Bridging Agriculture and Technology in China – with Franklyn Zhu

In this episode, we sit down with Franklyn Zhu, a Yale-trained computer scientist turned agriculture entrepreneur, to explore the evolving swine and poultry industries in China. Franklyn shares how his Silicon Valley data science background and family legacy in animal nutrition led him to co-found a company specializing in piglet milk replacers and dynamic nutrition systems.

We unpack key industry trends—from automation and data utilization to the economics of feed additives, antibiotic use, and consumer trust in food safety. Franklyn offers insider perspectives on overcapacity challenges, the realities of cage-free adoption in China, and the growing role of upcycled ingredients. We also discuss the unique opportunities and challenges for U.S.–China collaboration in animal agriculture over the next decade.

Whether you’re curious about global livestock production, technology’s role in agriculture, or the intersection of economics and animal nutrition, this episode offers rare insights from someone working at the frontlines of China’s agri-food sector.

Email technical@animistic.co to learn more.

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Transcript

0:00:00
(Chantel P.)
Well, welcome, everybody. It's really exciting to have all four of us here from Animistic, the technical team, as well as Dr. Franklin Xu, if I'm saying that right, I hope so. I'm really excited to have everybody here. And it's really special to share across the world and really excited to get to know you. Could you share a little bit about your background? Everybody on the podcast hopefully knows a little bit about us, but they definitely don't know about you, so take it away.

0:00:30
(Franlyn Zhu)
Yeah, sure. I'm really honored to be on this podcast, and thank you all for inviting me on here. So my background is I am from China, grew up in China. I studied computer science at Yale, did my undergrad there. And then I worked in Silicon Valley for about three years doing software engineering and data science. And in 2020, COVID hit and I was like, oh, I actually wanna be a bit closer to my family.

0:01:00
(Franlyn Zhu)
So I went back to China and because I'd been abroad for so long, I was considering you know, considering like maybe, you know, spending some time to get to know China a bit more. And so at that point, my dad, he had just retired. So he was the former CEO of Conti China. I don't know if Conti is still active in the feed industry in the US, but

0:01:25
(Franlyn Zhu)
it's the Continental Grain Company. And he was their head of technical and also CEO for like 30 years. And he had just retired. He was like, you know, Franklin, if you want to get to know China, you should take a look at agriculture. That's a very traditional industry. There may be opportunities there. And instead of staying in tech, get to know the real China. And so he made an introduction to one of his friends

0:01:56
(Franlyn Zhu)
at an agriculture private equity firm. This was like a nepotism internship. I'm certain I could have gotten a real job, like a market-driven job. But anyways, so this private equity firm was under Wenz. And Wenz is one of the largest wine companies in China.

0:02:18
(Franlyn Zhu)
And we invested specifically in agriculture. So we looked upstream and downstream. So upstream, all the inputs, veterinary medicine, feed, additives, and then downstream, the food processing and brands and all that stuff. And during my time there, we... You guys can probably cut out some of the stuff.

0:02:41
(Chantel P.)
No, no, we enjoy hearing about it. It's really interesting. I mean, your family, it's so interesting having your family involvement and you guys have such a holistic view of agriculture, you know, taking everything into account, it sounds like from the beginning all the way to the end. Yeah, really.

0:02:58
(Franlyn Zhu)
From from the so I started from the investment perspective and at that point, the key investment thesis was consolidation. You had companies like Wenz and Muyuan, some of the top players really expanding their production capacity. And so the upstream inputs that if you get one of those large companies, then your sales

0:03:20
(Franlyn Zhu)
would really go through the roof. That's happiness. And we invested in about seven different companies from vet medicine to additives to even insect feed.

0:03:33
(Franlyn Zhu)
Black soldier.

0:03:34
(Chantel P.)
So is it the feed that's feeding the insects?

0:03:38
(Franlyn Zhu)
No, we like-

0:03:39
(Chantel P.)
Or insect protein.

0:03:41
(Franlyn Zhu)
Insect production. The feed that feed the insects was like upcycled food and all that stuff.

0:03:48
(Chantel P.)
Okay. Yeah, that's a very hot thing right now, and alternative proteins and stuff like that.

0:03:54
(Franlyn Zhu)
Yeah, but unit economics, it's hard for it to really make sense. Yeah. Yeah, that's the tricky part. We had to dissociate the buzz from the stuff that actually made money? And I guess a few key takeaways from those three years

0:04:10
(Franlyn Zhu)
doing investment. First is that innovation is really hard. And it's hard to go from a trial to actual large-scale production and decreasing the cost. And we saw that in black soldier fly. We saw that in the kind of fermentation-based biotechnologies.

