ADM capitalizing on rocketing Chinese meat demand

By Jane Byrne

- Last updated on GMT

ADM capitalizing on rocketing Chinese meat demand

Related tags Livestock Meat Cattle

Archer Daniels Midlands (ADM) aims to leverage expected growth in the swine, poultry and aquaculture sectors in China over the next decade by expanding its premix footprint there with a new plant. 

The US headquartered group said the new facility, which will be its fourth premix production site in China when it comes on stream in the first quarter of 2016, will be located in Zhangzhou. 

It said the plant, which will complement its existing premix capacity at two facilities in northern China, will produce around 30,000 metric tons of premix products including lysine, threonine, vitamins, minerals and other specialty feed additives.

And, a spokesperson for the agribusiness group, told us an additional feed ingredients site in Nanjing, in eastern China, currently under construction, will “be operational by summer this year.”

Chinese meat demand

ADM said meat consumption in that Asian market is expected to rise at a pace similar to the trend over the past decade, coupled with a greater shift away from ‘backyard’ feed production.

The US Department of Agriculture (USDA), in a 2014 outlook​, projected a hike in pork, poultry, and beef output to 90 million metric tons (mmt) in China by 2024 - an increase of about 30% on 2014 rates.

“Around three kg of feed are needed to produce each kg of meat, so feeding a large and increasing population of animals will be a growing challenge. Growth in feed consumption has accelerated recently, and as China’s livestock farms transition to a more concentrated mode of operations that use commercial feeds more intensively, USDA projections expects this faster pace to continue,”​ said the report.

The USDA also said China’s combined use of corn and soy meal for animal feed is set to rise from 200 mmt to over 300 mmt in the next ten years: “Chinese animals also consume a variety of other grains, protein meals, bran, and hulls from grains, and growing use of these commodities is expected to support the expansion of meat output."

US expansion

Also announced this week is ADM's plans to build a feed plant in Glencoe, Minnesota, to support a growing swine and cattle market in the US Midwest, and that site, set to be adjacent to an existing ADM mill, is expected to be on stream in early 2016.

“We have not yet started construction. The Glencoe plant makes a wide range of livestock feeds, mainly for beef cattle, dairy cattle, swine, horse, show animals and wildlife. The product mix at the new facility will remain the same,”​ said the spokesperson.

In addition, Tuesday saw the trading and commodities group reveal it had signed off on a deal to acquire complete ownership of Black Sea facilities it had previously held a stake in.

ADM said the acquisition of North Star Shipping and Minmetal gives it ownership of grain elevator facilities, bulk commodity storage and warehousing along with port services, stevedoring operations and a shipping agency in the region.

Joe Taets, president of ADM Europe Middle East and Africa, and of the company’s agricultural services business unit said the ‘strategic expansion’ would help the group in its objective of doubling the volume of its grain business.

“By becoming full owners of these facilities on the Black Sea, we’re building on the investments we have made in our Danube River network since 2011, which enhances our origination, logistics and export capabilities in Eastern Europe,”​ he added.

Oilseeds driving volume

ADM also posted Q1 2015 financial results this week. Earnings, it said, jumped 85% in the period boosted by a good performance for its agricultural services and oilseeds businesses.

It reported net income up to the end of March as $493 million but revenues dropped 15% to $17,506m from $20,696m.

President and CEO, Juan Luciano, said the oilseeds team capitalized on favorable market conditions to deliver strong performances in each region during the quarter, while its new global trade desk, he added, drove higher merchandise volumes in its agricultural services division, to ensure a good quarter overall despite the slower industry ethanol margins limited earnings in corn and the strong dollar reducing US grain exports.

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