoning
Shenyang Huamei (est 2002) is one of the leading chicken producers and exporters in Liaoning, their products cover all
over China and export Japan, Korea and Singapore, etc. Total assets are USD80 million. There are 14 subsidiary
companies. DOC production is 60 m birds, broiler production 10 m birds. Slaughter capacity is 20 million birds. Feed
capacity is 0.1 MMT. 23,000MT of meat is produced with a 2014 export component of USD 21 million (approx.
8,000MT), mainly to Japan. Further processing capacity is 20,000 MT
15.16 Dalian Chengda Food Group 
Website: http://www.chengdafoodgroup.com/ 
Zhaotun Town, Wafangdian, Dalian, Liaoning
Dalian Chengda Food Group was established in 2001 with 25 subsidiary companies located in Liaoning, Jilin,
Heilongjiang, and Shandong There are 25 branch companies over China. The business covers feed production, breeding,
slaughtering and meat processing, and also corn processing. Total assets USD 650 m and total employees of 20,000. 6
slaughter and processing factories are under construction, with total investment of USD350m. Sales of around USD 0.8
billion
15.17 Liaoning Liaonfeng Group 
Website: http://www.liaofeng.com.cn/ 
Address: 3 Floor, Fangchan Building, Sujiatun District, Shengyan, Liaoning
Liaonfeng Group was established in 1998. Business includes feed, breeder, hatchery, commercial broiler farms,
slaughter and processing . 9 subsidiary companies located in Jilin and Liaoning. Total employee: 2,000
15.18 Shandong Spring Snow Food Co., Ltd. 

Address: No. 382, Fushan Road, Laiyang City, Shandong
Web: www.springsnow.cn 
Established in 1990. Business includes feed, breeder, hatchery, commercial broiler farms, slaughter and processing and
export. Feed production is 0.4 MMT per annum with DOC production 60 million bird. Chicken meat production is
180,000 MT. Sales revenue approximately USD320m with export value of USD 35 million, mainly to Japan and Hong
Kong. Long term supplier of Carrefour, Wal-Mart, RT-Mart, KFC and McDonald
15.19 Weifang Legang Food Co.,Ltd. 
Web: http://www.legang.com/
Address: Honghe Town, Changle County, Weifang City, Shandong

Established in 1990 the company is specialized in breeding, slaughtering, meat processing, import and export of duck
products. Total asset USD800m, employees 11,000.
15 PS duck farms, 1 hatchery, 50 commercial duck farms, 3 feed mills (0.6 MMT), 4 slaughter and processing factory
and 3 cooked food factories. Duck production of 200 million bird annually. Duck slaughter capacity 40 million
producing 150,000 MT duck meat. Products export to EU, Japan, South Korea, USA, Canada, South Africa and South
East Asia. Commercial DOC production 80 million annually, 1 GP farm and 14 PS farms
15.20 Jiangsu Jinghai Poultry Industry Group Co., Ltd 
Website: http://www.jinghai.net/  Address: No. 380, Renming East Road, Haimen City, Jiangsu
Established in 1985 the company is the biggest meat type broiler processing company in Jiangsu Province. The business
covers feed production, growing, breeding, slaughtering and meat processing. It has 3 JV (USA) subsidiary companies
and 16 other subsidiary companies
15.21 Jiangsu Lihua Animal Husbandry Co., Ltd 
Website: http://www.lihuagroup.cn/  Address: Luxi villiage, Niutang Town, Wujin District, Changzhou, Jiangsu
Established in 1997 Lihua has subsidiary companies, includes 12 broiler companies, 1 pig company, and located in
Jiangsu, Anhui, Guangdong, Henan, Shandong and Zhejiang. Total asset USD370m. Employee 3,300. 2014 broiler
production was 178 m and 2014 sales revenue was USD650m.
15.22 Summary of margins
Table 15-6 Summary of margins from selected broiler companies
2013 2014
Sunner Sales Revenue (USDm) 726 980
Operating Income
Huada Sales Revenue (USDm) 574
Gross Profit %
Operating Income 6%
Dachan Sales Revenue (USDm) 1895 1840
Operating Income -0.2% 0.5%
Xiantan Sales Revenue (USDm) 285.98 279.79
Operating Income 0.95 3.10%
Yisheng Sales Revenue (USDm) 81.11 135.79
Gross Profit -43.30% 9.10%
Operating Income -59.80% -1.10%
The highlight of the above table is the low margins for broiler production in China with net profit margins struggling to
reach 2%.
16 LISTED COMPANIES
The share price movements (without any explanation) of listed companies is as follows.
Table 16-1 Share price movements of listed companies

17 ANIMAL HEALTH SECTOR
Small pig and broiler farms have no biosecurity, use little/no vaccination and are prone to disease. Disease control is
compromised by lack of biosecurity, lack of veterinary staff, lack of vaccines and farmer ignorance of how to prevent
diseases.
Major diseases in pigs and chickens in China are as follows
Table 17-1 Major diseases in pigs and chickens in China

Pigs Prevention/Treatment
Foot and Mouth Disease Vaccination
Porcine Epidemic Diarrhea Virus (PEDV) Vaccination
Blue Ear Disease (PRRS) Vaccination
Japanese encephalitis (JE) Vaccination
Porcine parvovirus Vaccination
Swine fever Vaccination
Swine influenza Vaccination
Porcine pseudorabies(PRVD) Vaccination
Porcine Circo Vlrus(PCVD) Vaccination
Infectious pleuropneumonia Antibiotics
Bacterial (E. coli) Antibiotics
Atrophic rhinitis Antibiotics
Salmonella Antibiotics
Broiler
Newcastle Disease(ND) Vaccination
Infectious Bursal Disease (IBD) Vaccination
Mareks Disease (Gumboro) Vaccination
Infectious Bronchitis (IB) Vaccination
Chronic Respiratory Disease (CRD) Antibiotics
Avian Influenza (AI) Vaccination
Fowl pox (FP) Vaccination

