February 12, 2019
Recovery and re-invention: World feed and livestock's changing geography
Feed and livestock's largest market is in a slump but with all other regions expanding at a healthy rate, growth has not been so well balanced in decades.
By Eric J. Brooks
An eFeedLink Hot Topic
After spending half a decade in an unexpectedly sharp slump, world feed output is rebounding back to its long-term expansion pace, but with support from new growth drivers. Based on statistics from Alltech's annual Global Feed Survey, 2018 world feed output expanded 3.1%, to a record 1.1039 billion tonnes. If one factors out the 30 million tonnes of feed that is consumed by pets or horses, livestock feed production totals approximately 1.07 billion tonnes.
That is lower than the near 4% annual expansion that occurred in from 1990 to 2010 but a big improvement over the disappointing 1.4% growth that occurred from 2012 through 2015, when several coincident factors caused world meat production to slump. These included a severe US swine and avian pathogen outbreaks, unprecedented shrimp and salmon disease epidemics, deadly chronic Chinese bird flu outbreaks, China's ban on grandparent broiler imports and a severe economic slowdown in the latter's manufacturing sector.
While African Swine Fever threatens to keep China's feed output stagnant for a shocking seventh consecutive year, the rest of the world has mostly recovered from the feed output slump that took place in the first half of our decade: In the three years since 2015, feed output has risen by an average of 3.5% annually, far outpacing the 1.1% annual increase in the world's population.
Interestingly, despite all these setbacks, for 6.3 billion of the world's 7.7 billion people, per capita feed and meat production continues to grow as rapidly or even faster than it did in the 1990s or 2000s: World feed output outside of China grew by 3.6% in 2018 and expanded at a 3.9% annual rate in the three years from 2015 through 2018 included. From 2012 through 2018, feed production outside of China increased 21% to 159 million tonnes; in China, output fell 5.2% to 10.4 million tonnes.
In the six years since 2012 (when China's feed output peaked), world feed output grew by 2.4% annually –but if you don't include China, feed output in the rest of the world expanded at a 3.2% annual rate. Given the fact the world's population is growing more slowly today than it was twenty years ago, per capita feed demand outside of China is growing as quickly as before. In certain regions including Africa, the Indian subcontinent and Southeast Asia, meat demand is growing more rapidly now than it was before.
At the same time, growth is becoming far more multipolar and less concentrated: As the accompanying chart shows, in 2012, leading producers China, America and Brazil produced 433 million tonnes of feed. By 2018 world feed production had risen by 149 million tonnes or 15.6% above 2012 levels but the collective American, Chinese and Brazilian was almost unchanged at 434 million tonnes: Brazilian feed output has nearly stayed flat while the increase in US feed tonnage almost matches the decrease in Chinese output over this time.
Consequently, since 2012, all world feed demand growth has occurred in countries with less than a 4% share of global feed production. –Outside of China, America and Brazil, feed output expanded at a 4.2% rate or by 28.4% over the past six years –no slower than it did in the late 1990s/early 2000s boom years.
Collectively, these trends make for a highly ironic, under-appreciated reversal of a longstanding world agribusiness growth assumptions: China, which singlehandedly powered world feed growth from the 1980s through 2010, has since become the biggest drag on world feed and meat demand growth. While America's mature feed sector expanded production by 0.9% annually, the years 2012 through 2018 saw Chinese output fall at a -0.9% annual rate. The last three years have seen China's feed output stagnate near 188 million tonnes, ten million tonnes below its 2012 peak.
While China is stuck in this rut until at least the year 2020, feed demand in the rest of the world continues to expand at a healthy rate. Amid constantly improving animal feed conversion ratios constant and barring any disruptive natural, political or economic events, world feed and meat output are poised to grow at annual rates of 3%+ and 3.5% respectively –with growth momentum now coming from regions to the south and west of China.
Driven by India's 2018 13.3% increase in feed output (to 38.74 million tonnes) and Pakistan's 25% increase (to 8.0 million tonnes), the Indian subcontinent's 1.7 billion people saw their feed output expand by approximately 15%. India is South Asia's largest and most economically mature market. It has seen average annual feed output growth rise from 5.2% in 2012-15 to 7.3% in the three years since 2015.
While their feed industry is growing faster than that of any other region, India, Pakistan, Sri Lanka, Bangladesh, Bhutan and Nepal's collective 53.46 million tonne output for 1.7 billion people is less than the 68.65 million tonnes of feed milled by Brazil's 210 million people.
This reflects very low (but fast-growing) per capita meat demand of about in India(5kg), Bangladesh(5kg), Nepal(11kg) and Bhutan (14kg). Even with Pakistan tripling per capita meat consumption from 11kg in 2000 to 33kg today, overall South Asian per capita meat consumption remains below 10kg, with most protein intake accounted by poultry and dairy. Even though Pakistan's meat consumption is several times higher, it too has the momentum to double per capita protein intake over the next twenty years. Hence, South Asian feed is poised to expand at India's 7.3% post-2015 annual rate and double meat output every decade well into the late 2040s.
