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215 China Layer Industry Outlook Report 215 Content Episode I. China layer Industry 214--Benefits from De-Capacity... 2 1.1 The layer inventory dropped to a record low.... 2 1.2 Three records in 214... 4 1.2.1 The egg price set a record high in 214.... 4 1.2.2 The spent hen price was most stable.... 5 1.2.3 Layer farming profitability-turn from negative to positive and Three-year High.... 5 1.3 Breeder s market--bearish... 6 Episode II. China Layer Market 215 Supply outweighs demand.... 8 2.1 GPS Capacity Relief and the Growing Rate of Domestic Egg.... 8 2.2 The Rising Concentration of PS Layer Inventory... 9 2.3 The YOY Growth of Layer Inventory... 1 2.4 Stable Egg Consumption and the Rising Proportion of Brand Egg and Native Egg... 11 2.5 China Layer Market Forecast for 215... 12 CONCLUSION:... 13 1
the inventory of layers in laying period and Layer DOC Sales Volume,Layer 215 China Layer Industry Outlook Report 215 Episode I. China layer Industry 214--Benefits from De-Capacity 1.1 The layer inventory dropped to a record low. Based on Boyar s statistics, the inventory of layer and the egg production have kept falling since 29. Figure 1.1 The Commercial Layer Inventory in laying period, DOC Sales and Egg Production in 29-214 18 16 14 12 1 8 6 4 2 x 1 x 1 24 23 22 21 2 19 18 17 16 15 29 21 211 212 213 214 the inventory of layers in laying period Layer DOC Sales Volume Egg Production Egg Production,ton Note: The laying hens include commercial combination layers and native layer. The layer inventory or the egg production in this report means the commercial combination layer. Analysis from its supply:(i) In recent years, the layer farming suffered from oversupply situation and the layer farming profitability is relatively low, so the profit cannot meet many household farmers expectation and they have gradually abandoned layer farming. In addition, the pressure from layer farming cost and the more strict environmental law also accelerated to eliminate the low efficient producers. 2
215 China Layer Industry Outlook Report 215 (II) The condition that the egg from North China transported to South China has changed, which has caused the egg production from North China to be on the decline. According to Statistical Yearbook of China Animal Husbandry 212, the annual growth rate of egg production in major producing regions has begun to be negative since 27. The growth rate of Five-year average in Hebei was -5.27%, which was the third decline in China, Shandong (The second), Sichuan (The Seventh), Anhui (The Ninth), Jilin (The tenth). The top egg production province is Henan, only up.17 in the past five years. Furthermore, the layer farming scale in Liaoning (Top five) also has begun to decline in past 2 years. On the contrary, the growth rate of egg production in Guizhou, Guangxi, Hainan and Yunnan, etc keeps rising. Hainan witnessed the largest increase, 7.59%. But due to the low base, in spite of a large growth rate in South China, the volume increase is very limited. The location of layer farming is gradually changing from Egg from North to South to relocated around large and medium cities, which means that the egg supply in South China is on the rise and the egg production in North is on the decline. But the egg production growth in South cannot match the egg production decline in North, therefore at present the layer inventory and the egg production in China gradually decrease. Figure 1.2 Poultry Egg Production in provinces and its Five-year Average Growth Rate in 212 3 Source: Statistical Yearbook of China Animal Husbandry 212