Mycoplasma Vaccination
Avian RhinoTracheitis (ART) Vaccination
Coccidiosis In feed coccidiostat/cide
Infectious Larangeal Trachitis (ILT) Vaccination
Egg drop syndrome (EDS) Vaccination
17.1 Major pig diseases
The Chinese pig industry has long-standing and severe health issues. The level of technical expertise, including the use
of diagnostics, quarantine procedures and bio-security in small farms remains minimal.
Large Chinese farms often have a farrow to-finish system with limited quarantine or farm isolation for new pigs and no
age separation on site. Therefore, viral diseases, including three viruses with a possible immunosuppressive effect,
namely, PRRS virus, PCV2 and CSF virus, may enter the farm from various sources and then circulate actively in three
to ten week old weaners. On-farm breeder pigs can easily come into contact with these viruses, which can subsequently
be spread to new farms. This circulation leads to a high level of virus spread, virus persistence, viral mutations and
on-farm impact of primary and secondary infections. The potential positive impact of measures such as vaccination or
improved hygiene is likely to be greatly limited as long as this basic farm structure remains. Despite these issues,
single-site farm systems have been traditionally favoured because of land usage issues. Both CSF and foot and mouth
(FMD) viruses are widespread and endemic in pigs in China. Vaccines for these two notifiable diseases are
manufactured and delivered free by government authorities and imported vaccines are not permitted. There are
approximately 70 licensed animal vaccine manufacturers in China, including both semigovernmental and private
manufacturers. There are issues of variable titre and potency with both the CSF and killed PRRS vaccines. For these
three viruses, CSF, PRRS and FMD, vaccination may not offer full protection from infection or disease even when fully
applied to pigs of the appropriate ages, particularly on single-site farms with pigs of differing ages mixing on one site.
The level of relevant training and expertise of farm managers and attendant veterinarians is often low, particularly in
northern China. Similarly, very few provincial veterinary laboratories can offer pig farmers services in the basic
disciplines of pathology, microbiology and epidemiology. This lack of suitable diagnostic ability can affect the extent
and duration of disease outbreaks and on the overall level of education and training available to farms.
Foot-and-Mouth Disease (FMD) virus will continue to be a major threat to the Chinese pork industry. With so many
FMD infected countries bordering China and with so much cross-border trade, new introductions and infections appear
unavoidable.
PRRS virus is very commonly present in China and is causing a variety of different clinical problems. The main
consequence of a PRRS virus infection is the immune-deficiency that pigs are suffering from when infected with PRRS
virus leading to an increase in secondary (both bacterial and viral-) infections. Vaccines are only allowed to be used on
farms where PRRS virus is known to be present. Live vaccines are preferred, as inactivated vaccines have failed to show
efficacy under Chinese conditions. More and more farms aim to rely on biosecurity.
PCVD virus is of equal importance to the Chinese pork industry as PRRS. The main difference is of course that PCVD
can be easily controlled by vaccination that have been available for some time. Classical Swine Fever (CSF) or pig
cholera control is making great progress in China. All vaccines used are based on the C-strain and are either produced on
cell culture or still making use of rabbit-derived material. Viral diarrhoea in piglets of three to ten days old, leading to
high mortality figures, is regarded as a major problem in China. PED virus was frequently seen in these outbreaks but
also TGE virus and Rota virus. Aujeszky's Disease virus or pseudorabies is controlled successfully in most breeding
herds.
Bacterial diseases are often secondary in importance to viral infections. Main attention goes to Haemophilus parasuis
infections and of course to Streptococcus suis because of its zoonotic aspects and the human casualties that were seen
recently. Housing conditions, poor ventilation, lack of all-in/ all-out management and overcrowding are considered to be
the main reasons for Actinobacillus pleuropneumoniae infection. Another major concern to pork producers,
veterinarians and regulatory officials is the failing of antibiotic treatments due to increasing resistance problems.
The industry therefore aims to continually upgrade vaccination, biosecurity and other control programs to assist the
prevention of these common epidemic diseases. Purchase and appropriate storage and usage of high quality international
vaccines can prevent many issues with PRRS, FMD, CSF and JE.

Commercial company owned farms and contract farms would operate all-in, all-out systems, with one age group, thus
significantly improving disease control, while most farms outside this system have multiple age groups that significantly
increase disease risk.
17.2 Poultry disease

Disease has become the largest obstacle for development of China’s poultry industry. In the past few years, disease
outbreaks have brought serious consequences to producers and processors. The most serious outbreak can be traced back
to 2003 when combined fears of SARS (Severe acute respiratory syndrome) and the H1N5 outbreaks caused panic
about poultry consumption. Since then, avian influenza and other diseases have affected the industry. Lack of
bio-security and closeness of hen houses, especially in Shandong (where it is probably world’s worst) continue to pose
major threats to the industry. The mortality rate was as high as 10 percent even for some industrialised farms. It is
acknowledged that the industry has been its own worst enemy by not taking control of bio-security and food safety, and
the time has come for the industry to take these aspects seriously if they want to take market share from the pork sector,
which they should do given the cost advantage that they have.
17.3 Key Players
Key players in the animal health sector that support both the pig and broiler industries are
 Government Ministries involved in animal health and Food Safety

 Animal health companies that have operations on China (China and internationally owned)
 Integrated companies have their own in-house technical service capability (via veterinarians, nutritionists and
livestock expertise) but also have a dedicated technical service for contract farmers and independent purchasers
of feed, weaners and DOCs. The technical capability in these operations can be very high, but their impact is
limited by the deficiencies in the farms they support (housing, biosecurity, management).
17.4 Food Safety
In recent years, problems that were encountered regarding food safety include drug residues in Sudan-4 eggs; melamine
contamination in MILK; HPAI in chickens; FMD, PRRS and Streptococcus infection in swine. E. coli, Staphylococcus
spp. and Salmonella spp.are common in meat products. Given the high disease load of the sector, use of antibiotics is
common and not monitored well. Lack of licensing of slaughterhouses is a reported problem along with lack of cleaning
systems in many plants, despite regulations. 2012 saw some farms using banned growth hormones (e.g. Clenbuterol) in
pig production that caused consumers to have concerns about the safety of pork and demand and prices dropped. This
saw a reduction in pig production. Moore recently food safety impacted demand in KFC and OSI supply was stopped.
OSI is a Chicago based USA company that is a major supplier world wide to McDonalds so local staff accountability
and training is essential.
18 PORK AND BROILER DEMAND DRIVERS IN CHINA
The main driver of meat demand globally, is per capita income with a very clear correlation between GDP per capita and
meat consumption, especially for poultry. While it is possible to make comparisons between countries, there are many
anomalies e.g. Brazil meat consumption is much higher due to dietary habits driven by Brazilian meat being relatively
cheap. China broiler consumption is below the trend line because of the large pork consumption (a cultural preference as
in China) while Malaysian poultry production is high because, on religious grounds) they do not consume much pork
and the QSR34 sector is well developed. Other drivers of meat demand are:
Increasing urbanization that leads to higher incomes that in turn increase spending power, with meat being a preferred
item. Given that China has a relatively low urbanization rate (53%), this would suggest an opportunity for increased
meat demand as a country with China’s per capita GDP would be expected35 to have an urbanization rate of 70%.
Urbanisation will drive incomes and demand for broilers particularly (via QSR). A comparison of Chinese urbanization
rate versus other Asian countries is shown
Figure 18-1 Urbanisation
34
Malaysia has more KFC outlets per capita than any other country.
35
The Economist

Modernization of the distribution and retail chain will allow an opportunity to increase fresh and frozen commercial
meat production. There will be increased demand from modern retail outlets for branded meat. This suggests that
modernization of the distribution chain will assist to drive broiler meat demand but is more likely to change the
consumption patterns of pork meat (fresh ex wet market to fresh ex retail and fresh to processed), rather than have
dramatic impacts on overall demand for pork. The establishment of cold chains is critical for this.
QSR development is usually a major driver of chicken consumption. KFC was established in China in 1987 and now has
4563 outlets in China. According to Millward Brown research is the most powerful foreign brand in China. However in
recent times there have been too safety concerns with KFC and the supply relationship was OSI was terminated. Of
significance is that Yum Brands (KFC parent) has joined forces with Alibaba Group Holding to implement mobile
payment applications in stores.
McDonald's opened its first outlet in China in 1990 and now has over 2000 outlets, with deep fried bone in chicken a
major seller. Given the high pork consumption and advantages that broiler meat has in cost and placement in the QSR
sector, it is logical to assume that broiler meat consumption will take market share from pork, however demand for fried
chicken is still relatively low in China so this sector will not immediately follow countries like Malaysia, Indonesia and
Philippines and is not helped by the food safety scares. Some observers believe that KFC in China has lost its initial
appeal and is now seen as a high cost fast food outlet.
Food safety has had a significant impact on China broiler meat consumption, due to the HPAI outbreak and the food
safety publicity in KFC. This is an opportunity for the major players to gain market share as food safety is important to
Chinese consumers. The broiler sector has a major challenge to improve its image and increase sales.
Price has a significant impact on consumption of any food item with demand elasticity being high for broiler meat
particularly, while elasticity of pork demand in China will much less due to a strong preference for pork. Broiler meat
has been cheaper than pork since 2000 and in 2008 and 2012 was up to 60% cheaper than pork, thus potentially
favouring growth in broiler meat consumption.
18.1 Broiler Consumption versus GDP per capita
Consumption of poultry products has increased globally in recent years due to increasing income and improved
efficiencies in poultry production (brought about by improved genetics and production systems) that has reduced
production costs. Global experience shows that the increase in demand for poultry will increase as incomes rise and this
increase is more rapid at lower incomes than higher incomes due to meat consumption reaching saturation levels. The
graph below shows that China consumption is very low with the current consumption being below the trend line. One
can assume that the major reason for this is the distinct preference for pork over all other meats and the impact of food
safety scares with poultry meat, especially HPAI.
It follows that the Chinese poultry industry will develop as incomes rise, and this may be accompanied by a shift in
product specification as food safety demands increase and the QSR develops. This will have significant impact on raw
material demand, production systems, product development, marketing systems and foreign currency demands, along
with the infrastructure and environmental footprint. Knowledge of how the industry will develop (how big, when and
where) is critical to the GoC and the industry.
Figure 18-2 Broiler consumption versus GDP in selected countries