0:04:33
(Franlyn Zhu)
To this day, it's been hard to find a single agricultural innovation that's really saved a lot of money and made a lot of money for the innovator.

0:04:47
(Chantel P.)
Yeah, the input cost into insect protein, Daniel's told me about it, Dr. Daniel Adams, the input cost into insect protein and setting up a whole new company, it's just so high. And then the cost, even though maybe people think

0:05:03
(Chantel P.)
insect protein is a better alternative, is cheaper, but those initial investments, maybe Daniel could add a little bit more, but the initial investments are higher.

0:05:12
(Franlyn Zhu)
Yeah.

0:05:13
(Franlyn Zhu)
Yeah.

0:05:14
(Franlyn Zhu)
Happy to dive into that. That's a very interesting topic. So and then some back to that.

0:05:21
(Dr. Casey Bradley)
Well, I see a Daniel Franklin talking about bug production.

0:05:32
(Franlyn Zhu)
I'm so happy to talk about it. I was like very much involved in that deal and a lot of bug facilities. But I'll wrap it up. And then so that three is investment. You know, leave and then started a company with my dad focused on animal nutrition. And our initial starting point was piglet milk replacer. So whereas I think, you know, the premix and even the creep feed segment in China is relatively transparent now. I think with milk replacers, there still is a bit of a bit of a technical edge.

0:06:06
(Franlyn Zhu)
So we started there and currently our customers include some of the largest companies in China. And we just do the milk replacer stuff. And at the same time, so I came from a data science background. And so for another type of service that we offer to our customers is just dynamic nutrition. So based off the average feed intake and their nutritional requirements, we help them set up their entire data analytics

0:06:38
(Franlyn Zhu)
infrastructure and adjust the formula maybe every one week or two weeks dynamically to ensure that we're minimizing the waste. So that's another part of, you know, I think a pretty exciting part of our

0:06:49
(Franlyn Zhu)
work.

0:06:50
(Chantel P.)
That's why you say you're interesting in me doing simulation modeling, because that's literally what I do. I take all the inputs, predict outputs or have desired outputs, predict those inputs, reduce, you know, different objectives, reduce waste, improve feed conversion, I don't know, longevity, or, you know, there's just like endless objectives. And there's so many ways you can look at it. So it's really interesting, you speaking about data science, but you've kind of applied that to agriculture. So that's really cool that you have, you know, your family history and all those things. But what I want to know is how did your upbringing

0:07:26
(Chantel P.)
shape your view of swine and poultry nutrition? You speak about all this data inputs and outputs and all that science. But I want to know, how did it shape your view, having your family involved or your upbringing?

0:07:43
(Franlyn Zhu)
Yeah. your family involved or your upbringing? Yeah, so you know, growing up I never really knew what my dad did. I just knew he made like, you know, something related to pig feed. And you know, it wasn't exactly the most sexy business. So you know, when I went to college, you know, I had no interest in studying agriculture. So I studied, you know, when I went to college, you know, I had no interest in studying agriculture. So I studied, you know, the sexy thing at the time, computer science. And Silicon Valley was, you know, you know, where all the pool kids went. So I decided to go to Silicon Valley.

0:08:15
(Franlyn Zhu)
But then when I came back to China, and I looked at, you know, this industry, well, Well, Chinese tech companies are notorious for their 996 work hours and the pay wasn't that great. So I decided to give agriculture a try. And so when I actually got into agriculture, I realized, hey, you know,

0:08:48
(Franlyn Zhu)
this is such a huge industry and important industry.

0:08:51
(Franlyn Zhu)
And there's a lot more data science mathematics than you realize. Yeah, there is. And also the starting point is kind of low, you know, like there's so much data that is not being used.

0:09:00
(Chantel P.)
I call it data in a drawer, you know, people have it, but don't use it.

0:09:05
(Franlyn Zhu)
Yeah. Yeah. What did you call it? Data what?

0:09:08
(Chantel P.)
Data in a drawer.

0:09:10
(Franlyn Zhu)
Data in a-

0:09:11
(Chantel P.)
You put it in a drawer, you forget about it.

0:09:12
(Franlyn Zhu)
In a drawer. Yeah, absolutely. Everyone is competing on input costs, where they really should just be managing their data a bit better, and you'll get significantly higher cost reductions.

0:09:25
(Chantel P.)
We just had another podcast episode with a Zimbabwean pork producer and basically his age, Philip, he says he manages his farm so well. It's not a new farm, nothing special about it, but he manages his data and is proactive and things like that. And I think that's really what gives him the edge, is knowing his data and reacting to it.