wk3 wk7 1 5 9 wk23 wk27 wk31 wk35 wk39 wk43 wk47 1 Egg price, RMB/kg 215 China Layer Industry Outlook Report 215 From the perspective of consumption, at first, Chinese prefer to eat fresh egg and the egg processing rate is very low, so the egg consumption growth almost ceases; secondly, the Eight-Point code make food consumption more reasonable and the egg consumption in restaurants dropped 8.3% in 214, estimated by Professor Yang; In addition, as the egg consumption habit changes, the native layer egg is quickly rising, which is also a reason for the decline of layer inventory and egg production. In March 213, the sudden outbreak of H7N9 exerted a negative influence on China layer industry for a year: the egg price kept falling; the spent hen price and volume dropped; layer replacement decreased and household farmers gradually abandoned layer faming. This directly gave rise to the situation that the egg supply dropped a lot and the egg price soared in 214. Based on Boyar s poultry analysis system, the layer inventory was 1.4 billion layers, down 1.18% from 213 and the egg output in 214 amounted to 17.76 million tons. 1.2 Three records in 214 1.2.1 The egg price set a record high in 214. The egg price in 214 became bullish. Based on Boyar s statistics, the egg wholesale price was RMB 8.83/kg on average, up 18.52% YOY, exceeding RMB 7.87/kg in 21, the previous record high. Figure 1.3 Five-year Average Price and Two-year Comparison 12. 11. 1. 9. 8. 7. 6. 5. 4. 3. 2. five-year average prices 213 214 4
wk3 wk7 1 5 9 wk23 wk27 wk31 wk35 wk39 wk43 wk47 1 spent hen prices, RMB/kg 215 China Layer Industry Outlook Report 215 1.2.2 The spent hen price was most stable. The spent hen price also ended its low price in the past two years and returned to the high price range, in spite of the fact that its growth was not as good as the egg price. Though the spent hen price did not set a record high in 214, it was still very strong. Based on Boyar s statistics, the spent hen price was RMB 9.91/kg on average in 214, up 21.45% YOY. Figure 1.4 Five-year Average Price and Two-year Comparison 14. 12. 1. 8. 6. 4. 2. five-year average prices 213 214 1.2.3 Layer farming profitability-turn from negative to positive and Three-year High. Due to the rise of egg price and spent hen price, the layer faming began to gain profit in week 16 of 214, ending its two-year deficit. The layer faming profitability reached RMB 16.56/chick on average for the whole year, setting a record high, RMB 52.1/chick in week 35 of 214. The period of positive profits for layer faming lasted 37 weeks. 5
Jan Mar Jan Mar Jan Mar The Inventory of Layer GPS, Layer*1 Layer farming profit, RMB/Layer Jan Feb Mar Apr Aug Otc Jan Feb Mar Apr Aug Otc Jan Feb Mar Jun Aug Otc 215 China Layer Industry Outlook Report 215 Figure 1.5 Layer Farming Profitability in major producing regions in 211-214 6. 5. 4. 3. 2. 1.. -1. -2. 212 213 214-3. -4. 1.3 Breeder s market--bearish The GPS inventory in laying period was 628,8 D-lines in 214, up 21.11% YOY. The PS DOC sales dropped 1.12% YOY and its price fell 26.49% YOY. Figure 1.6 Inventory of GPS Layer in laying period in 211-214 8 7 6 5 4 3 2 1 Source: CAAA, Boyar 212 213 214 6
PS Layer Selling Price and Cost Gap,RMB/D-line wk3 wk7 1 5 9 wk23 wk27 wk31 wk35 wk39 wk43 wk47 PS Layer Sales Volume,Million D-lines wk3 wk7 1 5 9 wk23 wk27 wk31 wk35 wk39 wk43 wk47 215 China Layer Industry Outlook Report 215 Figure 1.7 PS DOC Sales in 213 and 214.9.8.7.6.5.4.3.2.1 213 214 Figure 1.8 PS DOC Price and Cost Gap in 214 2. 1.. -1. -2. -3. -4. Source: CAAA, Boyar The profitability of PS enterprises was better than GPS enterprises, but due to the relatively low replacement of commercial layer in 214, PS enterprises continued to restructure its productivity. Based on Boyar s statistics, the inventory of PS layer in rearing period declined.85% YOY and the inventory of PS layer in laying period increased 2.11% YOY. 7
