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Hototc Featured Company: AgFeed Industries, Inc. (FEED)

Vertical integration is one of the better ways to become economically sound in the animal feed market. But when a company starts integrating and dealing with the population of China, the numbers begin to multiply quickly.

AgFeed Industries, Inc., one of China’s domestic leaders of premix animal feed, is currently embarking on an expansion program into hog raising, while continuing to sign significant feed contracts with larger regional customers. On the hog front, the company indicates that it expects to produce 120,000 hogs (in2008) from 5 recently acquired hog farms and one existing farm. Ranging from 55% to 100% control of the farms, the agreements are under a lease arrangement for 10 years. Total costs associated with the current expansion are estimated at $5.3 million with existing management remaining in operational roles.

Clearly, the company is in forward motion with regard to carrying out longer term goals. In December 2007, the company filed for a shelf offering of up to $75 million (US) for “general corporate purposes. As the company has also just completed the purchase of a leading regional premix animal feed manufacturer in the North, what future plans may be in store for the company is anybody’s guess.

Additional good news for AgFeed Industries, Inc. is the appointment of one of the company’s founding executives to the Jiangxi hog trade associations’ presidency. The association oversees an annual hog production of approximately 14 million and carries a certain amount of sway with governing government bodies. In this instance, the relevance of contacts within the government cannot be overemphasized. AgFeed Industries path has been set in motion and its foundation apparently laid. Where it leads, is and will be the question.

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