0:09:52
(Franlyn Zhu)
Yeah. But it's shocking, I think, how little data literacy there is in this industry. Like, if you want to collect the growth weights and everything, just hire one more person, just focus on that one thing. To your overall P&L, it's not that much of an impact. But it's, I think, shocking how few people in this industry are willing to make that investment.

0:10:15
(Franlyn Zhu)
But the companies who do, like Muyuan, right?

0:10:17
(Franlyn Zhu)
So big.

0:10:18
(Franlyn Zhu)
Yeah.

0:10:19
(Franlyn Zhu)
So, yeah, I don't know if that answers your question about the... Yes, yes, it does. Yeah. So yeah, I don't know if that answers your question about the...

0:10:25
(Chantel P.)
Yes, yes it does.

0:10:27
(Franlyn Zhu)
Yeah, yeah. And so...

0:10:29
(Dr. Daniel Adams)
I was just going to say, I know you talked a little bit about traditions and such, but I was curious if there were, if there have been any turning points in your career, or like times where you could see changes like generational changes in the pork industry in China? I know you mentioned like the work hours and things like that. Have you seen

0:10:52
(Dr. Daniel Adams)
any any shifts in the industry since you've been working in it?

0:10:59
(Franlyn Zhu)
Shifts in the industry? I mean, the biggest one we're seeing right now is talent is pretty hard to find, increasingly hard to find, because in the pork industry in China, we just went through a couple of

0:11:08
(Franlyn Zhu)
years of African swine flu. And you kind of have to stay in the pig farm for at least three to six months. So I think that's one of the biggest shifts that are happening from the people perspective. Fewer and fewer young people want to enter this industry. Yeah, that's one. Is that what you were asking about?

0:11:35
(Franlyn Zhu)
Like more from the industry perspective?

0:11:37
(Dr. Daniel Adams)
Yeah, just kind of any general trends that you've seen shift since you started or maybe what you saw as a kid from the industry that might be different now?

0:11:50
(Franlyn Zhu)
I think the biggest change in the industry is actually it came from, it went from being a supplier dominated industry now to a customer dominated industry. There used to be, you know, back in the 90s and early 2000s, people would line up for the formulated feed because you were transitioning from using food waste and just random grains to using feed. So it was a huge growth market.

0:12:19
(Franlyn Zhu)
And so everyone made a lot of money. But then you enter like the, you know, 2010s and especially in the 2020s, it's totally over capacity and the customers got bigger and you, the relative position of the suppliers for customers just, you know, completely burst.

0:12:40
(Franlyn Zhu)
I think that is the biggest trend shaping the industry right now. Yeah.

0:12:42
(Dr. Casey Bradley)
I have a question for you on trends being the tech guy. Obviously, you've been involved in Silicon Valley. What is the technology investment into agriculture in China right now? 

0:13:02
(Franlyn Zhu)
Yeah, the biggest investments have been in, you know, smart facility, like the biggest investments have just been in modern facilities. And I think the level of automation, like we're not talking about robotic automation, but like, you know, environmental automation, like that's very common. We're looking at some pretty modern production facilities all around China.

0:13:35
(Franlyn Zhu)
At least at the South Farm level and at the large company level. But there is still a very large segment of the market that's dominated by pretty old facilities, mainly the finishing. So I think in the... So SAL wise, it's very modern, but finishing wise, the large companies have good facilities, but most of the market is still pretty primitive and they don't have the capital to invest in really great. So, yeah, go ahead.

0:14:11
(Dr. Daniel Adams)
I was just gonna say, is there anything specifically related to poultry that you, cause I know you do a little bit of that as well. Any trends that you're seeing in that industry that might be a little bit different

0:14:23
(Dr. Daniel Adams)
than what you've seen on the swine side, or is it all kind of, they kind of mirror each other?

0:14:29
(Franlyn Zhu)
Yeah, I think, I think they do mirror each other. Like, you had, you just have huge amounts of CAPX going into each of these segments. So Swine, you know, swine is a scent,

0:14:46
(Franlyn Zhu)
like the big players in swine are essentially already set. A lot of capital went into this industry since after the swine flu

0:14:55
(Franlyn Zhu)
because the companies that survived ASF made a killing. And so you had all this capital for real estate going here, building most modern facilities. And now we're seeing the same thing in egg layers. Your swine is no longer that profitable. And so in egg layers, you had three years of pretty good profits in the past five years,

0:15:17
(Franlyn Zhu)
three of them fairly profitable. And so now you have all these ultra modern million egg layer facilities popping up left and right. They're all big Dutchman, big Dutchman or big herdsmen. And and I think we're going to see a pretty similar situation in egg layer versus the swine industry, where you have just massive overcapacity and you're going to have these, a lot of these

0:15:46
(Dr. Casey Bradley)
companies are going to go bankrupt and then, yeah. 