Import Volume of Layer GPS,Layer Parental layer breeder inventory, Layer 215 China Layer Industry Outlook Report 215 Figure 1.9 PS Layer Breeder Inventory in 213 and 214 35 3 Million 25 2 15 1 5 213 214 Inventory of layer Inventory of pullet Episode II. China Layer Market 215 Supply outweighs demand. 2.1 GPS Capacity Relief and the Growing Rate of Domestic Egg. Beijing Huadu YUKOU poultry Co.,LTD. has produced 2.5 billion day-old-chicks of those three combination brands during 29-214. On the contrary, the import volume of GPS dropped a lot in 214. Based on statistics from CAAA, the total import volume of GPS was 234,7 D-lines in 214, down 38.32% from 213. Figure 2.1 GPS Importing Status in 24-214 5 45 4 35 3 25 2 15 1 5 24 26 28 21 212 214 Import Volume of Layer GPS Number of Importing Enterprises 2 18 16 14 12 1 8 6 4 2 Number of Importing Enterprises Source: CAAA 8
Parental layer breeder inventory, Layer 215 China Layer Industry Outlook Report 215 In addition, on January 12, 215, MOA and AQSIQ declared that due to the outbreak of highly pathogenic avian influenza in America, the imports of poultry products from America were banned, which will largely restrain the import volume of GPS from America and relieve the overcapacity of GPS in China. Insiders told that even if there is no import from foreign countries, China domestic layer breeding enterprises can meet the demand for breeding layers. Boyar believes that as the GPS import from USA continues to be banned, it is a good time to take challenges of providing high-quality GPS and offering excellent services. By means of this opportunity, China local GPS will account for 8% market shares and GPS imports will only be a supplementary way to maintain market competition. 2.2 The Rising Concentration of PS Layer Inventory The PS market may reconstruct its industry structure in 215: the number of PS farms will be on the decrease and the inventory of PS will be on the rise. Based on Boyar s poultry production statistics and production estimation system, the inventory of PS layer in rearing period increased 3.55% MOM and decreased 3.97% YOY in April 215; the inventory of PS layer in laying period declined.81% MOM and increased 3.36% YOY. Figure 2.2 PS Layer Breeder Inventory in 213-215(April) 35 3 Million 25 2 15 1 5 213 214 215 Inventory of layer Inventory of pullet 9
Mar Apr Jun Aug Oct Dec Jan Feb Mar Apr Jun Aug Oct Dec Breeding Egg Utilization of Layer PS Enterprises 215 China Layer Industry Outlook Report 215 Due to the overcapacity of PS, the utilization of hatching egg was only 64% during April 213 and December 214, down 21% compared with the normal utilization 85%. In 215, due to the weak market, layer famers are less active placement of new flock, so PS farms have to reduce hatching rate to control cost and reduce loss. Figure 2.3 Breeding Egg Utilization of PS enterprises in 213(Mar)-214 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 213 214 Source: YUKOU Poultry 2.3 The YOY Growth of Layer Inventory The egg market became bullish in 214 and farmers got very active in placement of new flock. Based on Boyar s statistics, the DOC sales volume amounted to 1.98 billion chicks in 214, up 24.91% YOY, so the inventory of layer in laying period began to rise after tember 214. As the layer placed in 214 will be culled at least in tember 215, so it is forecasted that the inventory of layer in laying period would be rising in 215 YOY. In addition, the proportion of layer in laying period in 215 is very high and the egg supply outweighs its demand. Based on Boyar s statistics, the inventory of layer in laying period dropped 1.16% MOM and increased 19.11% YOY in April; the egg production rose 1.8% MOM in April. 1
2 wk23 wk34 wk4 5 wk26 wk48 wk7 8 wk4 1 wk32 wk43 wk2 wk24 wk35 wk46 6 Egg production,ton Commercial layer inventory,layer 215 China Layer Industry Outlook Report 215 Figure 2.4 Inventory of Commercial Layer in 21-215(Apr) 2 x 1 18 16 14 12 1 8 6 4 2 213 214 215 the inventory of layers in laying period The inventory of layer in rearing period Figure 2.5 Egg Production and Egg Price in 21-215(Apr) 5 45 4 35 3 25 2 15 1 5 x 1 12 1 8 6 4 2 Egg wholesale price, RMB/kg 21 211 212 213 214 215 Egg Production Egg wholesale price 2.4 Stable Egg Consumption and the Rising Proportion of Brand Egg and Native Egg At present, Chinese love eat fresh eggs. Based on different origin, egg includes farmed egg and native egg; and the farmed egg includes brand egg and ordinary egg. 11
