World Grain - February 2016 - 32

FEATURE: FEEDING CHINA

Highlights of China's feed
industry development
1974-75 - First modern feed mills were constructed in
Beijing and Shanghai.
1978 - The Commerce Ministry set up a Feed Bureau and
built 143 mills by 1980. Agricultural departments, industry
bureaus, and rural townships built mills as well.
1979 - Feed-milling and livestock ventures by Charoen
Pokphand (known in China as Zhengda) and Continental
Grain were the first foreign companies permitted to operate
in China.
1982 - Leader Deng Xiaoping endorsed feed milling as a key
industry.
1984 - The government drafted a plan to expand feed
industry production capacity to 100 million tonnes by 2000.
Support measures included exemptions from value-added
tax and business tax, earmarked bank loans, reduced tariffs
on raw materials, imports of equipment, and subsidies.
Authorities budgeted 1.5 billion yuan for feed industry
support during the seventh Five-Year Plan.
1989 - The government's "vegetable basket project"
initiative charged municipal authorities with developing
meat and feed production to supply cities.
1990s - Privately owned feed mills expanded as the
domestic grain market was liberalized.
1995 - Tariffs were cut for imports of soybean meal,
fish meal, and distillers dried grains, and imports were
exempted from quotas and value added tax.
2001 - WTO accession stimulated a wave of feed industry
investment and lowered import barriers and restrictions on
interregional trade and investment. Soybean tariffs were
set at 3% with no import quota, while grains had tariff rate
quotas.
2005 - New Hope Group acquired a controlling interest in
Liuhe Group, the most prominent in a wave of mergers and
acquisitions.
2006-10 - A renewed push for livestock industry
modernization under the 11th Five-Year Plan prompted
greater use of manufactured feed.
2007-14 - A surge in pork prices and disease prompted
more government support and private investment in swine
production projects that included plans to supply feed to
producers.
2011-12 - Abuse of feed additives and hormones on swine
and poultry farms alleged by Chinese news media increased
pressure to increase vertical integration and coordination of
livestock and feed production.
2013-14 - Feed industry growth stalled with slower
economic growth, H7N9 outbreaks, stricter regulations, and
an anticorruption campaign.
2014 - The Ministry of Agriculture reported closing 30% of
feed enterprises after a re-licensing campaign.
Source: Compiled by USDA, Economic Research Service

paign spread through the livestock sector. China's 2005-10
Five-Year Plan helped to accelerate this modernization.
After 2007 there was a surge in complete, formulated feed
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emphasis on the substitution of commercial feed for locally
procured materials. Between 1990-2012, poultry feed production grew more steadily as feed companies promoted vertical
coordination in poultry production. Feed production for egglaying poultry, aquaculture, cattle and sheep also grew rapidly
during 2004-12.
ERS noted that an additional element of the new status quo
was the nature of enforcement and regulations on food and
feed safety, environmental protection and control of animal
disease became much stricter. ERS said China's Ministry of
Agriculture withdrew the business licenses of 30% of feed
mills during a 2014 relicensing campaign prompted by concerns about feed safety and quality.
A result of the increased concerns about food safety was
a vertically integrated business model became a preference
among meat and feed companies who sought to gain more
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in their products.
As large companies expanded, many small mills remained
in the industry. The ERS report cited China Feed Industry
Association statistics, which showed that China still had 10,113
feed-milling enterprises in 2013, nearly three times the 3,804
"above scale" feed industry enterprises - annual sales of
$800,000 or over - reported by the economic census that year.
The top 10 companies accounted for just 36% of output.
ERS noted the China Feed Industry Association estimated that
¿YHRIWKHODUJHVWFRPSDQLHVXWLOL]HGURXJKO\KDOIWKHLUFDSDFity that year.
ERS said that commentators had long cited chronic problems of excess capacity, crude equipment and low-quality
products in the Chinese feed industry overall.
The Chinese government's 2011-15 Five-Year Plan for the
feed industry called for transforming China from a "big feed
country" to a "strong feed country" by reducing the number of small mills with outdated facilities. The Ministry of
Agriculture's feed mill relicensing campaign during 2014 was
ostensibly aimed at improving the safety and quality of feed,
but it meshed with the objective of eliminating excess capacity by closing mills that lack modern equipment, quality control, and testing capacity.
URBANIZATION DRIVES
For the next decade China's feed industry is projected to
grow at a more moderate pace. As more of China's population
moves into cities and achieves higher living standards, the consumption of animal protein will grow.
As the livestock and aquaculture segments modernize and
grow to meet the demand, so will the commercial feed industry.
The ERS report noted that recent projections by the China
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