0:15:56
(Dr. Casey Bradley)
Now with the layer industry, is there any consumer demand to move away from battery cages into open housing or is it all these operations for a million birds Strictly kind of the traditional battery cage model

0:16:10
(Franlyn Zhu)
They're all battery cages The cage free movement is very very small in China

0:16:18
(Chantel P.)
Why do you think that is?

0:16:21
(Franlyn Zhu)
I think I think the biggest reason would be just the average level of consumption. The amount of money that the Chinese consumer has is a lot lower than in the West. That's one part of it. You kind of don't have the extra money to care about the cash-free stuff. Second, the amount of marketing.

0:16:49
(Franlyn Zhu)
There's a lot less publicity coming from these NGOs about cash-free marketing. So consumers are a bit less aware of it. And number three is also that I think the level of consolidation at the retail level is actually very important. And it's only when you have these super large chains that say, hey, my consumers are really, you know, calling for the stuff that they

0:17:20
(Franlyn Zhu)
have enough volume to force the upstream livestock producers to change their practices. But in China, the retail segment is very fragmented. Most of the eggs are still sold at these farmers markets, but we're not talking about the fancy US farmers markets. These are like, you know, actual farmers markets. Like a flea market. Yeah, like a flea market. Yeah. Yeah, so when you have mostly an industry like, and in the flea markets, it's like individual stalls, you don't have enough leverage to tell your upstream producers to do anything.

0:17:53
(Franlyn Zhu)
So I think these are the three factors behind why the KH3 thing is.

0:17:58
(Chantel P.)
But with the focus being so much on economics, you speak so much about inputs and outputs. How are companies navigating ingredient pricing and availability? Are they focusing on optimizing or maximizing gain or just are they looking at livability? What are they considering in all industries, poultry and swine?

0:18:25
(Franlyn Zhu)
Yeah.

0:18:26
(Speaker 10)
Are they...

0:18:27
(Speaker 7)
Yeah.

0:18:28
(Franlyn Zhu)
I think the broiler and swine industry is relatively more advanced. The egg layer industry is still a bit messy. And by advanced and messy, I mean, I think it's exactly that. Like, are they focusing on these metrics? You need to have a multi-agent to really measure and, you know, define your strategy based on these metrics.

0:18:57
(Franlyn Zhu)
I would say that the majority of producers in China are still operating at a, you know, let's just survive and wait for the commodity prices to increase level. Yeah, the majority.

0:19:08
(Chantel P.)
Is there an interest in feed ingredient, like alternative feed ingredients, you know, distiller's grains, all those kind of things? Is that something that's common? I know it's more common in Europe than the US.

0:19:23
(Franlyn Zhu)
Alternative feed ingredients? Yeah. Alternative feed ingredients.

0:19:25
(Chantel P.)
Yeah, just alternative feed ingredients.

0:19:28
(Franlyn Zhu)
Yeah, I mean, whatever is cheap. I had a chat with Casey about that the other day about upcycled food ingredients. That's actually a part of our strategy as well, to find more of these upcycled ingredients and to try to stabilize their quality. There's certainly a growing interest in that. However, I think relative to the US, it's a lot less regulated and it's a lot less stable.

0:19:53
(Franlyn Zhu)
Because in the US, you have stuff like Darling Ingredients, right? They really, as I understand it, really stabilize the bakery mix stuff. But in China, it's still quite messy. A lot of it is being sold in a, like, you know, somewhat shady perspective. So there's a lot less tracking traceability.

0:20:13
(Franlyn Zhu)
I think there's a growing interest and the government, I think, will eventually crack down on this and make the whole upcycle food ingredients market a lot more like legit.

0:20:27
(Dr. Casey Bradley)
Yeah.

0:20:28
(Dr. Casey Bradley)
Yeah. You know, they kind of ruined it, getting the truckloads of candy bars in.

0:20:34
(Franlyn Zhu)
What the government by regulating it, ruined it.

0:20:39
(Dr. Casey Bradley)
We're supposed to eat it, but you know.

0:20:46
(Chantel P.)
I would love to know what their back fat thicknesses and carcass quality was like.