Closely rivaling the Indian subcontinent in quantitative growth potential, Southeast Asia's feed and livestock dynamics are qualitatively different. ASEAN has only a third of the former's population but in all other respects is the world's most vibrant, exciting agribusiness market. While Vietnam's (0.9% feed growth) high pork prices and slowing economy pulled Southeast Asian 2018 feed production growth down to 5.9%
ASEAN feed output has grown at a 7.1% rate in the six years since 2012 and 9.0% annually since 2015 –which is even faster than South Asia. With rapid ASEAN feed output offsetting China, Japan and South Korea's collective stagnation, overall Asia Pacific feed output expanded 3.6%.
Not only is ASEAN feed output growing faster than that of India but at 90 million tonnes, ASEAN's 600 million people produce 68% more feed than all of South Asia combined. This, of course, reflects Southeast Asia's significantly higher meat consumption. ASEAN's meat consumption ranges from 5kg in Indonesia to 30kg to 40kg in Thailand, Vietnam and the Philippines, 55kg in Malaysia and 66kg in Singapore.
The region's racial and religious diversity also leads to more balanced poultry, swine, ruminant and seafood consumption. Whereas 75% of Indonesia's feed output is accounted for by poultry, 56% of Vietnamese feed is fed to swine, a higher percentage than even pork-loving China.
Moreover, Southeast Asia has almost as much long-term growth momentum as South Asia. While markets such as Vietnam, Thailand or Philippines now have meat consumption over 30kg, sectors such as dairy remain vastly underdeveloped. With meat consumption under 10kg and containing nearly half of ASEAN's people, Indonesian feed output can continue growing at the 6.6% rate of the last six years for many decades to come.
Indonesia's 280 million people are complemented by Myanmar's 55 million, which have seen their feed output rise at a whopping 34% annual rate, from 0.6 million tonnes in 2013 to 3.5 million tonnes last year. Myanmar's impressive annual growth over the last six years is complimented by the rapidly expanding Philippine (+8.1%) and Vietnamese markets (+8.5%), both of which contain over 90 million people. Even Thailand, the most mature, export-driven of ASEAN agribusiness suppliers, has seen feed output rise 4.8% annually since 2012.
Despite such impressive growth metrics, these Asian subregions have an unlikely challenger that rivals them for some of the world's fastest agribusiness growth: Due to rapid 2018 growth in Russia (+8.9%) and formerly communist East European nations such as Poland and Ukraine, European feed output grew by 3.8%.
While some regions grew faster than Europe, this relatively mature continent's feed demand grew faster than that of any other except Africa, where it expanded by 5.%. Even so, with Africa's 40.6 million tonnes accounting for less than 4% of world feed production, it is Europe's surprisingly fast growth which is having an impact.
Eastern Europe's rapid feed demand is led by the large Russian market, where the impact of rising consumer incomes is multiplied by gradual, ongoing substitution of domestically grown pork and chicken in place of imports. 2018's slower 4.3% growth (to 39.2 million tonnes) hides a more rapid 8.9% pace of annual feed output expansion in the six years since 2012.
European feed's Russian locomotive gets additional momentum from rapid feed production growth in Spain and Eastern Europe. Spain's rapidly growing, export-driven swine sector powered 2018 growth of 4.5%, to 34.5 million tonnes and 3.4% average growth since 2012.
Poland's poultry-driven agribusiness expansion resulted in an average 4.5% annual growth over the last six years, with feed production totaling 10.8 million tonnes. Having gone from 4.0 million tonnes in 2012 to 8.8 million tonnes last year, Belarus's feed production is rapidly catching up to that of Poland and has grown at a 14.4% annual rate since 2012.
Located in the eastern Mediterranean and already in a customs union with Europe, Turkey's 2018 feed output of 25.85 million tonnes has expanded by an 11.9% rate since 2012 –faster than that of any major agribusiness producer.
It is always an open question as to whether Poland and Spain's export-driven growth will end or if Russia will reach the limits of import substitution. For now, Russia, Spain and nearby Eastern European nations have pushed Europe's feed demand growth to level that rivals that of Asia Pacific.
Going forward, global agribusiness faces the future with a modest mixture of both uncertainties and secure constants. First, while we know that China's feed demand and livestock production will eventually recover, this was assumed five years ago and it still hasn't happened.
Global agribusiness has rebounded from its early 2010s slump. Even so but feed and livestock will not actualize their full growth potential until China's vast swine, poultry and dairy sectors recover a measure of their previous growth rates.
Second, Southeast Asia, Europe Africa, and the Indian subcontinent all showing signs of rapid, sustained growth, world feed and livestock are poised to expand 3% or more annually even without China's recovery. Even when China's 1.4 billion market recovers, it will be outpaced by significantly rapid expansion among the 2.3 billion people in Southeast Asia and the Indian subcontinent.
Third, when China's feed sector finally recovers, it could cause a major market upset: While Chinese demand for imported corn and soybeans has leveled off, Southeast Asia's imported feed volumes are growing rapidly.
By the mid-2020s, Southeast Asian feed crop buyers will be competing with Indian importers of soybeans, corn or both. Should India enter world grain and oilseed markets just as Chinese demand turns upward, it could lead to another round of feed cost inflation followed by a repeat of the slow growth seen for several years after 2010.
For now, world feed and livestock's engines are accelerating, and growth has not been so well balanced across the world in decades.
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