Local Feed Supply System

Summary

The Techlex Group is an agricultural business headquartered in Chengdu, China. In response to the rising costs of feed ingredients (i.e., corn and soybean meal) and a national initiative to reduce antibiotic additives, Techlex developed a local feed supply system. The keys to reducing costs and facilitating rural development were building a brand, utilizing local ingredients, creating public-private partnerships with local governments, and coordinating smallholders within the crop-livestock value chain.

Challenge/Problem

Although animal production contributes significantly to food security and poverty alleviation in developing countries, it can also generate substantial pollution when not practiced well. The growing demand for animal products, fuelled by rapid economic growth and changing diets in the developing world, highlights the need for sustainable input systems, especially regarding feed.

Within current feed systems, producing feed crops and transporting ingredients are two major sources of carbon emissions. The antibiotic additives in feed can also pollute soil and water. Although many economies have created industrial regulations and standards to achieve the Sustainable Development Goals and carbon neutrality, the resulting need for research and development has increased the costs of feed recipes and processing technology. Further, the costs of ingredients and energy – already prone to fluctuation – are likely to rise even more under intensifying climate change. Trade frictions, lingering effects of the pandemic and the shrinking amount of cultivated land have also played a role in increasing the costs of feed ingredients. These challenges translate to increased burdens on agribusiness and smallholder livestock producers, inhibiting rural development in developing economies.

Solution

Building a brand of antibiotics-free feed and livestock meat can help offset the costs of researching and developing new feed recipes and processing technology. This was the strategy of Techlex, which traces its origins to a feed-processing company and has long utilized fermentation technology and non-conventional feed ingredients. The group has actively engaged in developing national standards for formula feed, particularly regarding pigs and egg-layers. Techlex develops feed products not only for use on its own farms, but also to generate value for smallholder customers.

Creating feed locally, from local ingredients, can greatly reduce production costs and emissions. Techlex has built feed production factories by its farms in many Chinese provinces, using local ingredients as inputs. Unconventional ingredients, such as distiller’s grains and by-products from food processing, are key alternatives for providing high levels of protein and energy.

Coordinating with smallholders and cooperating with local governments is a crucial step in reducing transaction costs. During the targeted poverty alleviation campaign of China (2013-2020), Techlex actively provided low-income smallholders with hog-farming contracts, feed products and training on hog feeding. In addition, the local government of Suijiang county, Yunnan province facilitated a broad multi-stakeholder partnership among Techlex, banks, cooperatives, veterinary drug companies, meat processors and smallholder producers. Working with the government, Techlex laid out a comprehensive value chain for the feed supply system. The government is responsible for financing; construction and general management of the hog breeding and fattening bases; coordination with the village collective. While Techlex is in charge of paying the rent; design of the bases; supply of piglets, feed, drugs and vaccines, etc.; standardized process management; purchase of hogs with contract price and marketing via the Group’s outlets.

Capitalizing on local ingredients and partnerships, Techlex reduces costs and leverages common goals to benefit smallholders for rural development.

Results

- Techlex was named one of the Top Ten Leading Companies of China’s Feed Industry in 2020, when it created a new brand for its antibiotic-free fermented feed (Jiaoyida).

- With a solid local development partnership, Techlex has steadily scaled up its coordination with smallholder farmers. Notably, their collaboration with intermediaries, such as local government bodies and village collectives, has encouraged these entities to redirect available resources for the benefit of impoverished farmer. Between 2017 and 2020, 158 villages and over 15,000 individuals directly benefited.

- In 2020, despite the price volatility of feed inputs and other challenges such as African swine fever and COVID-19, the loss rate along Techlex’s pig value chain was limited to 3 per cent. This result was enabled by precision feeding equipment and its major disease prevention and control technology. Techlex provides substantial training and services to the pig farmers, including pig production and reproduction training as well as guidance on disease and parasite prevention and management. Techlex has leveraged its strengths in technology, management, capital, and brand-building around its feed supply system. Capacities of other value-chain stakeholders have also been activated to better respond local developmental challenges. In particular, cooperating with other intermediaries, such as local governments, helps redirect inventory resources to inclusively benefit poor farmers.

Lessons Learned/Potential for replication

- Agribusinesses are key to helping agricultural input systems sustainably meet increased demand. At the local level, managing costs can be balanced with social responsibility for protecting the environment and alleviating poverty.

- Substantial agricultural research and development (R&D) is imperative, but recipe improvement and brand-building can happen simultaneously. Nationally unified industry standards and properly defined metrics can guide the allocation of limited R&D resources.

- Utilizing local ingredients requires a relatively integrated value chain in which the local feed supply system can be linked to the market.

- Capacity-building and consensus at the local level are crucial. Supported by China’s consensus on the importance of rural development, the poverty alleviation campaign enabled synergetic partnerships with agribusinesses. Governments at various levels should further improve capacities in providing interactive platforms as well as financial support and services (such as credits, insurance, and inputs) to smallholder farmers and small and medium-sized enterprises.

Next Steps

- Techlex is improving its recipes that use local ingredients. Biological fermentation is a valuable tool in this process.

- Techlex has piloted the Valley of Quality Food (VQF) in five provinces across China. The VQF is a platform for integrating regional value chains, enabling the feed supply system to better access upstream industries and wider markets.

- Techlex’s development strategy emphasizes ecological values and interactions with civil society to embed the value chain into wide social networks. For instance, as local job opportunities have been created in the bases, villagers are able to access the hog production value chain of Techlex through the village collective.