0:20:50
(Dr. Casey Bradley)
That would be I don't I don't remember I just remember stealing the candy bars from the

0:21:00
(Franlyn Zhu)
Yeah uh the interesting also about the you know you talk about the back fat and the cartons quality. I think that only happens when you also, when you have that whole traceability thing happening. Like in China, most of the producers sell to these, just these pig traders. So they front the cash for the pigs and then they will deliver the pigs to whatever, you know, slaughterhouse, plus money. it could be across provinces, right? It could be anywhere. So the producers right now just don't have that data, you know,

0:21:32
(Franlyn Zhu)
from the breeding stock all the way to the parts quality. You've got to be pretty integrated for that. And I know that Muyuan is really starting to do that, and I think they will become the first player that actually really implements that. I don't think Wenz can really do it. Yeah, but I heard that in the US and Europe,

0:21:53
(Franlyn Zhu)
some companies have actually really nailed that. Is that actually true?

0:21:59
(Chantel P.)
Yeah, I mean, traceability is so important in optimizing and knowing what you're feeding your pigs, knowing if it's working, knowing your feed additives, you know?

0:22:10
(Dr. Casey Bradley)
I think it's vital. We don't have Casey's secret or wish list of blockchain traceability to where, you know, I envision someday pigs can do it. I don't think chickens can,

0:22:25
(Dr. Casey Bradley)
but you can scan a pork shop, a store, and know exactly the history of that pork shop and the carbon emissions by that pig. But, you know.

0:22:38
(Chantel P.)
I don't know if it could be done to a pig basis, maybe a barn or, you know, a batch.

0:22:43
(Dr. Casey Bradley)
Yeah, I was working on it.

0:22:45
(Dr. Daniel Adams)
One step at a time.

0:22:48
(Chantel P.)
Yeah. Yeah.

0:22:51
(Dr. Daniel Adams)
So I know you talked a little bit about the vet, the vet med side of things. So you saying talking about trends again, is there any push at all for dropping the use of antibiotics or anything like that? Or are they pretty widely used in the Chinese market?

0:23:10
(Franlyn Zhu)
Yeah, absolutely. There was a very big push to limit antibiotic usage by the government. And it's banned in feeds. So you cannot put it directly in commercial feed. However, it is still allowed at the producer level. But antibiotics is a huge issue in China.

0:23:37
(Franlyn Zhu)
I'll give you egg layers, for example. One of the most premier chains of supermarkets in China

0:23:42
(Franlyn Zhu)
is called Hema.

0:23:43
(Franlyn Zhu)
It's owned by Alibaba and they have these antibiotic free cage free eggs and just earlier this year was revealed that you know, they have antibiotics and I was talking with this this this this French, you know expert You guys might know him Vincent Guionet. He's like based in Canada, I think. And I was saying, Vincent, how are you guys able to actually make your antibiotic free? You know, what's your secret sauce? And he just says, well, we just don't have as many diseases, right?

0:24:14
(Franlyn Zhu)
We have better management. And then I realized that actually makes total sense because, you know, one of my clients is one of the largest layers in, you know, in Hubei province. And I go in there and like they have all the beautiful big Dutchman stuff, all the facilities, all the, you know, antibacterial stuff. But the SOPs are not strictly adhered to, right?

0:24:42
(Franlyn Zhu)
And it's a management issue. And so they have to, you know, like the egg layer market.

0:24:51
(Chantel P.)
It's treatment versus prevention. And I think treatment is always more expensive than prevention.

0:24:56
(Franlyn Zhu)
Yeah. But, you know, we're talking about multi-million layer companies that don't even have a financial statement. So they can't even quantify the cost of a lot of these things. And that don't even have a financial statement. So they can't even quantify the cost of a lot of these things. And they don't have the management capability to really prevent it. And so they'll use a lot of antibiotics because they cannot afford to lose their students, which is to, you know, experience this through the whole world.

0:25:19
(Dr. Daniel Adams)
I also think it ties back to the traceability piece also, because if you can't tell, if you can't trace those eggs back to a specific producer, why wouldn't the producer use antibiotics? You know?

0:25:31
(Franlyn Zhu)
Like, we're so right. You know, the way they do it nowadays, it's like the sheds where they pump them full of antibiotics. They just send them over to the farmer's market because that's not traceable. And then for the ones, right, the antibiotic-free ones, they just change the shadow.

0:25:46
(Franlyn Zhu)
That one's not, you know, doesn't have antibiotics. Let's send them to the supermarket chain. That's why there's a huge, huge trust issue in food safety in China right now. And sometimes maybe it's better not to know this, but once you know it, I'm never shopping at the, you know,

0:26:01
(Franlyn Zhu)
at the janky, you know, farmers markets again, because you know what's going into there. All the bad eggs are going into there. I mean, the total percentage, I hope, is still quite low. But that's where things are right now.