Source: Indexmundi
Estimation of the trend line for a given economy is a powerful tool for predicting the growth rate in the industry and
assessing its impact. It can be observed from the graph above that Chinese poultry consumption could increase
significantly. One could suggest that broiler meat consumption will increase around 1% for every 1% increase in GDP
per capita. This would suggest an increase in broiler meat consumption of around 5-7% per annum, well above recent
growth rates. But this will depend on the industry modernizing and eliminating disease and food safety issues. The
challenges in finding land, funding and developing the cold chain to relocate the sector, will be major constraints to
reaching these growth rates so 1-3% growth per annum may be more realistic (COFCO believe 1.7% growth)
Experience shows that demand will also be product driven (e.g. shelf stable sausages, QSR). A key advantage that
chicken will have will be that it will be the lowest cost meat. But the downside is that it is not the preferred meat.
18.2 Pork Consumption versus GDP per capita
In general, consumption of pork36 increases as GDP per capita increases but this relationship is much less exact, relative
to poultry37. The graph below, of pork consumption versus GDP in selected countries, shows that China consumption is
extremely high relative to GDP, due to historical dietary preferences, but also due to much of the pork historically being
produced on farm, with significant self consumption in rural areas. Vietnam, China’s near neighbor, has a preference for
pork that is even greater than in China on a GDOP per capita basis.
Figure 18-3 Pork consumption versus GDP in selected countries
36
Pork consumption is based on World Bank data (Indexmundi) and is carcass equivalent.
37
Due largely to cultural differences and the difficulty of integrating pork into QSRs.

Source: Indexmundi
Given that China pork consumption is so high relative to GDP per capita it is difficult to predict how consumption will
evolve, but one could suggest that it will not increase very much, as incomes rise, as consumption of other meats,
notably poultry, increase. Growth rates of 1-2% per annum seem likely. In fact data ex FAO/Rabobank suggests that
pork consumption even declines when incomes rise as in Taiwan.
Since much of the production is through in-efficient systems in small farms, and the industry is intensifying (driven by
the need to enhance bio-security, improve efficiencies, reduce environmental impact and increase food safety) then
consumption in rural areas may in fact reduce as own supply reduces. It is also likely that as the industry intensifies that
sow numbers will not increase (or increase much - or even decrease) as sow productivity increases and growth rates in
growing pigs increase and FCRs decrease. The impact for IFC is that while pork consumption may not increase, or
increase much, the method of production will change significantly, and requiring significant funding following the
Muyuan model. A COFCO presentation shows they believe that pork consumption will only increase around 1.3% per
annum while poultry will increase 1.7%. Of note is the COFCO estimate of meat consumption is the low GoC estimate
(much lower than the production estimate).
Figure 18-4 COFCO pork and chicken consumption predictions
18.3 Imports
Demand for pork and poultry will impact decisions on imports. China import some 0.56MMT of pork and 0.44MMT of
poultry. Pork imports come from USA, Germany and Spain while poultry comes from USA and Brazil. Pork imports
from USA have been impacted by their use (or assumed use) of the feed additive ractopamine, a growth promoter that
adds approximately 10 percent more lean meat to every pig. Ractopamine has been cleared by the US Food & Drug
Administration, but is banned by a number of countries (including the EU, China, Taiwan and Russia).
A number of US pork producers (20-30%) have dedicated ractopamine free pig herds aimed at these export markets and
most of the ractopamine free supply comes from Smithfield Foods, now owned by the Chinese WH Group, giving the
company a distribution channel into the Chinese market.
18.4 Regional Development
GoC is closing small farms, in-efficient processing plants and wet markets, as they encourage the intensification of the
industry based on an attempt to improve bio-security, food safety and on farm efficiencies. Key drivers for this strategy
are land availability, grain supply and access to markets. This will see increased production in NE and West China, but
production will continue across the country, and wet markets will continue while the cold chain does not exist.
19 CHINA EXCHANGE RATE

Since 2006, the renminbi exchange rate has been allowed to float in a narrow margin around a fixed base rate
determined with reference to a basket of world currencies. The Chinese government has announced that it will gradually
increase the flexibility of the exchange rate. A recent devaluation will impact imports of raw materials, notably soybeans
used in feed production for both pork and poultry sectors, and to some extent will increase prices for imported meats/
20 CHINA GOVERNMANT ROLE

The Government has many departments involved at national and provincial level in the pork and broiler value chains
with examples of their involvement following.

20.1 Dragon Head Enterprises
Dragon Head Enterprises (DHEs) first appeared in 1998 when GoC proclaimed that lead firms would be the key for
modernizing China’s agriculture by integrating and scaling-up production. This has seen increased power for firms in
restructuring production systems. The Dragon Head label entitles a company to obtain government subsidies and to have
bragging rights as a DHE, which translates into percieved brand value. Central, provincial and local governments can
bestow DHE status, with national-level designation being the most sought after.
To become a DHE, a firm must meet a set of operational, financial, and farm integration criteria. Operationally, a
company must function as an agricultural processor, distributor or intermediary, with processing and distribution
accounting for at least 70 percent of the value of the company’s products. Also, it must have legal standing as a
state-owned or private enterprise, a group or corporation, a China-foreign jointventure, or a wholly foreign owned
enterprise. Financially, the state sets minimum asset and sales thresholds for attaining DHE status, depending on a firm’s
location in the country and operational type.
Table 20-1 Minimums for processors and distributors by region for DHE status
Minimum Assets Minimum Sales
East $24m $32m
Central $16m $21m
West $8m $9.7m
DHEs must integrate farm households into their operations and markets. Mechanisms include contracts, shareholding
and cooperation with rural households, and 70 percent of the primary products for the company’s processing and
distribution must come through these arrangements. Whether or not these minimum thresholds are met, and more
importantly, whether or not they are beneficial to farm household, are matters of debate.
In 2011, China had 110,000 officially designated national-level DHEs. In the period from 2000 to 2005, the central
government spent USD1.9 billion subsidizing large-scale, national-level Dragon Heads. In addition to direct payments,
authorities also offer tax exemptions and reductions, export tax rebates, discount loans for export-oriented products, and
access to special loans with little or no interest. The subsidies to three large companies in 2011/12 were as follows
showing they are very substantial.
Table 20-2 Examples of subsidies the State has given to the top pork processing DHEs (ex Rabobank)
2011 subsidies (RMB Subsidy/Net Profit 2012 subsidies (RMB Subsidy/Net Profit
m) (%) m) (%)
Yurun 529 36 606 26
New Wellful 171 23 80 541
Shineway 120 16 33 2
Based on 2011 sales data, of the top 10 pork processing firms, all but one were DHEs. Lead enterprises accounted for 80
percent of the top 10 firms in pork slaughterhouses and retailing. Six of the top 10 pig breeding and production firms
were DHEs. All of the top firms in chicken slaughter and retailing are DHEs, and two have foreign joint ventures,
Xinchang Foods with Tyson Foods and Beijing Dafa Chia Tai with the CP Group.
GoC needs to encourage more investment in areas such as Inner Mongolia and Jilin where there is land but only small
populations of pigs and DHE subsidies is one method they may use to do this.
20.2 Subsidies
China pork production has been buoyed in the past by a Government subsidy for productive sows (RMB100/sow) and an
insurance subsidy for fattening stock (20 percent of a pig’s value if the cause of death is related to a disease outbreak).
In 2014, the government provides the subsidies of RMB 1.65 billion (USD266m) for 16.5 million heads of fine-breed
sows. This is a high cost subsidy to manage requiring manpower to count sows on farms etc, plus it is open to corruption.
Many believe that these subsidies should be abolished as they did not play the role they should have and had little impact
other than increase the cash flows of large suppliers.
20.3 Statistics
Official agricultural statistics for China are subject to major inconsistencies. One problem with Chinese meat statistics is
that reported meat supply is far greater than consumption, particularly for pork. According to 2011 NBSC statistics, per

