In a presentation at the 2017 IPPE Dr. Mark Lyons, VP of Alltech shared his observations and experiences based on his residence in China over the past three years.
In preferencing his comments on China Dr. Lyons noted the changes in the structure of society during the past fifteen years.
One of the most significant has been the shift in population from rural areas to cities involving relocation of 300 million citizens.
There are now180 cities in China with a population exceeding that of Chicago.
Industrialization has elevated over 400 million from poverty. Changes have resulted in profound economic consequences. Since 2008, labor cost has increased by 62 percent, raw materials have soared by 70 percent and the real estate boom has increased the price of property by 60 percent. Advancing earning power has changed the economy of China from an export to a consumer market.
The four trends promoted by the Government include self-sufficiency, improvements in quality, increasing scale of production and protection of the environment. Concurrent with a campaign against corruption, the Government is enforcing food safety, modernization of agriculture and relocation of the population.
Changes in food production have resulted in intensification. In the two decades preceding the turn of the century, there were approximately 20,000 feed mills in operation. During the last ten years there has been a marked move to integration with 6,000 feed mills many of which are financially connected to pork or poultry producers. It is estimated that by 2020 the trend will extend through the food chain with integration and clearly defined market segments.
It is estimated that there are 1.2 million egg-producing hens in China in addition to ducks for egg production. Approximately 40 percent of flocks are under 2,000 hens in size with 33 percent ranging from 2,000 to 10,000 hens and only 25 percent of the national flock comprises farms with more than 10,000 hens.
Integration has seen the emergence of a few in-line operations with as any as three million hens. To place egg production in China in perspective, output expressed in metric tons (19,000 eggs) is approximately five times the size of the U.S. Average production per hen is estimated at 185 eggs per year.
Challenges facing the Chinese egg industry include high feed cost and relatively stagnant consumption. Intensification of environmental laws and high labor rates dictate adoption of western technology in housing, equipment, management of flocks and housing of flocks.
As in the U.S., specialty eggs are emerging in response to demand from affluent urban consumers. Approximately five percent of eggs are branded yielding a 2 to 5-fold premium over generic product. Nutritional enrichments include DHA, selenium and vitamins.
The challenges facing egg producers will be to raise capital to erect modern in-line facilities, to comply with pollution control and environmental laws, conserve water and to suppress diseases such as evident avian influenza. Given relatively stable egg production consumption from commercial farms, China is actively seeking export markets. In all probability egg products will represent the bulk of shipments although there will be extensive competition from India, the U.S. and Eastern Europe.
Agricultural banks and investment groups will play an important role in modernizing the egg industry in China by providing finance and promoting trade involving importation of ingredients and export of product.
Dr. Lyons noted that the business environment in China is unique and challenging given the rapid evolution of the poultry industry, it is necessary to embrace flexibility, commit to the nation and to adapt.