0:26:16
(Dr. Casey Bradley)
Well, you made a comment before we started, because you're, you know, where am I located in Home of Walmart? You said Sam's Club is just doing a phenomenal job in China. How has that influenced food safety and traceability? Because they have a pretty stringent, you know, process here in the United States.

0:26:41
(Franlyn Zhu)
Yeah, you know, I think Sam's Club has actually made a real contribution to food safety in China. Like I would make such a statement like that. They entered China in the early 2000s and I think they have like a couple hundred standard in the traceability and the food quality and because of their business success it's forced a lot of other Chinese chains to adapt adopt similar levels of food quality, right? So yeah, I think they just set the standard on a lot of things and they showed the Chinese supermarkets that you could make a great profit doing this as well. Yeah.

0:27:37
(Chantel P.)
It's great that they're not, Sam's Club is maybe not pushing the small producers out, but kind of making everyone realize that they kind of need to do better and be better. And so it's kind of pushing innovation in that way, hopefully.

0:27:54
(Franlyn Zhu)
Oh, I was talking about it's shown the other chains, restaurant chains.

0:27:59
(Chantel P.)
Oh, I see.

0:28:00
(Franlyn Zhu)
Yeah, they work with some of the larger producers, probably the largest producers, because as we said earlier, the mechanism of why you're able to provide the antibiotic-free stuff is because you have enough scale and you have enough channels to push the other stuff away.

0:28:17
(Chantel P.)
I see. Yeah. Okay.

0:28:19
(Franlyn Zhu)
Maybe that's a bit too real, but it's actually how it's working in the industry right now.

0:28:27
(Chantel P.)
And what else can, I mean, what can small producers and large producers, what can they do to kind of like maintain that economic edge? You spoke right in the beginning, you spoke about like premixers, Creek feed, but you said milk replacer was kind of where you started. And you said that China still has the itch and that had me intrigued.

0:28:47
(Chantel P.)
What did you mean by that?

0:28:49
(Franlyn Zhu)
What I mean by that is I think a lot of people, a lot of producers kind of don't quite understand like how to formulate a milk replacer. I think in the US and Europe, it's generally quite transparent at this point. But a lot of females don't know how to do that.

0:29:12
(Franlyn Zhu)
And they're still using a lot of expired milk powder, human milk powder or whatever milk powder. And they're not even balancing it for the amino acids. There's way too low of a CE level. And a lot of producers are not familiar with the concept of the protein and how important that is.

0:29:34
(Franlyn Zhu)
So that's what I mean.

0:29:38
(Franlyn Zhu)
Yeah.

0:29:39
(Franlyn Zhu)
But we're talking about regional feed mills who maybe they don't even have a nutritionist. Their formulas were just copied from somewhere. Or some local college professor probably provided them with it, and they've never changed it since.

0:29:55
(Franlyn Zhu)
So that's what I mean. And yeah. Does that answer your question?

0:30:04
(Chantel P.)
Yes, yeah. Yeah, it does.

0:30:06
(Dr. Daniel Adams)
I was curious, and I know Chantel mentioned this a little bit earlier, do you feel like specifically in the poultry sector, are any poultry producers using things like essential oils or acidifiers or phytogenics, those kind of like novel feed additives to try to boost their performance. Cause really if they see that added performance boost, they should kind of buy into some of the feed additives.

0:30:39
(Dr. Daniel Adams)
But I don't know if you're seeing that.

0:30:41
(Franlyn Zhu)
Yeah. I mean, feed additives have been, like they've been very popular for many decades and a lot of producers did buy into that, but I'd say not because they saw a statistically significant change in the growth,

0:31:03
(Franlyn Zhu)
that's part of it. Maybe this again is too real,

0:31:13
(Franlyn Zhu)
but a lot of it is about the customer relationship or about like the...

0:31:15
(Franlyn Zhu)
Yeah, yeah.

0:31:18
(Franlyn Zhu)
Because, you know, I think the nutrition, the animal nutrition side of things in China, there's lower hanging fruit.

0:31:33
(Franlyn Zhu)
Like maybe in the West, you know, it's already quite optimized and the nutritionists all know what they're doing. But for a lot of producers, you're taking like a standard textbook formula that might not even be completely balanced. And so while it may be stat sig, the effect size of the additives might not be as visible.

