Company update: AgFeed Industries, Inc.

10-03-2010 | Home | News

AgFeed Industries, Inc., one of the largest independent pig production and animal nutrient companies in China, announced a production volumes increase of 66% in the company’s pig division and 56% in the animal nutrition division.

Dr. Songyan Li, AgFeed’s Chairman, commented, “In the face of a difficult operating and market environment for pigs in China, we are pleased with the company’s record results. During 2009, we successfully executed against each of the five goals set out in our strategic plan. Both of our business units contributed to our record revenue of $173.2 million, an increase of over 20% from 2008.

“Our production levels also achieved records; we produced 680,000 pigs and 117,000 tonnes of feed. […] In spite of these record production levels our margins came under pressure as pig prices hit a 3-year low.

“Taking advantage of market opportunities we chose to sell a significant number of pigs at lower weights than in the past in order to exploit certain supply & demand opportunities, in the face of increased production costs associated with increases in the price of soy and corn.”

Three market participants

Dr. Li continued, “Our core strategic concept is simply described as: AgFeed, Government & Farmer. These are the three principal market participants that lead and drive our business discussions and which together must find common ground and benefit in order for our business plan to be successful.

“Our business plan calls for introducing modern western standards and methods to greatly improve the efficiency and yields in our operations. In order to successfully implement these methods and apply these standards, we will continually demonstrate the benefits of our methods and standards for food safety, yields, returns and employment.”

According to China Research & Intelligence, there were 13,600 feed enterprises in China in 2008. Based on the data and trends provided by this research Li said this number today has fallen to approximately 10,000.

“As this consolidation continues, we will continue to use our technical superiority and innovative marketing model to increase our market position. We intend to take advantage of the positive trend in the capital markets to continue to develop our market position and become one of the largest animal nutrition companies in China,” Li said.

Expand to 1.2 million tonnes

Junhong Xiong, AgFeed’s President, said that their feed distribution is focused on and located in the largest hog production regions of China. AgFeed’s goal is to increase its annual production levels to 1.2 million tons in the next 4-5 years.

“Our existing distribution channels now serve almost 2,000 customers, 1,300 distributors and 780 large commercial hog farms. Our growth strategy is to expand our distribution channels, supported by ongoing direct marketing, while continuing to supply AgFeed’s expanding base of company owned pig farms,” Xiong said.

During the coming 12-18 months AgFeed will open two new feed mills while also evaluating selective acquisitions of feed operations that fit their distribution foot print and operating model.

“We expect our distribution system to double in size in the coming years while we also increase our product range placing greater emphasis on concentrate and complete feed,” Xiong added.

Improve sow performance

Gerard Daignault the company’s President of the hog division added, “Working with Hypor on animal genetics and M2P2 on farm operations has already resulted in an increase in births/sow on our established farms from 17.1 to 17.6. By 2011 we expect to achieve birth rates of 18.2. The average in China is approximately 16.

“On our western style farms, which are now under construction, we anticipated yields of 22-24. We also expect to increase our sow base to approximately 40,000 this year and to 60,000 by 2011. This sow base will allow for production of approximately 1,250,000 hogs in 2011.”