Fang Shijun: China’s Livestock & Feed Market Review 2010 and Outlook 2011 (english)

China’s Livestock & Feed Market Review 2010 and Outlook 2011 9 March, 2011 Fang Shi Jun Senior Analyst, eFeedLink

Presentation Outline
China’s Livestock & Feed Market in 2010
Review of China’s livestock market in 2010
Review of China’s feed market in 2010
China’s Livestock & Feed Market Outlook 2011
Outlook on China’s livestock market in 2010
Outlook on China’s feed market in 2010

Part One
China’s Livestock & Feed Market in 2010

Part One (1)

Total livestock output dropped slightly by 0.83% in 2010, among which:
swine -1.94% layer +1.03% broiler -1.12%
aquaculture -2.17% ruminants +2.26% others +3.19%
In terms of output growth rate, North China did better than South China
In terms of of absolute output quantity, south China’s volume is larger than north China
Reasons:
Gloomy global economy situation hurts consumer spending power, plus adverse
weather conditions in 2010, drove animal production lower.
Data Source: eFeedLink

Annual Output Variation of Swine, Layer, Broiler, Aqua, Ruminants, and Other Species (2005-2010) 　 Swine Output Layer Output Broiler Output Aqua Output Ruminant Output Others Output Total Output 2010/09Y -1.94% +1.03% -1.12% -2.17% +2.26% +3.19% -0.83% 2009/08Y +0.26% -0.93% -6.15% +2.54% -9.31% +2.12% -1.44% 2008/07Y +7.46% -4.05% -12.67% -3.10% 7.20% -0.64% +2.07% 2007/06Y -2.53% +11.66% +16.85% -2.13% +13.45% +15.70% +6.55% 2006/05Y -7.98% -8.19% -5.02% +4.73% +11.09% +5.27% -5.50%

Profitability of livestock production
Overall, especially for swine, layer, and broiler sectors, profitability improved in 2010.
All three sectors were profitable in 2010
Average prices went up compared to 2009
Key price rising drivers
Decrease in overall output
General rise in prices in the economy
Analysis by sectors & regions
Swine was most profitable, followed by broiler & layer
Broiler chicken did better than broiler duck
layer chicken did better than layer duck
Due to the rising costs, profitability of aquaculture production is worse than previous year
Profitability of dairy cow farming has no big change, meat ruminant sectors were less profitable

China’s livestock market in 2010 Data Source: eFeedLink

Part One (2)

Total feed output increased by 1.68% , from 108.09 million MT in 2009 to 106.3 million MT in 2010, among which:
By animal specie
swine feed + 1.71% layer feed + 3.68% broiler feed + 0.57%
aqua feed - 0.42% ruminant feed + 3.64% others + 1.83%

Feed production in 2010 by regions
Production volume recovered in the North, but slightly lower in the South
North China + 2.87% Northeast China +1.51% East China +2.72%
Central China + 2.14% South China -0.34% Southwest China -0.10%
Northwest China + 1.88%
Feed production in 2010 feed type
Both absolute output volume and market share of feed concentrates down
Growth rate of absolute output volume: Changes in market share:
complete feed +4.13% complete feed + 1.83%
feed concentrates -7.69% feed concentrates -1.84%
premix +1.96% premix +0.01%
The hike in energy raw material prices plus continuous decline in back-yard farming
are key influencers of changes

Part Two
China’s Livestock & Feed Market Outlook 2011
China’s livestock market outlook 2011
China’s feed market Outlook 2011

Part Two (1)
China’s livestock market outlook 2011

Overall output expected to be going up by 2.34%, among which
Swine + 1.91% Layer + 1.50% Broiler + 3.66%
Aqua + 1.85% Ruminant + 1.63% Others + 2.73%
Outlook on livestock market in 2011 Data Source: eFeedLink Forecast on the % output changes of swine,layer,broiler,aqua,ruminants, and others in 2011 　 Swine Output Layer Output Broiler Output Aqua Output Ruminant Output others Total Output 2011/10Y +1.91% +1.50% +3.66% +1.85% +1.63% +2.73% +2.34% 2010/09Y -1.94% +1.03% -1.12% -2.17% +2.26% +3.19% -0.83% 2009/08Y +0.26% -0.93% -6.15% +2.54% -7.31% +2.14% -1.64%