215 China Layer Industry Outlook Report 215 The affair of human infected H7N9 persuaded some consumers to choose brand egg. Based on Boyar s statistics, the retail price of ordinary egg exceeded RMB 1/kg for 26 weeks in 214 but the brand egg price only slightly rose. The price gap between ordinary egg and brand egg is narrowing down, which assists some consumers to choose brand egg. Though the Eight-Point code will continue to depress the unreasonable consumption in 215, the egg consumption remains relatively strong, for it is a cheap and good source of animal protein. Therefore in 215, the egg consumption will remain relatively stable. Individual consumption rapidly stimulates native egg production. Based on Boyar s statistics, there was RMB.6 billion invested in scattered farming layer producing green-shell eggs and other high-quality layer farming project. It was estimated that native egg production accounted for 12% of the total egg output. As the egg production from commercial layer kept falling in the past four years, the production and proportion of native egg is on the rise. 2.5 China Layer Market Forecast for 215 Farming cost will fluctuate steadily: After October 214, the corn and soybean meal price kept dropping, especially the price of soybean meal, so the price of compound feed for layer may be lower than 214. In addition, due to the negative influence caused by H7N9, the layer DOC price was very low in H2 213 and the whole year 214, which to some extent would reduce the layer farming cost. But as the labor cost is on the rise at present and the investment in scale and mechanization will be on the increase, the layer farming cost will rise, but Boyar forecasts that the layer faming cost in 215 will fluctuate steadily and may fall. The egg price is very weak: The egg price will revolve around RMB 7/kg on average in 215 and the high price will emerge around the Moon Festival but be hard to exceed RMB 9/kg, for the egg supply outweighs its demand in 215. The holiday effect will keep dropping. The spent hen price will fall from the plateau: It is different from the egg price and it will maintain a high price range, but after tember 215, it will probably drop. The live poultry 12
215 China Layer Industry Outlook Report 215 market continues to be banned in South China and many consumers do not completely accept fresh and chilled poultry meat consumption, both of which exert a negative influence on consumption of spent hen. All in all, the egg price will continue to be weak and the spent hen price will be hard to be stronger. Boyar forecasts that the layer faming in 215 will be in deficit, except a slight profit during the Moon Festival Holiday. CONCLUSION: Considering the overcapacity in layer industry in recent years, this situation will last in near future. Due to large fluctuation of commercial egg market, keeping the reasonable inventory should be taken as a priority. Based on Boyar s estimation and calculation, the reasonable inventory of layer should be 1.1-1.15 billion chicks, during which farmers can gain reasonable profits and the egg supply meets its demand. On the other hand, as the layer industry is developing, the inventory of layer and its species will change as well. In addition, the market share of native egg will be on the rise, which scaled layer farming enterprises must pay attention to. Report Writer:Animal Farming Research Panel of Beijing Boyar Communication Co.,LTD. Website: www.boyar.cn Address: Room 729 JINYUANJIAN Building, XINXI Road 1#, HAIDIAN District, Beijing. Post code:185 Welcome to subscribe Boyar information product series Boyar Daily Report, Weekly Report, Monthly Report, Year Report and Trade Report, etc about Live hog, Poultry, Feed, Vitamin and Amino acid, etc. Subscribing website:http://www.boyar.cn/user Email:ask@boyar.cn Hotline:1-8289456;1-8289457;1-82893429;1-82893871 13