0:31:56
(Dr. Daniel Adams)
Yeah, it's a long process. And a lot of times you have to try a lot of different things to find or combine lots of different feed

0:32:05
(Dr. Daniel Adams)
additives to see a boost in either performance or health. Like you're not going to find one essential oil that really changes your response to a disease challenge, but it's usually the combination. And that can be difficult to get buy-in on because it takes a lot.

0:32:23
(Franlyn Zhu)
Yeah, endless trials. And it's also very fierce competition. You have the keys, you have so many alternatives. So why this one versus that one? And so at this point, it's also become a bit of a race to the bottom. Now, I know a lot of larger companies, if the total kilogram cost is over the equivalent of $15 per kilogram, then we won't even consider it. So that's for feed additives, functional feed additives nowadays.

0:32:53
(Franlyn Zhu)
So, right.

0:32:54
(Dr. Casey Bradley)
Did you say $15 a kilogram of product or per treated time?

0:33:01
(Franlyn Zhu)
Per product. Like, like they'll ignore the ton level. They just say keep it under, if anything is overpriced, priced above that, then look, I have all these other alternatives that say they have effect.

0:33:13
(Franlyn Zhu)
So keep it under 50 RMB per kilo. Yeah, and the typical functional budget that these companies might have might be about maybe like 100 to 150 RMB per ton. And that translates to about 20 to 20, I guess, $20 per ton for the feed additives.

0:33:36
(Franlyn Zhu)
Yeah.

0:33:37
(Dr. Casey Bradley)
That's why some diets may be higher than what it is in the US. We may look at higher budget nursery diets or starter diets in poultry, but nothing ... Be hard for us to my mind, but I guess is that including amino acids and enzymes or ...

0:33:58
(Franlyn Zhu)
No, that's not. We're talking pure functional and yes, this is more on the, I'd say, the starter and the small pig diet. In the larger ones, you're not going to be.

0:34:10
(Dr. Casey Bradley)
Well, with that big of a budget and the openness to use it, how do they get their information and knowledge? And you said it's relationship driven on that trust. So I mean, where is that coming from? How do you build trust? How do you get that knowledge out?

0:34:30
(Franlyn Zhu)
Yeah, I think this is the biggest challenge that the feed adjectives industry is facing in China. Because there can be a lot of like snake oil kind of a vibe to this and there can also be a lot of also commercial bribery, you know. So there's been a crackdown on that in the past few years, especially as the industry has become a lot more competitive. When you had fat margins, you will use whatever, it's fine.

0:35:01
(Franlyn Zhu)
And especially if your procurement officers skim a little off the top, it's okay. But now there's been a ruthless drive to cutting costs. And I think the way that the industry is working now, the theater editors industry, it's got to be someone who is already reputable and trusted, and they'll just do endless trials. They'll do maybe like two, three, four trials to test your additive. And if it works, then they might consider using it. But the margins are going to be a lot lower nowadays than they were

0:35:37
(Franlyn Zhu)
maybe even just five years ago.

0:35:40
(Dr. Casey Bradley)
Now, I was working with a pet client from China that wanted a product supplement made in the US or Europe because he used it as competition. Do you see any advantages of that for, you know, feed additives or technologies coming outside of China to be used? I mean, cost-wise, it's still probably going to be cheaper to source within China.

0:36:11
(Franlyn Zhu)
Oh, you're saying imported additives and, you know, whether they're competitive in China. I think there will certainly be a credibility advantage, especially if the large players in the US aren't already using it. And yeah, I think there's a lot of distrust in the China's market for local suppliers, because they'll just think, oh, you know, are you even adding enough of the active compound in there?

0:36:48
(Dr. Casey Bradley)
Yeah. Yeah. I'm going to go down another touchy topic. Yeah. If you can't answer it, you can't answer it. But what is the word on the street in China about the dumping, the lysine dumping lawsuit and issues? Has that come into any of your news or talk in your circles in China?

0:37:07
(Franlyn Zhu)
Actually, no, I haven't paid too much attention to this. Yeah. I can find out. You can tell me more about that later.

0:37:22
(Dr. Casey Bradley)
I don't know. Yeah. I don't know. No comment. Lycine dumping issues.

0:37:25
(Franlyn Zhu)
Yeah.

0:37:26
(Franlyn Zhu)
Are you talking about like the like Chinese producers dumping lycine? I mean, that's sounds like a broader trend, not limited to lycine. Yeah, there's just I mean, there's just too much capacity in China for everything.

0:37:47
(Franlyn Zhu)
Yeah.

0:37:48
(Franlyn Zhu)
So that's a different topic.

0:37:51
(Franlyn Zhu)
That's tough.