capita meat supply was around 59 kg, while the average per capita consumption is 28 kg – or less than 50%!. One issue
with meat statistics is the large variance between live weight, dressed weight and ready to cook weight (not to mention
per bird or per kilogram liveweight) and these are often wrongly inter-changed and when ready to eat yield may be 55%
of live weight, the errors are substantial.
Estimates38 indicate that over-reporting of pork production is the largest contributor to the gap between reported supply
and consumption, while pork consumption is significantly under-estimated. In an excellent review 39 of the pork
statistical issues the authors state that reforms to the agricultural statistical system should be considered that increase the
incentives to report accurate production statistics. Statistics are currently based on reports from local officials who have
incentives to inflate production figures so as to improve their performance reviews and prospects for promotion.
This report has relied on various sources and there will be inconsistencies, and errors, but these will not materially
impact the conclusions.
20.4 Trade and Tariffs
Tariffs are used as a mechanism to control imports and examples of ariff and VAT levels are as follows.
Table 20-3 Tariffs

Product MFN40 tariff rate General tariff rate Value Added Tax %
Fresh and chilled pork products 20% 70% 13
Frozen pork products 12% 70% 13

Fresh and chilled chicken meat products 20% 70% 13
Frozen whole chicken 1.3 CNY/Kg 5.6 CNY/Kg 13
Frozen chicken meat with bone 0.6 CNY/Kg 4.2 CNY/Kg 13
Frozen chicken meat without bone 0.7CNY/Kg 9.5 CNY/Kg 13
Frozen chicken wing (exclude wing tip) 0.8CNY/Kg 8.1 CNY/Kg 13
Frozen chicken feet 1 CNY/Kg 3.2 CNY/Kg 13
Frozen Gizzards 1.3 CNY/Kg 7.7CNY/Kg 13
Frozen other chicken giblets 0.5 CNY/Kg 3.2 CNY/Kg 13
In addition phyto-sanitary barriers can be used and there is ban on broiler GP imports from USA and on certain pork
meats, outlined above.
20.5 Animal Health – covered under Section 13.
Government policy is driven by food security, food safety and sustainability. Their goal is to develop a more traceable
vertically aligned industry by reducing the number of slaughter houses and pig farmers to improve efficiencies and
reduce production costs.
20.6 Food Safety
Food safety is becoming a significant issue for China’s livestock sector. Scandals such as the KFC scandal and
epidemics such as avian flu led to sharp drops in demand, and is seeing a move away from wet markets. Food safety
concerns are driving the government and consumers to demand greater control of the supply chain, slowly shifting
consumer habits towards more processed poultry bought in supermarkets. Currently, most livestock products in China
are distributed by small traders. Outside tier-one cities, the cold chain is still absent or fragmented, supporting wet
markets as the major distribution channel. However, the biggest shift is the expansion of organized retail in marketing
chilled poultry products, taking away the share from wet markets. Retail outlets are capitalizing on food safety concerns
as a way to increase their market share and will contribute to shifting production practices by exerting greater control
over the supply chain. However, wet markets and consumer preferences for fresh meat will continue to dominate the
Chinese market in the coming decade.
38
http://dx.doi.org/10.1016/j.chieco.2014.03.004
39
(Yu X. and D. Abler. (2014): Where Have All the Pigs Gone? Inconsistencies in Pork Statistics in China. Forthcoming in China Economic
Review),
40
Most favoured nation

20.7 Industry Associations
Key industry associations are as follows.
Association Website Comments

China Animal www.caaa.cn  Activities and services cover Industry Management,
Husbandry International Cooperation, Conference &
Association Exhibition, Professional Training, Product
Recommendation, Quality Authentication,
Information Exchange and Consultancy Services.
 Objectives are the Integration of Industry
Resources, Standardization of Industry Ethics,
Protection of Industry Interest, Development of
Industry Activities, Exchanges of Industry
Information and Promotion of Industry
Development.
Pig Industry http://www.caaa.cn/association/pig/  The aim is to protect members' benefit, promote
Association Industry self-regulation and the healthy
development of our country's swine industry.
 Provide reference for the government when the
policy, regulation and plan are made.
Poultry Industry http://www.caaa.cn/association/poultry/  Service, coordination, consultation, the aim is to
Association protect members' benefit, promote Industry
self-regulation and the healthy development of our
country's poultry industry
 Coordinate and promote the reform and
development of Chinese poultry industry.
 Inform the government about the requests,
suggestions and opinions of members by all
China Feed http://www.chinafeed.org.cn/  It plays an important role as a bridge between the
Industry government and enterprises, social groups and
Association personnel who are engaged in the feed industry
 The main task of CFIA is to help the government
program the industries and provide basic linkages
for the government to enact policy
China http://www.cvda.org.cn/index.html  It played an important part in service, coordination,
Veterinary consultation, the aim is to protect members' benefit,
Association promote Industry self-regulation and the healthy
development of our country's veterinary drug
industry
20.8 Role of Government in setting prices

GoC controls corn price at $362-368/MT in NE China which is responsible for the high price of pig and broiler
production in China. GoC has an interesting balance to manage as fuel ethanol price must be related to gasoline price, so
in effect the high corn prices discourage ethanol production, which in turn impacts food security. So GoC policy of high
corn prices has a greater impact than keeping farmers happy.
21 ENVIRONMENT ISSUES
The livestock industry in China poses the same threats and opportunities as in other countries, with the most significant
from intensification of the industry being the increased environmental impact from animal waste and wastewater. In
livestock production farm development may pose issues of habitat, especially in mountainous areas.
A major environmental issue can be the toxicity of arsenic in drinking water. This due to the use of arsenicals in the pig
and broiler industries (3-Nitro, as “Roxasone” as a growth promoter). When arsenicals are used in pig feeds up to 90%
can be excreted and organic forms converted to toxic inorganic forms. Up to 70-90% of arsenic in poultry litter can be
water-soluble and if pig manure is used for anaerobic digestion (methane production) then all the arsenic can be
converted to toxic forms. So when pig manure is used for fertilizer there is immediate contamination. The solution is
control of the use of arsenicals in pig feeds. Like wise heavy metal and N, P K are issues especially in China where waste

treatment is a major impediment to sustainable growth of livestock production. See Section 22.
Zoonotic diseases are always a threat when there are such a large number of small farms with no bio-security. Health
education is critical for the rural poor.
As the industry intensifies, there is likely to be increased interest in animal welfare issues, particularly the use of dry sow
crates and caged broilers. Reality is that animal welfare is probably a bigger issue in small farms with no biosecurity and
inferior management, while any engagement by NGOs will focus on the integrators and GoC regulations but these
should be manageable.
22 E-COMMERCE
Sales through e commerce in China have experienced rapid growth in the past three years. E commerce transactions are
strongest in the consumer retail segment with 42% of shoppers reporting that they purchased Chinese New Year gifts in
2015 through e commerce verses tradition off line channels. In the livestock and feed industry the update of e commerce
varies along the supply chain.
22.1 Grain and feedstuffs
As previously reported grains are the largest input into the livestock industry. There are few websites that offer grains
for sale and e commerce transactions are reportedly small. The grain trading platform, Huinong99.com is an example of
grain and feed stuffs e-commerce website. The website aims to offer a convenient platform for feed raw material
purchasers and suppliers and it supports a large resource of information online. Most suppliers who use this website are
wholesalers and producers and total about 2,000 companies that are actively selling their grain through this platform.
They reported key accounts such as CP, Wudeli, and Wanshixing
It is free of charge to open a shop in line but if you advertise and highlight your company there will be a fee. The
website, like many websites in China is linked to the company Wechat platform a social media APP that is equivalent to
China’s version of Twitter. Wechat platforms gather target markets contact details and are able to efficiently
communicate with potential clients through short mobile based messages that then link the user back to website. This e
commerce platform has been reportedly very successful as it provides real time information and smooth transactions.
Other examples of successful platforms are www.5tsh.com, www.shionba.com, www.zgslsc.com , www.zgslsc.com
Figure 22-1 Example of Huinong e commence platform
22.2 Veterinary and animal health

The veterinary and animal health e-commerce platforms are considerably more advanced and more popular than the
grains and feed stuffs. This channel emerged last year and many large players have establishing e-commerce
subsidiaries online. The supply chain between manufacturers and end users in China is often long and complex and in
the case of veterinary supply the cold chain is often poor resulting in sub-standard medication (vaccines) being used with
these poor results.

