Feed manufacturing volumes in Asia are dominated by China and the Chinese feed scene in 2008 has been strongly influenced by melamine. The discovery of the nitrogen-boosting chemical in infant milk was just the start of an episode traced to the contamination of feeds that penetrated deep into both dairy and egg industries.

The melamine scandal surfaced originally in complaints from American dog owners, who said that their pets fell ill or died after eating petfood containing ingredients from China. The culprit proved to be wheat gluten contaminated with the banned chemical. Subsequent reports claimed some Chinese suppliers had deliberately used waste melamine from the plastic industry to make their product appear richer in protein. Later, investigations said there had been widespread use of a melamine derivative called cyromazine in animal feed materials and pesticides.

Concerns escalated

International concerns over products sourced from China escalated when infant milk from the country's biggest supplier was blamed for making thousands of babies ill. Countries importing Chinese dairy products imposed strict controls. More recently, they have looked at extending these to confectionery, biscuits and snacks, after the detection of unacceptably high melamine levels in eggs sent to Hong Kong from the northeastern province of Liaoning. This case has further prompted new testing of chicken meat in case of contamination through the feed.

The overall impact on China's feed business can be seen most clearly in the complete contrast between reported numbers for the period between January and June, and for the second half of the year. Volumes during the first six months were definitely up from those of a year earlier but the feed demand slowed appreciably from July onwards — hit not only by the melamine scandal but also by the economic slowdown.

This has meant either no growth or just a minor increase in the total feed tonnage from China's industrial mills. With more certainty, industry observers within China talk about a new round of consolidation.

The consolidation process involves a mix of established domestic companies with some that have foreign investment. What is more, the advice heard in China is to look out for some newer domestic entrants that show promise of becoming powerhouses at regional or even national levels.

The problem, on the other hand, is a perennial one of trying to use any data on commercial feed production in China as a yardstick for judging the relative development of the country's poultry and livestock sectors. Reported feed volumes in themselves can be untrustworthy at times, in that they may paint an overly optimistic picture of growth in the businesses they serve. Perhaps more important from an analyst's viewpoint is that the reports relating to tonnages rarely, if ever, take account of on-farm feed mixing. Yet, the farm-mixing sector is known to exist on quite a large scale, especially at bigger enterprises.

The Chinese administration's 11th five-year plan, running from 2006, has included an aim of seeing the total two-shift capacity from all feedmills rising to 170 million metric tons of compound feeds annually. Actual production from these plants would be around 95 million metric tons per year, the plan indicates. Now compare these numbers with the output statistics issued by the national feed office attached to the national Ministry of Agriculture. They suggest the manufacturing of compounds shot up from 81.2 million metric tons in 2006 to 93.2 million metric tons in 2007.

Aggregating monthly reports in 2008 suggest that between 45-46 million metric tons of compounds were produced in the first six months of 2008. Such a figure, if confirmed, would represent a staggering further increase — in the range of 12-13% compared with January-June 2007.

Usage of feed premixes and additives up to the end of June 2008 reportedly rose 6% to 2.5 million metric tons, although the overall total for 2007 had been 5.2 million metric tons, so the major use had seemed to be in the second half of the year. Factor in a similar 5% increase for concentrates in January-June 2008, say our sources. Early estimates also pointed to a 3% rise in aquafeed use in the six-month period.

However, it must be taken into account that nearly a quarter of all compound feeds manufactured industrially in China are for laying hens and cattle. The proportion leaps above 50% when all poultry feeds are included. The dampening effect of melamine troubles affecting eggs and dairy products in the second part of the year was inevitably strong for total feed volumes.


Due to a fall in meat demand because of pressure on the economy, reductions of 5-10% in feeds across all species have been proposed to us for July-December production from commercial and integrated mills. Our estimate is that the annual total has remained at 93 million metric tons. Elsewhere in Asia, the situation reflects a mixture of economic disturbance and changing prices for commodities. Our newsdesk heard recently from Thailand, for example, that Thai feed-to-food group Betagro was putting the national demand for animal feeds at 11.3 million metric tons, which would compare with approximately 10.3 million metric tons in 2007. According to the group, the new annual total would include 5.5 million metric tons for poultry and 4.4 million metric tons for pigs, as well as 1.4 million metric tons covering cattle and other animals.

The estimate came from chief executive Vanus Taepaisitphongse as Betagro opened an 18,000 metric tons/month feedmill in the Lamphun province of northern Thailand.

Expected increase in demand

The Philippines' supplies of soya bean meal and grains have also been in the news. A former vice-president of the Philippine Association of Feed Millers Inc was quoted as forecasting increased imports of soya bean meal and feed-quality wheat in order to keep up with an additional demand in 2009 from an expected recovery in the livestock sector.

However, there is speculation across Asia that high prices for fertilisers may still reduce crop sizes for grains domestically. Initially in the Philippines, the official target had been to increase local corn production in 2008 to almost 8 million metric tons, from 6.7 million metric tons in 2007. This was later cut back to 7.2 million metric tons.Now the Philippines government wants to see 7.8 million metric tons produced in 2009. To this end, it has applied for funds through the department of agriculture to increase the land area to plant yellow corn for feed use.

While poultry and pig sectors will be driving feed requirements in the Philippines, in other countries of Asia one of the main drivers at present is the fast-growing dairy business. A report produced by a United Nations agency has said there are nearly 300 million milking cows and buffaloes in the region. Nevertheless, half of all milk used there is imported.

The agency underlined a multi-government declaration made at a meeting in Thailand in early 2008 — that the aim should be to increase production so that every child in Asia aged between one and 10 could have a 200ml glass of milk every day. Meeting this objective would need a 20% improvement in the productivity per milk animal.

Rise in dairy consumption

Asia-Pacific countries already account for over 60% of the rise in global consumption of milk and dairy products since 1980. A projection made by the UN Food and Agriculture Organisation (FAO) in 1999 was that the consumption of milk in the Asia-Pacific region would reach the equivalent of 231 billion litres of liquid milk by 2020. In fact, actual consumption was already at 240 billion litres in 2007. Demand will keep growing, powered by urbanisation in Asia as well as by a return to economic growth, say Asian analysts. Continuing consequences of avian influenza in parts of Asia have had the opposite effect — limiting the opportunities for selling more feed. This is most visible in Indonesia.

An assessment of the national animal-feed industry presented by the Indonesian Commercial Newsletter said the country's production of animal feed had increased at an average annual rate of 8.4% until 2007 but then fell back to 7.7 million metric tons from 9.9 million metric tons in the previous year as a result of bird flu. A bounce-back was predicted for 2008 as the number of cases of the disease in Indonesian poultry stocks diminished.

Feed manufacturers' association GPMT predicted 8.13 million metric tons could be achieved. The assessment also referred to moves by some key players, such as a Malindo Feeds plan to build a new mill with an annual capacity of 300,000 metric tons and plans by the local arm of Charoen Pokphand (CP) to expand its factories. CP from Thailand is among a number of foreign investors in feed production in Indonesia. Others include Gold Coin from Singapore and CJ from Korea. Notably, it has been the foreign-based operators that maintained or expanded their production capacity during the bird flu crisis. Charoen Popkhand Indonesia (CPI) reportedly has three mills with a combined capacity of 2.6 million metric tons per year.

In 2007, it exchanged an aquafeed plant in Medan in part payment for a PT Central Proteina Prima mill in Central Java. It has also been described as planning to construct a new mill in the east of the country. An increase in capacity from 750,000 metric tons to one million metric tons per year is said to be in the cards for CJ Feed Indonesia.