0:37:52
(Franlyn Zhu)
Yeah.

0:37:53
(Franlyn Zhu)
And actually, I talked a little bit about why that's happened. Obviously it's happened in all countries, US, Japan, whatever, when you went from manufacturing-based economies eventually transitioning to service economies. Although whether that logic still applies, I don't know, but that's another question for the economists. In China, the CAPEx issue is especially pronounced because there's a lot of state-driven or local provincial government-driven subsidies, what we call Zhao Chang, which is you invite these factories to producing companies with huge subsidies to build more factories.

0:38:45
(Franlyn Zhu)
And it brings up the local GDP, right, and which is part of each province's KPI. They don't care as much about profit, but they care about GDP. And if there's, you know, a factory being built, the whole upstream inputs, that all counts into your GDP. And so this kind of mechanism has just led to a massive overproduction. And now actually the government, you know, one of the biggest key messages this year

0:39:13
(Franlyn Zhu)
is about anti-involution. They call it, involution is just essentially like race to the bottom, you know, endless subsidies and endless price floors. So the government is fully aware of this and is really trying to control this. So specific actions like the swine industry,

0:39:31
(Franlyn Zhu)
they're saying, okay guys, we need to decrease the amount of capacity now. And they just launched this policy to prevent secondary finishing. I don't know if that's a thing in the US, but they'll sell the pigs at standard market

0:39:46
(Franlyn Zhu)
weight, and then these other guys will come in here and buy those pigs, and then continue feeding them until they're maybe double standard market weight, and then sell it based off where hog prices are. So you have a screwed up supply side, And the government's cracking down on these practices to make it, to make the market a bit more rational and less like a Las Vegas casino.

0:40:12
(Dr. Casey Bradley)
No, I don't, I don't think we could double the weight on our pigs.

0:40:16
(Franlyn Zhu)
Maybe not double, but yeah.

0:40:20
(Dr. Casey Bradley)
Oh, profitable too. Profitable too, so.

0:40:25
(Dr. Daniel Adams)
So I'm curious, I guess kind of rounding us out. How do you think the Chinese swine and poultry industry views the US at the moment? And then what are our opportunities for the US and the Chinese to collaborate over the next five to 10 years?

0:40:50
(Franlyn Zhu)
What do you think that looks like? Well, the previous, current and previous points of collaboration were soybeans until that happened and then, and breeding stock, right? I guess some additives. And I guess certainly imported meat.

0:41:16
(Franlyn Zhu)
So we can go down those. I mean, soybean thing, that's a larger issue, geopolitical issue. There's a switch to Brazilian and Argentina. But US soybeans, as I understand, like the world's rates is still better and cheaper. So, you know, if the geopolitical tensions ease, I'm sure that'll come back, but maybe not to the prior levels because,

0:41:42
(Franlyn Zhu)
you know, they'd have to hedge it.

0:41:45
(Dr. Daniel Adams)
And I guess, you were saying earlier that there was a little bit more credibility from US feed additive companies. Do you feel like that might start to dwindle as well, or do you still see that being pretty

0:41:58
(Franlyn Zhu)
strong? I think the credibility will still be there and it'll be on par with the European additive companies. However, the feed additive industry itself is facing tremendous issues in China, challenges. So, yeah, I don't think the credibility has fallen. It's just the industry has gotten smaller.

0:42:22
(Franlyn Zhu)
Yeah, yeah.

0:42:25
(Dr. Casey Bradley)
Well, I just wanted to wrap this up and say thank you. We have a whole more, a bunch more episodes planned with Franklin. We're just talking about how we're going to sit down and model out profitability and price in inputs and things into our production systems and see how they compare in the US versus China. We have tons of ideas to kind of bridge this gap

0:42:56
(Dr. Casey Bradley)
and open the doors because not like all of our political statements here in the US, American agriculture needs China. And I'm hopefully opening the door that we can continue to communicate and collaborate and grow together.

0:43:16
(Dr. Casey Bradley)
And I rather see you guys as partners than in a trade war. So I would hope that that door is always open for us to keep collaborating in agriculture because there's so much value both countries bring to each other.

0:43:34
(Dr. Casey Bradley)
So Franklin, it was great to have you.

0:43:37
(Franlyn Zhu)
We appreciate it. Yeah, happy to be here.

0:43:41
(Chantel P.)
Thank you all. I really enjoyed meeting you and speaking to you and I look forward to future podcasts with you. I have a lot more to ask you and I'm excited for the next one. and I'm excited for the next one.

0:43:51
(Speaker 5)
Yeah, great.