The e commerce platforms in veterinary and animal health serve two purposes; one is to create awareness of the
products and also to offer end users a platform to contact the original manufacturer directly. Often these direct contacts
lead to the end user being supplied directly from the manufacturer, thus reducing the number of steps in the supply chain
and improving the competitiveness of their products. The on line platform serves to create awareness for the off line
offering where the transactions occur. It has been reported that the savings available to farmers are between 10 and 50%
compared to the original traditional channels. Examples of these platforms are: shop.feedtrade.com.cn,
www.yyxzdsl.com and www.shionba.com. Www shionba.com is reported to have 32,064 farmers registered.
Figure 22-2 Example of www.zgslsc.com website platform
22.3 Inputs Genetics:

There is an emergence of e commerce in the swine genetics industry primarily in the swine market. The leading genetic
companies have websites and educational platforms and also advertise heavily via independent websites mentioned in
the next section. There is a new tendency as seen in the figure below that shows Tianzow marketing animals on line live.
As biosecurity concerns have prevented farmers from visiting pig farms and selecting their own pig’s e commerce
platforms offer farmers the opportunity to view their selections or “representatives” of their selections prior to
purchasing.
Figure 22-3 Example of Tianzow’s website for selling breeding stock
22.4 Live production technology transfer

There is a proliferation of websites focused on the swine industry. Most of these websites use a combination of
education and technology transfer to attract farmers to their site and then use this platform to promote the brands,

products, sponsors websites and e commerce. These educational websites have been incredibly successful at gaining
traction as can be seen by the reported number of subscribers as follows.
Table 22-1 Production websites members and reported visitor rates
It is no surprise that these website have attracted the volume of followers as they have been able to fill a niche in the
market where emerging industries can access knowledge on their industry. The websites not only share production and
technology knowledge but also industry news, pricing and trends that are often difficult to come across in China’s
fragmented and complex industry and have been poorly supplied by print media alternatives.
The advertising revenues from these websites are considerable and the individual websites are also linked to company
wechat APPs that continue to share information via the mobile platform and increase awareness and build followers.
Figure 22-4 Examples of popular swine websites (www.chinapig.cn and www.zhue.com.cn)
22.5 Live pig and poultry trading

There is an emergence of trading of livestock via e commerce and these website offer farmers and also buyers of finished
poultry and pigs and the opportunity to access livestock outside of the tradition buy seller relationships and thus saving
middlemen margins.
Figure 22-5 Examples of live poultry and pig trading websites

22.6 Consumers
Consumer e commerce platforms and leading the e commerce industry in China, and foods that tend to be less perishable
have enjoyed more success at the expense of those foods that require a secure cold chain such as meat.
Successful food e commerce platforms have focused on nutrition, rarity and supported the offering by eye catching
pictures. There is a very close and strategic link between the e commerce platform and health care programs (TV
/broadcast), life style/business media and support via key opinion leaders and social media (Wechat). As with the
veterinary inputs, food e commerce serves a purpose of increasing the profile of food offerings through e commerce but
then realising the commercial trade off line. It is thus critical that an e commerce offering is supported by an off line
offering.
Figure 22-6 Consumer targeted pork and poultry e commerce (www.Too.Too.com & www.JD.com)
The entry website of the Jinluo’s E-commerce is

http://ebiz.jinluo.cn/NETSALE/Login.aspx?ReturnUrl=%2fNETSALE%2fOrder%2fMain.aspx
This includes 1,500 cooked food distributors, 20,000 franchised stores, 250 fresh meat delivery dealers and hundreds of
frozen meat distributors. The customers can choose the products online and choose payment method either by online or
pay at the delivery. After the customers confirmed their order, Jinluo system will calculated the customer information
and deliver the products from the nearest store
There is potentially a role for e-commerce in the marketing of fresh pork but the cold chain is not established so it is a
high risk area.
22.7 Cross border commerce
Chinese consumers with their increasing amounts of disposable cash and curiosity through travel and greater access to
international food have an increasing curiosity for different and often imported foods. E commerce offers Chinese
consumers an opportunity to access different foods from different countries and this trend is growing at an increasing
rate.
New sales models of foods are booming, and imported foods are widely accepted and welcomed by the Chinese market.
The motivation for purchasing imported foods are often attributed to the uniqueness of the product and high quality
(food safety). It is not too hard to visualise the WH Group website offering Smithfield American grown Pork Chops via
the Shineway website!

We expect that access to imported foods via e commerce will increase and as result the local domestic producers will
strive to produce and brand products that are of higher quality and branded in such a way that will mirror that of
imported products.
Figure 22-7 An example from JD.com promoting international food available in China
22.8 Trends
The volume of E commerce in the pork and poultry supply chains will increase especially in the veterinary, animal
health and genetic industries and will continue to play an important role in sharing technology and educating the
industry. Consumer E commerce will also increase in volume and the rate of increase will be governed by
improvements in the cold chain and the increase of retail verses wet market purchasing options.
It has been reported that China has a new “e+” policy to encourage business to accelerate e commerce adoption and as
a result many famous integrators are preparing their e commerce platforms
23 WASTE – CHALLENGES AND OPPORTUNITIES
As the Chinese pork and poultry industries modernise there will be less small backyard farms and more farmers focused
only on livestock production and as a result there will be a disassociation between live pig and poultry production and
the use of poultry and pig waste to fertilise the land owned by the farmer. As a result the larger poultry and pig farmers
will be required to manage and dispose of their waste in a safe and sustainable method.
Unlike backyard poultry and pig producers, commercial poultry and pig producers do not have sufficient land to dispose
of waste. As a result, livestock urine and faeces, which are considered as “valuable fertilizers” by the former, become
“troublesome wastes” for the latter. This potentially will result in a closer cooperation with the local grain producing
communities and livestock farmers, where livestock farmers will cooperate with grain producers as an outlet for their
waste.
The management of commercial livestock wastes are expensive and complex. Commercial pig farms generate larger
volumes of waste compared to poultry and we will focus our attention on the pig industry. To sell the hog waste the
farmer needs to build large storage facilities and store the waste until the farm requires the waste as application times are
important to grain farmers. The waste is also required to be transported from pig farms to farmers’ fields. Increasing
labour and transportation costs have resulted in an increasing cost associated with handling wastes.
Pig waste is also bulky and requires a lot of transportation whereas its alternative, chemical fertilisers are relatively easy
to transport and do not smell to the same extent as pig waste. Past difficulties of encouraging farmers to use pig waste
resulted in the past of pig waste simply being dumped into rivers, lakes or other waterways and as a result these
waterways had increase rates of nutrient pollution. As a result the GoC has brought into play stricter rules of waste
disposal
China has limited land availability and pig production is often in areas of high population densities as these areas are
also high consumers of pork. As a result, the pig industry and its waste are in areas of high population densities and little
opportunities for sustainable waste management.

