In the first half of 2012, the feed market experienced a sharp increase in raw material prices. Ingredients such as fishmeal, soybean meal, cottonseed meal, and corn saw rapid price hikes, drawing significant attention from the industry. As a result, feed companies found themselves facing rising costs and challenges in maintaining profitability. In this context, Mr. Huang Yongqian from Zhengbang shared his insights on the impact of these price increases and provided valuable perspectives on how the feed industry was responding.
**First, what are the impacts of feedstock price increases on the cost of feed enterprises?**
According to Mr. Huang, the surge in feed ingredient prices directly increased the cost of production. The most significant impact came from the sharp rise in soybean meal and fishmeal, which had a major effect on companies producing concentrated feeds. For example, a 100-yuan-per-ton increase in soybean meal could lead to a 60-yuan-per-ton increase in feed costs, with the overall price expected to rise by about 25 yuan per ton. While companies could adjust formulas to some extent, the reality was that all raw materials were increasing in price. Protein-based ingredients like cottonseed meal, rapeseed meal, and fishmeal all rose, while energy sources like corn also saw price increases. This created a chain reaction, making it nearly impossible for feed companies to avoid higher costs. As a result, many enterprises were forced to raise feed prices to sustain operations.
**Second, how have feed companies adjusted their purchasing strategies in response to rising feed ingredients?**
Mr. Huang explained that companies adopted proactive measures. First, they made strategic purchases, buying as much as possible or even securing futures contracts to lock in lower prices. Second, they sought alternative raw materials to reduce costs, looking for cheaper substitutes without compromising quality.
**Third, how can feed enterprises pass on the rising costs of raw materials?**
The primary method was to directly increase feed prices. Another approach involved substituting ingredients—for instance, replacing corn with wheat, soybean meal with other protein sources, or importing Peruvian fishmeal with locally sourced or Vietnamese alternatives.
**Fourth, how has the sales performance of feed been affected?**
Mr. Huang noted that when farmers faced losses, rising feed prices became a burden. Sales volumes dropped, and farm inventories decreased. Additionally, some farmers opted for lower-quality feed to cut costs, switching from high-grade to medium or low-grade options.
**Fifth, what advantages do large feed enterprises have during price hikes?**
Large companies had several key advantages. They had access to timely information and could stock up in advance. They also had greater capital and storage capacity. Their large-scale procurement gave them stronger bargaining power, and they could source materials from multiple regions to find the best deals. Moreover, they had advanced technological capabilities to develop alternative ingredients and reduce costs. Finally, their procurement teams were highly skilled, with expertise in both direct purchasing and futures trading.
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