Chinese
feed and food manufacturing giant Lianing Wellhope is enjoying
significant growth and profits, even when facing challenges in China’s new corn
stockpile policy. The odds are well that the company will continue to expand
quickly and a bright prospect for the future is more than likely, according to
CCM.
Source: Pixabay
China
is in the middle of its feed industry transformation, which aims to upgrade the
industry in terms of output and efficiency. In 2016, the feed output in China
witnessed a significant growth. Enterprises, in general, were able to enjoy
profits, due to decreasing raw material prices and hence lower production
costs.
One
of the biggest players in China’s feed market is Lianing Wellhope. According
to market intelligence firm CCM, the company was enjoying a steady growth of
profit throughout 2016. The total profit in 2016 even increased by more than
35% compared to 2015.
However,
Wellhope is also facing the risk of China’s abandoned corn stockpiling policy,
which let the prices of corn, one of the main raw materials for feed products,
rise under uncertainty.
In
the year 2016, China’s government decided to cancel its purchase policy of corn
for temporary storage and established a subsidy system for corn producers in
China. This followed the principle of letting the market determine prices and
delinking subsidies from prices. This, to some extent, relieved the problems of
continuously rising corn prices, stockpiles, subsidies and losses in China.
However, at the same time, it creates possible risks for feed manufacturers
like Wellhope, as fluctuations and uncertainties are pushing up the
manufacturing costs for pig feeds.
Currently,
corn stockpiles for temporary storage still surpass 230 million tonnes in
China. The state will take grain safety and rulemaking into consideration when
it promotes new channels to reduce corn stockpiles. According to CCM, in the
future, will be a series of policies issued to support corn stockpile reduction
by multiple ways.
According
to CCM’s price monitoring, the price of corn is falling since the second half
of 2015. When the Chinese government announced the end of its corn storage and
subsidy policy, the corn price dropped even faster. As a result, In the middle
of February 2017, China’s corn price witnessed a year on year decrease by
28.7%.
On
the other hand, China’s policy of implementing forbidden farming areas in the
country is benefitting the enterprise. As part of the new Law of
Environmental Protection of the People Republic of China, the government is
establishing forbidden farming areas in several parts of China, which have to
be left by farming companies by the end of 2017. Other areas, mainly located in
the northeast and south-west of China, are labelled as developing areas, which
indicates the encouragement of farmers and enterprises to move in these areas.
Wellhope is
stated in one of the developing zones in the northeast of China, which offers
the company a great geographical, logistical and economical advantage to
competitors. This is due to the low distance to many raw material producers
like corn farmers. In addition to this, the area of Wellhope is also labelled
as one of the key areas for China’s pig industry, which offers some benefits in
environmental protection and pollution management.
What’s
more, Liaoning Wellhope will work together with Beijing Dabeinong to invest
about USD146 million in a new project of pig feeds production. As a matter of
fact, the Chinese pig production was shrinking in 2016 by about 3.4%. The
reason can be found in a large volume of cheap imported pork, which lowers the
price and makes live pig farming less profitable.
What’s
more, the enterprise has announced to invest about USD5.5 million in Indonesia
firm PT Karka Nutri Industri, which is the largest food processing company in
Indonesia. This shows the international trend the company is following to
ensure a stable growth and bright prospect for the future.
About
the company
Liaoning
Wellhope was founded in 1995 in China by chairman Jin Weidong. Nowadays, the
enterprise is the biggest agricultural company in the economically strong
northeast of China.
The
company is one of the most influential feed enterprise in China and has
established a business scope from international trade, feed machinery, farm
equipment, slaughtering, food processing to agricultural product deep
processing. Especially the latter areas are granting the company an advantage
in China’s market, as sectors like raw material trading, slaughter, and food
processing are booming in profitability and also represent a less uncertain
trend than feed production.
The
dutch feed enterprise Royal De Heus has become one of the main shareholders in
the year 2006, whose knowledge and expertise has helped Wellhope to
grow rapidly in the feed market. By now, the company is doing business
worldwide.
About CCM
CCM
is the leading market intelligence provider for China’s agriculture, chemicals,
food & ingredients and life science markets.
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