23.1 Manure as fertilizer
Pig and broiler manure can be and are used as a fertiliser globally. N and P are key macro-nutrients necessary for crop
growth, and manure can be a rich source; hence, in the USA for example, “zero discharge” methods of dealing with
livestock manure have been developed by proper nutrient management planning to provide crops with the quantity of N
and P they need, and no more.
However, the use of manure as a fertilizer must be made cautiously as excess N and P applications can create water
quality problems; NH4 de-nitrifies to NO3, and can further de-nitrify to N2O in anaerobic systems and/or to N2 gas; P
generally binds to soil particles, and creates water quality impairment when fertilized soil is eroded into surface water
runoff. Ammonia that volatilizes from fertilized soils is one source of nitrogen that contributes to air quality
degradation, including potential for acid rain and regional haze caused by chemical reaction with sulphuric compounds
(SOx) to create small aerosols. In the USA, Agriculture is the single largest source of ammonia emissions (US EPA,
2004), with animal agriculture a majority contributor; thus efforts to reduce its emission are ongoing and offer lessons
for other larger livestock producing countries.
23.2 Government policy and regulations related livestock manure treatment
In Table 22-1 we have summarised the regulations related to livestock manure treatment
Table 23-1 Summary of Government policy and regulations related livestock manure treatment
Document Key points

Regulation on the Prevention and  This is the first pollution control regulation by the Chinese government at
Control of Pollution from scale the federal level
Breeding of Livestock and Poultry  This regulation points out the importance of developing nutrient
management in modern farms at various scales
 Provides guidance and incentive methods regarding nutrient management
of farm-animal housing systems in both permitting and operating phases
 Highlights some environmental concerns when operating livestock and
poultry facilities near certain environmental sensitive areas.
The review of the Farmland  Contains the current standard guidelines for conducting the environmental
Environmental Quality Evaluation evaluation of existing livestock and poultry facilities.
Standards For Livestock and Poultry  This guideline clarifies the applicable areas, scale factors, terminologies
Production in China and incorporations, evaluation standard details, and methodologies of
environmental evaluation. EPA at or above the county level shall refer to
these standards when conducting the farmland environmental quality
evaluation.
The review of the Discharge Limits  The regulation is the current discharge limits standard that defines
of Pollutants for Livestock and numerical constraints affecting the existing livestock production systems
Poultry Production in China (GB under consideration
18596-2001  This standard represents the basic requirements of the pollutant emission
control.
 The people’s government at the provincial level may formulate local
standards for pollutants not regulated in this standard.
Technical specifications for pollution  The regulation suggest different mode of manure treatment practices
treatment of livestock and poultry  The regulation provides criteria of Mass concentration of pollutant in waste
farms water in livestock and poultry farms
 The regulation provide manure and urine output by species
23.3 Opportunities for manure utilization

A zero discharge system of manure utilization (for its fertilizer value) has worked successfully in western country
livestock sectors, where sufficient land availability exists within economic transport distance. The system has been
successful for a number of reasons, including a regulatory structure that emphasizes the use of manure as a fertilizer, the
substantial economic value of manure as a fertilizer, the fact that livestock are typically reared near cropland, and that an
entire system of nutrient management planning has been developed and implemented. Chinese pig and poultry
production is constrained by land availability, topography, and lack of nutrient management infrastructure including
soils and manure testing capability, stakeholder education and outreach, and cropping systems nutrient requirements.

For a zero discharge system to work the GoC needs to take a leadership position and establish a very clear policy that is
clear to all and implemented fairly across the industry. The GoC has to decide how important self-sufficiency is in
poultry and pork and if it is as important as it is currently seen then the GoC should make suitable affordable land
available for livestock production and the utilisation of their waste.
Appropriate manure collection, treatment and storage technologies can be developed to address the China’s manure
production situation. Western Countries have been using hog waste as a manure source and strategies exits such as
solid/liquid separation to conserve both N and P but reduce the volume for transport; advanced biological treatment
systems to ensure complete de-nitrification of NH4/NH3 to N2 gas; and development of co-product markets for use
fertilizer ingredients or soil amendment.
During the course of field-work, interviews with members of the pig industry indicated that manure management
presented the largest challenge for large scale expansion and modernisation of the pig industry in China. Education of
all members of the livestock and grain producing industries is required to demonstrate the value of livestock waste.
Leaders in both industries need to work creatively together to establish demonstration farms and the Chinese Ministry of
Agriculture needs to actively support these initiatives. There is an issue where large farms need to distribute to say 500
small holders so logistics is difficult to manage. There is an opportunity to develop sustainable systems and models
around this. Part of this involves education that is needed on the value of the product and there is a good case for a large
number of demonstration bases.
One challenge that will be difficult to overcome in the short term is land-holding size. The current small size of farming
plots make it challenging for the distribution and spreading of livestock waste and as the land holding rules change in
rural China this challenge will be reduced, but this change will not be in the short term.
There is huge potential and opportunities but there is a need to educate both the government, the public and the farmers.
There is a need to understand what waste the land will support (quantity and quality) so China needs more work on the
research side and comparisons made to what is done in the west.
24 OPPORTUNITIES FOR IFC

24.1 Opportunities for IFC Investment Services
In the feed sector, there is surplus capacity. However as pig farms move to full feed (from home mixing and
concentrates) there will be a need for more production. The larger companies (New Hope etc) will lead this development
and may need to increase capacity. There are options of existing mill expansion, acquisitions and green field expansion
to achieve this. However many industry observers believe that as the pig sector modernizes that larger farms will
establish their own feed milling capacity.
It seems that while the GoC encouraged integrators to own an increased proportion of the pig supply (for food security
reasons), there is little appetite for this from the integrators. Not only is the capital expenditure large, but also the risk of
establishing a large livestock operation with demand on management, technology and bio-security, amongst others.
There is a clear preference for processors to buy pigs for slaughter with the risk of production being with the farmers.
Efficient supply of quality pigs is the limiting factor for processors. The development of the pig-growing sector seems to
be focused on 1000-5000 sow units. These are manageable at all levels from livestock production to waste management.
Once farms get to 10-20,000 sows plus, then the risks on all fronts are much greater and land availability for waste
treatment is a major issue. Since many operators have lost money in pig production from larger units, the appetite for
investment is not necessarily high as entrepreneurs have many investment opportunities and pig production is only an
option, rather than a Government encouraged requirement like in the days of ADC (IFC project Changchun). It may
therefore take time to modernize the sector. However, the pig sector China is so large that there will be a continuing flow
of investment opportunities in modern breeding and growing facilities.
The industry sees a role for IFC to invest in farm size of 2000-5000 sows to develop and support model production
systems that focus on innovation and technology as they will be the farmers of the future. DQY is an example of the role
IFC can play in supporting innovation even though the investment was relatively small. At the other end, and as a much
larger investment, Muyuan has played a role in where the pig sector is going. An integral part of any IFC role will be to
support technical transfer in all aspects of the business from livestock production through waste management to linking
with processors so premiums are obtained for quality pork production. It seems funding is more difficult for such
developments as project size is not large and attractive security could be difficult to obtain. A key issue for IFC is

