Yuhe International Inc., a large supplier of day-old broiler chickens in China, has signed a contract to lease a feed production facility to Shandong Nongbiao Purina, a division of Cargill Company, for a period of 10 years.
The facility measures around 21,500 square metres and Purina will pay a total of $2.2 million over the life of the lease.
The capacity of the factory's initial phase will be 90,000 mt per year. Construction of the factory and installation of the equipment will be completed in June 2009.
According to the agreement, Shandong Nongbiao Purina will invest approx. US$1.5 mln for the acquisition and installation of feed production equipment which will be used in the facility.
In addition, after the facilities are operational, Shandong Nongbiao Purina will serve as Yuhe's exclusive supplier for feed.
Feed produced at the facility will meet all of the most stringent safety and health standards which have been implemented by the Chinese government. The Company's own feed production will be gradually phased out.
"We are very pleased to forge this agreement with Shandong Nongbiao Purina, a fast growing feed manufacturer with a strong reputation in China and abroad," commented Gao, chairman and CEO of Yuhe International, Inc.
"Before discontinuing our current feed production to transition to Purina as our sole feed supplier, we will perform a series of independent tests on Purina's feed in order to insure that it complies with the most rigorous standards set forth by the Chinese government. We are particularly excited with this arrangement as it will allow us to focus exclusively on the production of high quality day old broilers."
Strong market share
Founded in 1996, Yuhe is the second largest day-old broiler chick supplier in China. The Company's main operations involve incubation. With headquarters in Weifang, Shandong provinceYuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd. which largely supplies the Company's internal demand for chicken feed.