Outlook on China’s livestock market in 2011
Livestock market recovering in early part of 2011. It is estimated that profitability in the first half year would be better than in the second half year. In the second half year the increase in livestock output would impact profitability negatively
The prices of raw materials will be the key factor in animal production costs and volume output
In the 1 st half year of 2011, soaring price of live pigs will drive other species’ prices higher
For aqua sector, over-supply will last for a while
Dairy cow market still in slow recovery, would improve in the third quarter of 2011

Optimistic in overall profitability in 1 st half year of 2011
In 2 nd half year of 2011, increase in pig output will drive profitability down, and expect to see the turning point in Aug to Sep period
Due to the soaring prices of raw materials, it will be less profitable in 2011 than in 2010.
Good profit leads to higher pig production
Price of live pig will move higher in 2011
Short in pork supply
Rise in raw materials’ prices
Inflation
Epidemic situation is the key impact on pig production in some regions
In 2011 a bigger number of back-yard farmers will exit the market
Outlook on China’s livestock market in 2011 - Swine

Layer raisers were unprofitable in 2008 & 2009, which has a significant impact on back-yard farming
The overall output stays stable in 2011
The layer market is over-supplied, but moving to the balance point
Due to the rising prices of raw materials, it is estimated the profitability of layer sector would be marginally lower compared to that of 2010
Outlook on China’s livestock market in 2011 - Layer

The 1 st half year of 2011 will be more profitable, the 2nd quarter and the 1 st part of the 3 rd quarter will see the worst performance in 2011
Two scenarios would be seen: market cycle shortening, trend
changing quickly
- Production would be stable for whole year
- Overall bird stock could be 5% up
The operation scale of labor-intensive factories that employ millions of workers that produce goods for export, mainly those located in eastern coastal areas, will have significant impact on demand for broiler meat
Outlook on China’s livestock market in 2011 - Broiler

General aquaculture production in some areas will be marginally lower due to over-supply
Profitability continues to go down
Import of fishmeal
High prices of protein raw materials
Price of monocalcium phosphate stays high
Optimistic estimate: overall national output increase by 1.85%.
Production in the Southern regions better than other areas in the country
Outlook on China’s livestock market in 2011 - Aquaculture

Dairy cow market still in recovery, improvement seen month on month
Food safety concern
Swinging profitability
Production of meat ruminants will increase significantly
Living standard improving
Demand increasing
For ruminant production, a stable profitable year in 2011 seen
Need to watch price movement of rapeseed meal, cottonseed meal, and DDGS, which are key to the sector’s profitability
Outlook on China’s livestock market in 2011 - Ruminants

Raw materials supply
Short supply both in energy and protein raw materials
Food safety concerns
Development of deep-processing livestock products
Export restriction
Disease containment
Pressure on environment protection
Long-term factors affecting China’s livestock market

Part Two (2)
China’s feed market outlook 2011

China’s feed market projections 2011 Data Source: eFeedLink Animal production drives changes in feed output Feed 　 Swine Layer Broiler Aqua Rumin-ants Others Total 2011/10 +2.65% +0.64% +5.03% 2.33% +1.56% +3.18% 3.08% 　　 ↑ ↑ ↑ ↑ ↑ ↑ 　 Animal Produc-tion 　 Live Pig Layer Broiler Aqua Rumin- ants Others Total 2011/10 +1.91% +1.50% +3.66% +1.85% +1.63% +2.73% +2.34%

Prices of major raw materials will stay high, or will rise further in 2011
Supply of protein raw materials, except soymeal, will be tight
The pace of global and China’s economy recovery is key to the prices movement of raw materials
Inflationary pressure will drive raw material prices higher
Outlook on market of feed raw materials in 2011

Corn & other energy raw materials
Feed corn annual demand: 92-95 million MT
Feed wheat annual demand: 8.1-9.5 million MT
Protein sources: Soymeal, rapeseed, cottonseed meal, fishmeal
Soymeal import dependence: 80.6%
Rapeseed meal supply-demand gap: 2.7 million MT
Cottonseed meal supply-demand gap: 2.8 million MT
Fishmeal import dependence: 74%
Others- DDGS
Long-term issues affecting China’s feed market

