April 14, 2011

 

High wheat costs hurt Europe's feed sector

 

 

High wheat prices have weighed down the European feed industry, prompting a switch to cheaper raw materials to uphold the declining livestock sector, said traders.

 

Traders in the Netherlands, Belgium and Spain, Europe's largest feed producer, have seen a sharp decline in demand for feed grain in the past year.

 

Typically, there is a recovery in April demand, when cattle, sheep and pigs produce offspring, but this year traders are pessimistic.

 

"What everyone accepts again is that (grain) consumption has fallen, it is not recovering and we await developments, but there is the feeling there will be little cause for celebration," a Spanish port source said.

 

In France, farm office FranceAgriMer sees industrial feed demand for wheat - the main feed component - at 4.4 million tonnes in 2010/11, down from 5.4 million tonnes last season and the lowest level since 1993/94.

 

To compensate for high wheat prices, producers are moving to other raw materials.

 

"We are moving from wheat to other cereals such as corn, barley, and also we are using rape meal," said Roland Elshuis, in the purchasing department of Netherlands-based feed producer De Heus, which has production facilities in eight countries worldwide.

 

High prices of raw materials have already hit feed demand as producers see a loss in market share in Europe.

 

A trader who works in the Netherlands and Belgium says feed production in the two countries is estimated to have fallen as much as 15% from last year.

 

"We have seen a decline in demand for feed in northwestern Europe. It is still too early to say what is the real reason for it," an industry source.

 

"Despite this downturn in Europe, we still see stable global feed demand with India and China rising," he added.

 

Europe's pig sector, which together with the poultry sector consumes the major portion of compound feed production, has declined as meat prices cannot be adjusted to sufficiently cover high production costs. The industry sees this trend continuing.

 

In the Netherlands, the number of pig farms is expected to decline by 50% in the next 10 years, from 7,000 to 3,500.

 

French analysts Strategie Grains estimate that compound feed production for the pig sector in France will fall from 5.8 million tonnes in 2009/10 to 5.7 million tonnes this season and then 5.5 million in 2011/12.

 

Overall animal feed production in France is on course to rise this season as demand from dairy farmers has more than offset weakness in the pork sector.

 

Production of compound feed in France rose 2.4% in the July-January period. Demand from the cattle sector rose 7.4% whereas demand from the pork sector fell 1.8%, according to figures from the feed makers' association SNIA and cooperative federation Coop de France.