May 17, 2017
Aqua feed statistics turn fish farming assumptions upside down: Why Europe is becoming vitally important to world aquaculture
Asian producers languish under the weight of stocking densities but a mature region known for its farm management techniques leads the industry's growth.
By ERIC J. BROOKS
An eFeedLink Hot Topic
Based on Alltech Global Feed Survey results, we can say that in most of the world, a three year slump in aquaculture growth has ended. At 39.9 million tonnes, aqua feed output rose 12% on the previous year. For 2017, we can expect it to break its 2013 peak output level of 40 million tonnes by 5% to 8%, totaling somewhere between 42.0 and 43.5 million tonnes.
While over a hundred nations practice aquaculture, aqua feed statistics show that how the lion's share of world fish farming occurs in a small handful of nations. Led by China (16.4 million tonnes), ten nations including Vietnam (3.41 millio tonnes), Turkey (2.38 million tonnes), Spain (2 million tonnes), Norway (1.78 million tonnes), India (1.72 million tonnes), Indonesia (1.5 million tonnes), Brazil (1.0 million tonnes) Thailand (0.96 million tonnes) and Chile (0.85 million tonnes) produce 80% of the world's aqua feed and approximately four-fifths of its farmed fish.
While the sector's growth momentum has rebounded, many points of weakness remain. For one thing, fish farming is still in retreat or at best, bottomed out in China, the world's dominant, leading producer. In particular, while aqua feed output expanded 12% globally, at 16.4 million tonnes. China produced 5.2% less aqua feed in 2016 than the 17.3 million tonnes it produced in 2015.
While disease outbreaks and bad weather played a role, it does not completely account for China's poor performance. Whereas the rest of the world produced 6 million tonnes or 34.6% more aqua feed in 2016 than it did in 2013, China's output was 28.6% below its peak 23 million tonne volume set in 2013.
In fact, when we factor China out of world aquaculture, we stumble upon an interesting fact: Based on Alltech Global Feed Survey statistics, in the three years after world aquaculture output peaked in 2013 (at 40.4 million tonnes), it declined at an average 0.5% annual rate –but in the rest of the world excluding China, world aquaculture output grew over these same three years at a whopping 10.3% annual rate.
In other words, world aquaculture is splitting into two growth streams: A near stagnant sector marked by flat Chinese and Southeast Asian output and a 10%+ growth boom in the rest of the world. There are however, two other problems: First, with China and East Asia making up over 80% of global aquaculture, the region's stagnation slows down the entire growth of world fish farming. Second, the problems dogging East Asian aquaculture are spreading to most other parts of the world.
Having avoided the issues of food safety and ecological sustainability for years, a dwindling supply of frontier areas within China has put its aquaculture farm management methods into the spotlight. It finds itself unable to raise the output of many species beyond their present level without boosting stocking densities to levels that result in uncontrollable disease outbreaks.
China's dilemma however, is part of a larger story within East Asia, which once accounted for nearly 90% of world fish farming production. Led by a near 40% contraction in Thai aqua feed output, leading Southeast Asian seafood exporters Thailand, Indonesia and Vietnam produced 15.5% or 96 million tonnes less aqua feed in 2015 than they did in 2012, the year when diseases such as EMS and EHP began decimating their output of crustaceans.
By last year, Southeast Asian shrimp producers had only partly escaped being caught between chronic disease outbreaks, illegally high antibiotic levels and limited stocking densities. As a result, their collective aqua feed output of 5.87 million tonnes only stood 4.4% or 15 million tonnes higher than their previous peak of 5.62 million set back in 2011.
When East Asian output of species like shrimp and tilapia leveled out, world demand for them kept growing. As a result, East Asian fish farms have lost considerable market share to producers in India and Ecuador, and may face new competition from neighboring Myanmar in the next decade.
In fact, where it not for Vietnam's rapidly growing domestic market and its reliance on hardier but feed hungry black tiger shrimp (as opposed to more productive Pacific white leg shrimp), Southeast Asian aqua feed production and seafood output would be significantly lower today than it was at the turn of the decade.
On the basis of aqua feed production statistics, industry growth has shifted out of the Pacific Rim and into the Indian subcontinent, Latin America and even Europe –but even these areas face their problems.
