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Bao Hongxing, Chairman of Twins Group: An Outlook

Published:2016/7/29 11:41:52

Sina Economics News September 26th, the 6th International Corn Industry Conference was held in Nan Chang by Dalian Commodity Exchange and Feed Industry Association of China. Here is the speech delivered by Bao Hongxing, chairman of Twins Group.

Bao Hongxing: Ladies and gentlemen, good afternoon! To envision the development of pig feed in China, we should learn what developed countries have done and connect with China’s reality. Because the development of pig feed follows the change of breeding structure which tends to be in a large-scale manner. The efficiency of breeding pigs is growing, and professionals do professional stuff is what’s for sure in future. Moreover, the reality of China is that more people, less land. It is difficult to balance this situation depending on domestic resources. No matter for soy beans, sugar, oil or corn, it is the fact that the population of China is far more than the land needed. Finally, it goes without saying that the balance of the material supply would be conducted globally. Additionally, the competence of this industry accelerates its integration.    

The breeding industry of China will go towards polarization. One is to lead by large corporations. Large corporations have sufficient capitals, for example, Smithfield breeds sows in a large scale and leaves hogs for farmers to breed themselves. This mode will account for over 40% of the pig breeding industry in next 10 years. Another 60% would follow the traditional mode that each household breeds themselves, which is the most efficient and responsible mode in my eyes. Something in the middle of these two modes will gradually disappear. In my opinion, the pork we eat will be mainly provided by household pig breeding.

According to current level of this industry in China, a sow annually produces 13 to 14 pigs, and the official statistics says there are 50 million sows. Now the efficiency of breeding is not a tough problem anymore. However, many local governments are restructuring the scale of pig farms. Different from the free development of pig farms before, many local governments shut down pig farms in suburb and riverside area, and forbid building new farms. For example, the event happened in Jia Xing last year; thousands of pigs were thrown into the Huangpu River. It is said that Jia Xing government wishes to cut off 80% of pigs (7 million heads), and leaves 1.4 million pigs. In the past, if you wanted to build a new farm, you can easily get it done. However, it is impossible now, and the thread of entering into this industry rises remarkably. I have faith in the industry, because the total volume of pigs is declining, and the number of sows shrinks. Moreover, in U.S each sow could produce 23 hogs and in Denmark this number reaches 26 to 28. Therefore, we have large potential in China.

First, I think we do not have a reasonable attitude on breeding, quantity not quality is what we pursue. Second, the infrastructure of pig farms needs to upgrade. A high bed and heater would be helpful for sows to produce two more pigs. It is easy to set up these equipment but we just focus on the quantity. Third, the quality of pig feed has much to do with the nutrition problem of our pigs. The four indexes of pigs reach 3 or 5, but it is 0.8 in U.S. Each sow may produce over 3 dead pigs, sometimes even 6 or 7 dead pigs. If we tackle the problem of toxin, nutrition and infrastructure, it is easy for sows to produce over 20 pigs at a time in China.

Looking around the globe, the mortality rate of nursing period is high in China. We have not done enough in nutrition and health care, especially in warm keeping. In south China, the RH is high so even the temperature is 8 degree Celsius, many pigs died of frost. In north China, it is colder. But if we upgrade the infrastructure, control the quality of sows, secure the nutrition sows need, it is not hard to achieve this goal.

Look at the picture, a kid holds a small fish in each hand, and a foreigner adult holds a big fish with two hands. In the industry of feed production, do you have the advantages of capital, update information, purchasing power, processing, and workforce efficiency? When the boss’s eyes do not focus on his staff, you have no idea what your staff put into the feed. Big corporations like us may price our product for piggy higher than small companies, but our product could make one piggy grow 7.5 kg more weight or at least 3 to 4.5 kg. The quality of pig feed in the market varies from company to company, and most of feed show bad quality. The reason is that these companies are not professional. In China particularly, if you only have one hundred sows, there is no advantages.

Not only the farms, but also the feed plant should reflect what they have done. We did not get advanced in technology, management before. What we did was to make money. That’s not right. Therefore, we did not get the trust of farm owners, and we should change this attitude. I went to Australia, Brazil, and U.S to see how their pig farms operate. They take the mode that farms do what they are good at, and feed plants do theirs. The processing cost in Australia is 132 RMB, and in U.S 17 dollars. This is what I think the right thing to do, and I am glad that we have been moving towards this direction. A few months ago, I went to Jia Hua, Jiangsu Province. I visited a breeder farm with the scale of 12 thousand sows. Theoretically speaking, this farm would need 60 to 70 thousand tons feed, but the owner told me they bought feed from wherever the good feed was produced instead of producing themselves. This is the tendency of this industry.

As doctor Lv said just now, mycotoxin has much damage to sows. One way or another, all enterprises of feed production should eliminate this 1% toxin at any cost. Even to add 10 yuan to the cost, companies should make good quality product. For crushed corn, it is important for companies to test the amount of its aliphatic acid, which farms always neglect. For example, we once bought a corn in Guangxi province, and it looked perfect. However, we made a test and found the amount of Aspergillus flavus surpass the standard dozens times. That explains why many people living in Guangxi suffer from the liver cancer, and the reason is Aspergillus flavus.  

With the development of farms in scale, the bulk material will be more and more popular, and many companies have widely utilized bulk materials. In the industry of feed production, what we should do is to offer good quality feed and help farms control their cost and strengthen their competitiveness.

Fourth, as minister Han pointed out, the self-support ratio of grain in China is 98%, and the ratio of corn will be 80% in future. Last year, the total production of corn is 211 million tons, and another 30 to 40 million tons should be imported. We believe that the corn in China is likely to be imported sooner or later. Take the soybean as example, the total production of soybean last year was 58.38 million tons, and this year the number will surpass 60 million tons. Currently, the top 10 enterprises account for 54.90 million tons of corn consumption. Our industry has accelerated its integration and acquisition. The rules have changed, thus many small enterprises survive hard because of lacking capital, talents, technology and advanced equipment. Generally speaking, a feed plant with production of 100 thousand tons could hardly survive competing with that of 30 or 50 thousand tons production. Even the plant invests money in; it may not see the return. Therefore, the speed of acquisition in this industry will be faster, and the mode will move from quantity-increasing to quality-improving, from the comprehensive way to a specialized one. The orientation is to farm in large scale, lower the waste and improve the efficiency of cost utility.    

The feed plants in the producing area are different from that in sales area. There is wheat in Northeast and North China. The operating mode there is different from that in South China with respect to facility scale, management mode, and purchasing mode, which is similar to that of Vietnam. In Vietnam, foreign big corporations control the whole market. If wheat, barley, broomcorn and even corn are required to import, the feed industry would change in response. A case in point is that once the engagement of foreign big corporations into soybean oil industry made many SMEs bankrupted. Therefore, the import mode that may occur in future is worth our attention.  

Our total production this year will reach 9 million tons, 2 million tons more than that of last year. Our consumption of corn will be nearly 6 million tons, which could rank the first in China. I appreciate that if all suppliers sitting here could provide us high quality corn. Twins Group has achieved the revenue of 1.8 billion RMB 2007, and 30.8 billion RMB in 2012. The amount of plants under production is 60, and 20 more plants are under construction. In 2 years, the total number will be 80 to 90. Twins Group has readjusted our attitude, redefined our status, and promised to offer the best quality pig feed. Thank you very much!


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