Higher prices for raw materials — including fishmeal and maize — has been blamed for the rise, with chairman of the Guangdong Haid Group Group Xue Huari singling out a jump in fishmeal costs in particular.
While rising feed costs will pressure China’s huge aquaculture sector (with almost five million individual producers involved in cultivation nationwide) they will be welcomed by investors in China’s thriving aquafeed firms. Earnings forecasts show Haid's revenue in 2012 hitting CNY 15.5 billion, up 29.67 percent year on year, with net profits at CNY 448 million, up 30.17 percent over 2011.
Haid, which will shortly publish full results for 2012, has become a favorite of China’s stock pickers, with analysts pointing to growing demand for aquatic feed with demand currently outstripping supply.
According to the China Securities Journal, theoretically the demand for feed in 2011 was 34 million tons but feed production in 2011 was only 15.4 million tons.
In its statements to investors, Shenzhen-listed Haid has said it plans to sell 10 million tons of feed in 2016, with aquatic feeds accounting for half that figure. Keen to take advantage of the market potential, Haid raised CNY 1.101 billion through a private placement of shares for feed and “micro-ecologies” projects in four key aquaculture provinces of China with construction set to take three years.
Largely due to a less efficient farming sector, feed companies in China have seen domestic grain prices soar higher than those of key producers like the U.S., with imports restricted to firms with government-appointed import quotas. That’s perhaps why Haid has sought to diversify its activities, tap the aquatic seedlings and antibiotics market. According to the firm’s stock market filings Haid has several researching “anti-disease ability rate” of fish fry. Haid claims its own seedlings are 15 percent more resistant to disease than fries from other companies and foresees a “bright” market in this sphere.
Other leading aquafeed companies are also diversifying across the sector. Listed on the Shanghai exchange, feed-focused Tongwei Group is increasingly broadening its aquaculture activities. In July, 2012, Tongwei Aquatic signed contracts with more than 500 tilapia farmers, pledging to pay CNY 8.8 per kilo for their tilapia while also offering free training and feed advice.
Haid may also be able to drum up sales of its feed among upstream users. Well-connected politically, Haid’s chairman Xue Hua was in January selected as the president of Guangdong Agriculture Industrialization Association, an umbrella group promoting larger scale farming. The firm looks set to retain the affections of investors. Beijing-based CITICS Securities pointed to higher grain prices in the first half of 2013 but predicted Haid’s aquatic feeds sector would increase significantly. It predicted the firm’s sales of aquatic and pig feed in 2014 will surpass 10 million metric tons.