therefore the size of individual projects41 they will support or alternatively the development of sector specific credit lines
that also have linkages to IFC AS. While the industry sees the modernization of the breeding/sector being at the 2-5000
sow unit size (with waste management being a major impediment to the development of larger farms) then project cost
will be in the range of USD10-25m. However given that a large component of the Chinese pork sector needs
modernizing the overall investment needed will be huge e.g. if 10% (only) of China’s pig production is modernized into
new facilities the capital required will be USD20 billion. An investment opportunity of this magnitude would suggest a
major re-think of IFC agribusiness structure and resourcing for China.
In the pork slaughter and processing sector, there is surplus capacity (some 50% in the large operations) for so
investment need and opportunities will be few. However, the undeveloped cold chain is a real impediment to distribution
of fresh meat so investment in mechanized further processing to extend the shelf life of pork will be needed and this will
be with the large processors. Plus investment in the cold chain will be required as wet markets are closed and there is
move to more branded fresh products.
Some industry observers believe there may also be opportunity for co-operative type pig production models through
centralised support and distribution (e.g. common genetics supply, common feed mill, consolidated marketing plan,
technical services and animal health support). However these models seem to have failed in China so would need to be
carefully analysed.
The broiler sector is under going a transition from an inefficient producer of birds with major bio-security, health and
food safety issues. The only road forward for the sector is to modernize livestock production hardware, bio-security and
production systems. This will be led by the large integrators who have existing infrastructure (genetics, feed and
processing). There will be a need to develop own growing capacity and also to promote modern contract growing
systems. It is likely that there will be resistance by companies to developing their own growing capacity as it is capital
intensive and contract growing (as used internationally) is more attractive. Availability of land for integrators to invest is
also an issue. This suggests a scenario very similar to what is proposed for pig growing, whereby funding is needed for
development of relatively small (by IFC standards) operations such as used internationally where family farms of
50-200,00042 broilers are common. Again, sector specific credit lines would be a route to be explored since individual
project size is so small. However, as in the pork sector, the need for funding to modernize the livestock chain will be in
the US billions. Since the integrator would be funding much of the working capital (depending how the system was
structured) then there could be a role for IFC in working capital funding if that was required.
Growth in the broiler sector will be very dependent on how the sector over comes its image. If it grows at the high end
(5% per annum) then significant processing capacity will also be required, along with development of the cold chain (as
in the pork sector). For growth to be at the high end, it will be the large integrators that will lead the way with
modernization of livestock production as a pre-requisite. However this will take time as land (for bio-security and waste
management) and development of the cold chain will be a major issues.
There seems adequate sources of funding for integrated pork and broiler enterprises in China. Equity may be required
where businesses want to develop more rapidly. This offers IF opportunities like they have taken in Anyou and
Muyuan. But the livestock supply chain seems to offer the greatest need and opportunity for funding.
The structure of both the pig and broiler sectors has significant implications on how IFC will approach investment in the
pork and broiler sectors as national market share is not a criterion for investment as usual in probably all other countries.
Thus IFC targets will largely be regional or even provincial players in both sectors, and often likely to the livestock
supply chain rather than the integrators per se. Given the size of the country and that 50% of the world’s pigs are
implicated, this poses a major promotional challenge. When a parallel report was done for IFC on the Vietnam pig and
broiler sectors, it was possible to get significant market information on players without visiting them, as all companies
had a national presence and competitors could give valuable insights. This did not happen in China, as most companies
are regional or provincial players. A greater understanding of these is needed to obtain a greater understanding of
opportunities for IFC at integrator level.
41
A 5000 sow piggery with progeny would cost around USD12-15m capital expenditure plus working capital of around USD2.5m. A supporting feed
mill for 40,000MT would cost around USD5m plus working capital. So an all up ballpark figure of USD5m per 1000 sows plus progeny
42
100,000 bird growing farm would cost around USD0.5m

24.2 Opportunities for IFC Advisory Services
There seem to be several areas for IFC AS engagement in the pork and broiler sectors in China.
24.2.1 Food safety
 Engage with clients (or beyond) to assist to establish food safety guidelines, procedures and governance
 Engage with GoC on control of the use of antibiotics and heavy metals in the food chain, through legislation,
advisory services and enforcement.
24.2.2 Waste management
 Advisory to decrease the amount of in-organic fertiliser and increase the use of organic fertilizer, linked to pig
farm waste management challenges. This will include the encouragement of use of organic fertiliser on farms
and the training of farmers in its use.
 Assist with investment in manure management programs on pig farms
 Initiative on nutritional optimisation on N/P/K and heavy metal residues. This initiative would include
optimization of amino acid balance and P levels in feed and be linked to other waste management initiatives.
25 SWOT
An overall summary SWOT43 analysis of the pork and broiler sectors follows, with production efficiency issues also
having been addressed earlier.
Table 25-1 SWOT

Strengths Weaknesses
 Meat sector accounts for a sizeable proportion of  In-efficient small-scale farms dominate
industrial output and GDP  Bio-security a major issue in both sectors but
 Huge domestic market especially for broilers
 Young population  Limited cold chain development to take over when
 Increasing urbanisation wet markets are closed thus impeding relocation of
 Huge consumption of pork relative to GDP/PPP the industry
 Relatively low consumption of poultry re GDP/PPP  Rely on soybean imports for protein sources but use
offering potential beans processed in China
 GoC support for pig production via DHEs/subsidies  GoC imposed high corn price so cost of production
 GoC supporting agricultural development especially worlds highest.
intensification of livestock production  Food safety in slaughter houses and wet markets isva
 Projected GDP growth of 5+% will support growth in major issue
meat consumption  Food safety scares (KFC) adversely impact broiler
 National coverage of livestock production demand
 Grow nearly all the feed corn requirements.  Broiler sector image is tarnished
 Only 20% of feed costs imported (versus 75%  High pork consumption relative to GDP suggesting
Vietnam/Indonesia) volume growth will be restricted
 Ample (over) capacity in feed, slaughter and  Weak management and funding in locally owned feed
processing sector so larger mills taking market share
 Managed currency offers stability for imports  Wide income disparities between urban and rural
 Skilled low-cost workforce areas
 Chinese consumers, particularly the young and  Poor control of supply/demand relationships causing
affluent, are increasingly interested in brands major price cycles
 Low margins impacting investment and integrators
very cautious of investing in livestock production as
small farms dominate pricing
 Too slow to adapt to new technologies
 Current economic downturn impacting demand
 Waste management a major impediment to livestock
development
 Land availability impacting waste and bio-security
management
43
See sector efficiency issues in report – Sections 6.5 and 8.5

 Skilled work force with an understanding of large
scale livestock production
Opportunities Threats
 Low livestock production efficiencies can only  Low biosecurity and disease threats in both broiler
improve and pig sectors
 Live pig and broiler production likely to consolidate  Food safety issues threaten meat consumption
into modern production systems with enhanced  The existence of over supply of capacity (especially
biosecurity. slaughter) will threaten margins
 Opportunities likely to be for 2-5000 sow units and  On going cycles for supply of pork and broilers
50-200,000 broiler farms impacting price
 Demand for branded products is increasing but wet  Low efficiencies at farm level
market still plays a role – although GoC has intent  Unknown GOC intervention
closing them down but no cold chain to drive the  Low margins impacting investment
closure  Lack of funding for livestock sector modernisation
 More development of QSR especially for chicken but  Cold chain development will be slow and compromise
this will be slow following KFC food safety scare and any relocation of the industry or closure of wet
growing disinterest in high cost QSR markets
 Target increasing urbanization and demographics  Availability of labor willing to work in livestock
with enhanced food safety, brands etc. Rebranding of production
the broiler sector particularly
 Enhancing bio-security and control of disease
 Investment in livestock production, processing and
distribution
 Improving food safety
 Improving waste management
 Education of farming community and GoC on the
value of pig and poultry waste
 Relocation of industry to the north
 Development of contract growing for pigs and
broilers in modern housing and management systems
 Better control of supply and demand volumes through
integrations
 Increased investment in cold chain to replace wet
market dominance
 Improved product quality especially for fresh
chicken/pork – with premiums to farmers for quality
and improved yields
 Taking advantage of rising income levels and
changing lifestyles
 Consolidation of the industry at all levels
 E commerce a channel to reduce supply chain
inefficiencies and an alternative purchasing channel
for consumers