Review on raw material price movement in 2009/10 (RMB/MT) Data Source: eFeedLink Corn Soymeal Rapeseed Meal Cottonseed meal Fishmeal 2010Y Annual avg. price 1942.46 3160.08 2236.50 2472.17 11876.33 2009Y Annual avg. price 1655.50 3368.00 1910.50 2181.20 8364.40 10/09 price change in % 17.25% -6.03% 16.99% 13.42% 43.33% 10-09 Price change in RMB 285.50 -203.00 324.50 292.80 3624.60

Data Source: eFeedLink 　 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg. 10Y 1825 1824 1852 1919 1958 1971 1964 1977 1981 1982 1996 2040 1941 09Y 1471 1485 1568 1599 1606 1618 1687 1733 1785 1744 1766 1805 1656 10/09 24.1% 22.8% 18.1% 20.0% 21.9% 21.9% 16.5% 14.1% 11.0% 13.6% 13.0% 13.0% 17.2%

Corn price 2006-2010 RMB/MT Data Source: eFeedLink 　 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg. 2010 1825 1824 1852 1919 1958 1971 1963 1976 1981 1982 2019 2036 1942 2009 1471 1485 1568 1599 1606 1618 1687 1733 1785 1744 1766 1805 1656 2008 1673 1671 1669 1655 1697 1708 1735 1732 1726 1676 1617 1501 1672 2007 1504 1496 1500 1492 1538 1580 1573 1565 1577 1576 1644 1704 1562 2006 1232 1247 1261 1253 1307 1346 1355 1357 1374 1343 1396 1493 1331

Soybean supply in quantity (2002-2011) (K MT) 　 Domestic Production Import Export Total Supply Imp/Total supply Volume Compare to last yr Volume Compare to last yr Volume Compareto last yr Volume Compare to last yr 2002 16400 　 11310 　 259 　 25951 　 43.6% 2003 15390 -6.2% 20744 83.4% 267 3.0% 34367 32.4% 60.4% 2004 17400 13.1% 20230 -2.5% 334 25.2% 35796 4.2% 56.5% 2005 16350 -6.0% 26590 31.4% 397 18.6% 41044 14.7% 64.8% 2006 16200 -0.9% 28270 6.3% 379 -4.4% 42591 3.8% 66.4% 2007 14000 -13.6% 30820 9.0% 457 20.4% 42864 0.6% 71.9% 2008 16500 17.9% 37440 21.5% 468 2.6% 51972 21.2% 72.0% 2009 14500 -12.1% 42550 13.6% 346 -26.2% 55204 6.2% 77.1% 2010 15000 3.4% 54800 28.8% 350 1.2% 67950 23.1% 80.6% 2011 15000 0.0% 57500 4.9% 360 2.9% 70640 4.0% 81.4%

Data Source: eFeedLink 　 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg 10Y 3351 3158 3066 3054 2944 2802 2981 3184 3215 3451 3410 3368 3165 09Y 3490 3254 2964 3267 3177 3439 3366 3454 3407 3490 3562 3546 3368 10/09 -4.0% -3.0% 3.4% -6.5% -7.3% -18.5% -11.4% -7.8% -5.6% -1.1% -4.3% -5.0% -6.0%

Soymeal market price 2006-2010 RMB/MT Data Source: eFeedLink 　 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg 2010 3351 3158 3066 3054 2044 2802 2981 3184 3215 3451 3438 3277 3160 2009 3490 3254 2964 3267 3177 3439 3366 3454 3407 3490 3562 3546 3368 2008 3634 3791 3843 3669 3852 4381 4502 4011 3867 3304 3258 3041 3763 2007 2198 2369 2477 2322 2353 2315 2437 2736 3218 3367 3716 3720 2769 2006 2398 2381 2270 2121 2109 2063 2066 2056 2124 2162 2296 2193 2187

Analysis based on eFeedLink data,
and are for reference only.

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Fang Shijun: China’s Livestock & Feed Market Review 2010 and Outlook 2011 (english)

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Fang Shijun: China’s Livestock & Feed Market Review 2010 and Outlook 2011 (english) — Presentation Transcript