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Lv Mingbin: Overview and Analysis of Substitution

Published:2016/7/29 11:48:41

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 Lv Mingbin, head of technical department of New Hope Liuhe.

Lv Mingbin: I am glad to be invited, and what I am going to talk may be not interesting for some of you. Last Novenmber, I was invited to speak here on the same topic, today I will finish my report soon in 20 minutes and I will let you understand.

I will explain to you about my views on substituting wheat for corn in 4 parts, and what should take into account when making raw material is as follows: 1, Technological feasibility. When all companies are under R&D but the price of materials is high, we will store the technology as the available. 2, Economic feasibility. Many business opportunities are fleeting, and many of you sitting here contribute to your corporation on this part. 3, Easy to get.  

Back to the topic, wheat is different from corn in terms of its energy, for example. The protein of wheat is 50% high than that of corn, generally speaking, if corn has 8 units of protein, then wheat has 12. Considering the protein, it is not reasonable to substitute wheat for corn. No matter which material we use, the price will fluctuate because of many factors. For wheat, the price of bean meal will affect the utility of wheat, and for corn, the breed, year, rainfall will make the price of corn up and down. Therefore, all formula are dynamic.

We need to conduct an experiment to test the metabolic energy of corn and wheat.

Let us see the advantages and disadvantages of corn and wheat. First of all, corn contains much uranidin and wheat has non-starch polysaccharides which could be disposed with enzyme technology. In Europe, the formula of feed barely uses corn, and in Australia and Singapore, wheat and broomcorn are widely used.

Concerning utility of wheat, we had a conference in Harbin in September 2012. In that conference, directors of technical department of feed companies attended a seminar and concluded to a book, which discussed how to use newly-reaped grain and how to use the old. In October 15th this year, we will continue to discuss the processing technology.

As mentioned above, the price is one factor standing in the way of substituting wheat for corn, another is toxin, and the last is the price of other materials.

For the price, the purchasing price of raw materials will be different in different years for different companies. Since 2010, 2011-2012 in particular, the sales price of wheat and corn is lower than the purchasing price. For a company, it figures largely to choose wheat or corn, because the need of wheat is twice as that of corn. By the end of 2011, not using wheat could contribute 200 million RMB to a company, therefore, it is not the time to use wheat.

For the toxin, look at this graph, heavy pollution shows red, such as the European toxin, the percentage of toxin in feed over 1 % will make the pig vomit. Corn also has pollutant, and all feed companies place much importance on this, not just focus on the protein as before.

This year’s new data on wheat shows normal, no red. Therefore, toxin is the key factor to consider when making feed.

The ratio of wheat in the feed varies from condition to condition. With bean meal, in feed for chicks or ducks, the situation differs. As usually, the bean meal will not be used without corn, this is conducive to the influence of American technology on Chinese technology, thanks to the 20-year work that American Bean Association and American Grain Association have done in China.

For example, for a company of 20 thousand tons production, before purchasing the company should make clear what it produces and how much does it need. This case in point is producing feed for chicks and ducks, not for aquatic animals.

Let us compare the data of Sep.15th of this year with that of last year, then we can tell the difference between utility and no utility of wheat. For last year, 20 thousand tons feed needs 10112 tons wheat, and the price of wheat is 2320 RMB per ton, the price of corn is 2380. The utility of wheat saves the cost for 1.72 million RMB in total. For this year, it does not make a difference whether use wheat or not.

The price of corn will affect the amount of wheat being used. If the amount of corn is lower than 2300 tons, it will no need to use corn. We could calculate the tipping point by software to know in which amount it is better to use corn.

The price of wheat itself also affects its amount. From 2000 to 2900 yuan, if the price surpasses 2700, wheat will not be used. The software will help companies figure out which to buy and which not.

If the price of bean meal is high, we could use wheat. If low, there is no need for wheat. But the price of bean meal is increasing, what could substitute for bean meal? Peanut meal or cottonseed meal. More and more enterprises tend to use wheat.

When we purchase corn, we evaluate corn by its value. I told my purchasing colleagues if the moisture of corn increases from 14% to 15%, we need to cut the price by 2%. If from 15% to 16%, then 3% cut in price. They told me it is impossible. Now many enterprises benefit a lot, but the moisture of feed should not grow.

All in all, I think in the formula of feed there are many factors influencing the decision to select wheat or corn, such as price, quality and so on. Another factor I did not mention is the price of lipid, which could affect the use of energy if going up from 5000 yuan to 10000 yuan. Amino acid is the second most expensive right behind energy.

Last but not the least, many of you sitting here work in purchasing positions, and it’s the communication that helps companies do well in feed production. In my company, we have achieved the communication of purchasing and technical department. The staff in purchasing department would ask his counterparts in technical department for what could substitute, and share what would rise in price. Our formula of feed is 100% and it is rich. Many small enterprises cannot make their formula 100%, hence the low quality.

Therefore, the formula is dynamic and needs organic integration of technology and raw materials. What we are doing is to purchase measured by value, not to buy value. I hope this is helpful for the feed production enterprises.


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