26 APPENDIX. FEED PRODUCTION BY PROVINCE
Table 26-1 Feed Production By Province 2013 MT

Guangdong 10,433,279 9,706,576 324,565 402,138
Hunan 7,724,184 6,510,464 631,738 581,982
Henan 7,375,396 5,792,737 1,397,850 184,809
Sichuan 6,316,224 5,203,651 920,879 191,693
Shandong 6,132,961 4,822,237 1,108,139 202,585
Guangxi 5,720,900 5,405,348 235,291 80,261
Jiangxi 4,863,325 4,216,537 195,802 450,986
Fujian 4,179,292 3,654,959 246,759 277,573
Liaoning 3,495,912 2,027,880 1,364,543 103,489
Zhejiang 2,868,564 2,701,247 58,161 109,157
Hebei 2,827,558 2,079,457 691,986 56,115
Jiangsu 2,815,374 2,340,876 340,318 134,180
Heilongjiang 2,412,200 1,113,200 1,181,000 118,000
Hubei 2,385,161 2,094,830 216,331 74,000
Shannxi 1,933,853 1,294,920 581,422 57,511
Yunnan 1,758,836 833,632 904,350 20,854
Anhui 1,537,660 1,244,849 219,193 73,618
Jilin 1,512,443 660,629 832,135 19,679
Chongqing 1,136,496 930,513 181,965 24,018
Tianjin 1,091,000 461,846 494,248 134,906
Shanxi 1,077,997 543,679 513,665 20,653
Beijing 969,628 394,701 314,296 260,630
Hainan 797,437 792,146 1,051 4,240
Gansu 650,484 392,373 254,707 3,404
Shanghai 623,715 348,116 137,392 138,206
Guizhou 514,369 206,509 307,357 503
Inner Mongolia 476,647 207,019 261,698 7,930
Xinjiang 293,825 200,428 81,035 12,362
Ningxia 140,747 63,833 71,601 5,313
Qinghai 47,829 47,677 5 147
Total 84,113,296 66,292,869 14,069,482 3,750,942

Table 26-2 Broiler feed production by province in 2013 (MT)
Shandong 11,306,427 11,178,360 26,697 101,370
Guangdong 6,700,653 6,643,885 11,036 45,732
Liaoning 3,854,269 2,718,123 1,119,604 16,542
Guangxi 3,580,169 3,526,479 27,708 25,982
Henan 2,955,838 2,811,455 125,346 19,037
Jiangsu 2,446,749 2,425,367 2,281 19,101
Anhui 2,342,748 2,331,859 3,052 7,837
Fujian 1,843,989 1,841,823 - 2,166
Sichuan 1,829,684 1,812,330 1,168 16,186
Hebei 1,249,077 1,067,551 171,808 9,718
Jilin 1,174,901 892,757 268,794 13,350
Heilongjiang 1,157,100 497,000 617,000 43,100
Zhejiang 1,002,544 990,105 564 11,875
Hunan 950,524 935,746 5,748 9,030
Hubei 918,220 879,149 31,060 8,011
Yunnan 914,778 872,513 40,774 1,491
Hainan 677,430 671,412 1,500 4,518
Beijing 675,699 665,048 10,651
Shanxi 651,303 607,958 40,312 3,033
Jiangxi 642,135 571,915 20,000 50,220
Shannxi 437,550 254,444 164,324 18,782
Chongqing 409,643 408,539 697 407
Xinjiang 396,764 379,778 14,869 2,117
Tianjin 359,292 335,408 16,585 7,299
Shanghai 317,439 305,159 201 12,079
Inner Mongolia 272,442 251,812 18,561 2,069
Guizhou 167,916 162,001 5,915 -
Gansu 140,505 100,272 40,183 50
Ningxia 95,035 48,213 44,711 2,111
Qinghai 6 5 - 1
Total 49,470,829 46,186,466 2,820,498 463,865

Table 26-3 Feed mill number by province and by feed type in 2013
Province Compound Feed Concentrate Feed Premix Feed Total
>10 tonne <10 tonne
Hunan 182 122 1291 183 1,778
Shandong 588 207 661 290 1,746
Liaoning 559 300 648 89 1,596
Hebei 452 393 404 199 1,448
Heilongjiang 169 389 647 229 1,434
Henan 315 520 305 121 1,261
Guangdong 345 187 141 324 997
Sichuan 174 231 443 142 990
Jiangsu 288 179 224 210 901
Jilin 263 100 309 19 691
Yunnan 113 143 333 44 633
Inner Mongolia 111 151 332 34 628
Shannxi 145 55 252 72 524
Anhui 186 53 120 148 507
Fujian 171 92 92 123 478
Zhejiang 119 150 30 97 396
Beijing 63 50 110 160 383
Jiangxi 93 154 39 79 365
Guangxi 140 39 106 76 361
Hubei 120 128 79 32 359
Shanxi 65 130 133 26 354
Chongqing 70 67 147 63 347
Tianjin 98 63 116 51 328
Gansu 35 92 127 22 276
Shanghai 49 40 40 79 208
Xinjiang 31 43 60 29 163
Guizhou 30 52 55 3 140
Ningxia 14 56 17 11 98
Hainan 12 25 16 14 67
Qinghai 15 38 2 2 57
Total 5,015 4,249 7,279 2,971 19,514

Ryan - China Pork and Poultry Value Chains

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OCTOBER 2015

CHINA PORK AND BROILER

Report to International Finance Corporation

A JOINT REPORT BY OLIVER RYAN

AAC = Asian Agricultural Consulting Ltd

China Pork and Broiler Value Chain 2

China Pork and Broiler Value Chain 3

China Pork and Broiler Value Chain 4

Table 6-1 Overview of key genetic pig companies 15

China Pork and Broiler Value Chain 5

Figure 4-2 China’s population density 11

China Pork and Broiler Value Chain 6

China Pork and Broiler Value Chain 7

1National Bureau of Statistic of China

China Pork and Broiler Value Chain 8

China Pork and Broiler Value Chain 9

 Largest 20 companies control 40% of industry.

Broiler 2015  Integrated production controls 30% of production

Slaughter  Largest players slaughter only 8.5%

 5% of pork is sold in modern retail outlets

China Pork and Broiler Value Chain 10

Figure 4-1 China’s population density

2National Bureau of Statistic of China

China Pork and Broiler Value Chain 11

Figure 5-2 China Meat Production

China Meat Production MMT

In 2014, pork production accounted approximately 75% of total meat production.

Figure 5-3 Consumption of pork and broiler meat in selected countries

Pork and Broiler Meat Consumption by Country

4National Bureau of Statistic of China

China Pork and Broiler Value Chain 12

Figure 5-4 China Pork Production 2000-2014

China Pork and Broiler Value Chain 13

Figure 5-5 China Broiler Meat Production 2000-2014

China Broiler Production

Figure 6-1 Pork Value Chain

China Pork and Broiler Value Chain 14

Table 6-1 Overview of key genetic pig companies

Table 6-2 Largest pig breeding/growing companies in China

China Pork and Broiler Value Chain 15

6.3 Slaughter and Distribution of Pork

China Pork and Broiler Value Chain 16

HQ Slaughter Capacity Actual Slaughter Capacity Utilization

Figure 6-2 Slaughter capacity of leading pork processors

Table 6-4 Top 10 pig slaughter and processing companies in 2014

Company HQ Structure Slaughter (m) Market share

Figure 6-1 Slaughter margins

China Pork and Broiler Value Chain 17

Figure 6-3 Packed pork supply market shares

6.4 Likely developments

China Pork and Broiler Value Chain 18

Table 7-1 Pig sector volumes

Table 7-2 Top pork producing province in 2013

China Pork and Broiler Value Chain 19

Figure 7-1 Pig Density in China

Table 7-3 Pig industry structure

China Pork and Broiler Value Chain 20

Figure 7-2 Pig supply shares

7.3.1 Production systems

Figure 7-3 Production contribution by farm size China vs USA

China Pork and Broiler Value Chain 21

7.4 Pork Sector Production Costs and Margins

Figure 7-4 Pig and pork prices