China's USDA post forecasts yellow broiler production in 2025 will be nearing the end of its decline and be relatively stable, according to a recent US Department of Agriculture (USDA) Global Agricultural Information Network (GAIN) report. Yellow broilers previously dominated the market and flocks were maintained with domestic genetics. Due to live poultry market closures - the major market platform for yellow broiler sales - yellow broiler production has been in decline since 2019 and accounted for less than 30% of the market in 2023.

According to industry sources, yellow broiler production continued to decline through the first half of
2024. Though some large-scale producers increased production, a greater number of producers have
lowered production or exited the market. Lower production volumes have resulted in higher yellow
broilers prices in the first half of 2024. Due to higher yellow broiler prices and lower feed costs (see
Chart 2), operations have generally become profitable in 2024.

In China, there are three large-scale, publicly traded yellow broiler breeding companies. According to
their 2024 semi-annual financial reports, all the three are profitable and one reported almost 200%
year on year profit growth. The three large-scale companies continued expanding production while small- and medium-sized yellow broiler producers exited the market. The total market share of the three producers was estimated at 50% in 2023 and post forecasts the overall production of the three producers will continue to expand in 2025. In the second half of 2024, there are more holidays and periods of increased consumption.

Assuming no outbreaks or shocks to feed prices or large capital expenditures, the companies should
remain profitable through 2024 and will continue to gain market share. Post forecasts production gains in commercial operations will be offset by shrinking production volumes of numerous smaller producers, resulting in a bottoming out of the decline in total yellow broiler production in 2025. Smaller producers seemingly have lower production efficiencies and increased costs and some challenges meeting environmental regulations. Also, many of the smaller firms reportedly had prolonged losses in 2023 and less financing available to them to weather the difficult market conditions.