China seafood producers face higher feed prices in 2015

Higher feed prices will put pressure on China’s seafood exporters in 2015, say industry experts. Feed prices increased by more than 50 percent in 2014 due to tighter supply of Peruvian anchoveta as well as a consolidation of local output. This scenario will continue through the first half of 2015, said a spokesman from the China Feed Network, a research service of the China Feed Industry Association.

International fishmeal supply remains tight — meal from Peru where China gets 55 percent of imports — fishmeal is currently selling for an average CNY 16,000 (USD 2,560; EUR 2,224) per ton at Chinese ports whereas the price for domestic fish meal stands at an average CNY 12,500 (USD 2,000; EUR 1,738) per ton.

“In the past the ideal price differential was typically RMB 500 (USD 80; EUR 69) to RMB 800 (USD 128; EUR 111),” said Wu Hao, a Beijing-based analyst at the China Feed Network.

He’s expecting domestic fishmeal producers to pick up market share in 2015 as fish farms seek cheaper supply. But supply is limited. China’s domestic output in 2014 at 45 million metric tons (MT) was down from 60 million MT in 2013. This is because there’s been a consolidation of producers in key production region of Shandong province, where government has been withholding licenses from smaller firms in a bid to encourage consolidation. Wu notes that in the city of Rongcheng there were 186 fish feed companies in 2013, “now there’s about 20 active companies … All companies must be able to produce 20 tons an hour to get the license from government.”

China’s feed industry has been going through a process of consolidation as the scale of the country’s meat consumption increases and government seeks to improve food safety by encouraging giant agribusiness and food companies. China’s two fishmeal and aquafeed processing champions are Tongwei Group and the Haid Group, both based in southern Guangdong province. Tongwei announced an expansion in sales of 25 percent in the first half of 2014, with earnings growth of 70 percent (from a low base in 2013 when sales fell due to woeful weather damaging fish stocks) while Guangdong Haid lifted its sales volume by 15 percent.

Recovering demand and pricing for pork — the country’s first-choice meat — also means the big players in the feed industry have been less urgent about building their presence in the aquafeed sector, hitherto seen as a higher margin business.

China went from being the world’s No. 3 animal feed producer in 2008 to taking the No. 2 slot in 2011, behind the United States but just ahead of the EU. Estimates from various bodies suggest the current figure is between 200 and 210 million MT. After adding 120 million MT of new capacity in the past 20 years, China already had 191 million MT of output per year in 2012 (according to the China Feed Industry Association and the UN’s Food & Agriculture Association). The bulk of that goes to feeding pork and poultry with about 12 percent going to aquaculture.

Tighter supply of fishmeal creates problems for Tongwei and Haid given both have promised to expand their sales and production in Southeast Asia. But both firms face competition from larger animal feed firms like New Hope (also known as Liuhe) Group, located in Sichuan province: It has more than 15 million MT of capacity, which puts it well ahead of second placed CP China (eight million MT) and East Hope Group (Shandong province), which annually produces more than seven million MT of animal and fish feed.


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