On one hand, powered by domestically oriented tilapia farming and export-oriented shrimp cultivation, Indian aquafeed output jumped 80% in the years from 2011 through 2016 inclusive. Totaling an Alltech estimated 1.7 million tonnes in 2016, Indian already produces more aqua feed than Indonesia and looks to soon overtake Norway too.
On the other hand, with Indian producers increasingly facing outbreaks of EMS, EHP, WSSV, stocking density challenges and sustainability issues, the country's days of 20%+ shrimp output growth are giving way to a slower, though still respectably fast growth rate of 4% to 6% during the 2020s.
As the new, top two shrimp exporters, India and Ecuador successfully took take advantage of East Asia's sustainability issues to overtake their Chinese and ASEAN rivals in market share. Unfortunately, just like Thailand did in the early 2010s and India today, Ecuador too finds it difficult to maintain previous growth momentum when output of species such as shrimp approach 500,000 tonnes and stocking densities become an issue. When EMS broke out in Ecuador, it like India opted to curtail output growth rather than risk a Thai-style decade long crash in production.
While sustainability issues dog East Asia, shrimp and tilapia farming the most, they are by no means the only region or seafood species facing these challenges. For example, within South America, Chile saw its aqua feed output fall from 1.24 million tonnes in 2015 to 0.8 million tonnes last year.
This reflects the fact that Chilean salmon production has fallen by nearly half since 2014, when its aqua feed output peaked at 1.6 million tonnes. The reason is due to Chile's inability to control disease outbreaks, and this forced it to cut stocking densities and production by nearly half. In North America, Canada faces similar issues in getting its farmed salmon output beyond 150,000 tonnes.
Similarly, Brazil has been repeatedly touted as a 'future aquaculture superpower'. In fact, only when it stopped cultivating export-oriented, commercially popular species like shrimp and began cultivating species native to its rainforest ecosystem did Brazilian aqua feed output and aquaculture production rise in a sustained, uninterrupted manner.
All this has brought world aquaculture to a surprisingly ironic outcome: Because it has the best farm management techniques, the most mature (and traditionally most stagnant) part of the world aquaculture sector has become its fastest growing region.
At Alltech's webinar on its 2017 Global Feed Survey, chief innovation officer Aidan Connolly noted that,
"We saw the fastest increase [in aqua feed output] within the European zone, which is quite surprising but of course, there are a lot of changes taking place." –and in this author's opinion, the most underrated change is the ascending importance of fish farm management and coincident exhaustion of frontier zones in once fast growing Asia.
While Europe's relatively rapid growth may feel counterintuitive, it is not a one-off, one-time event: The industry may continue to invest heavily in Asia and Latin America, but for the next few years, Europe will lead the world aquaculture industry growth.
According to Research firm MarketsandMarkets, "The European region is projected to be the fastest-growing market for aquafeed between 2017 and 2022." Among the factors powering Europe's leading growth are, "The increased consumption of seafood, flexibility in using secondary raw materials, and increasing income of the expanding middle class in developing nations."
Please Do Note: By "developing nations", MarketsandMarkets is referring to Eastern Europe, where population size, personal incomes and growth in per capita protein consumption are comparable to those found in many parts of Southeast Asia and Latin America.
Whether it is the rapidly growing consumption in nations like Russia, Hungary and the Czech Republic or the opening of frontier aquaculture regions along the Black Sea coastlines of Russia, Turkey, Ukraine, Moldova, Bulgaria and Romania, Eastern Europe is blessed with both dynamic developing country growth rates and untapped frontier regions.
At the same time, EU membership, geographic proximity and common European cultural similarities make it easy for capital rich, technologically advanced aquaculture producers from countries like Norway and Denmark to invest in frontier Eastern European region. All this makes Europe a highly underrated aquaculture growth region with many new exciting future opportunities.
But there is another unspoken reason for Europe suddenly taking the role of leading the world expansion in aquaculture and aqua feed production: The continent's aquaculture sector is less impacted by disease outbreaks than that of countries that up to now, saw their industry expand more quickly.
On one hand, frontier East European regions like Russia, Turkey and the Balkans have the low stocking densities which allow for a decade or more of rapid growth. On the other hand, mature production regions like Norway and Denmark are known for having some of the most sustainable, safe and efficient fish farm management practices in the world.
For example, even in Norway where disease issues have constrained growth in salmon output, its superior farm management techniques enabled it to avoid the drastic output fall suffered in number two salmon exporter Chile.
Over time, it becomes impossible to expand production by bringing a dwindling supply of frontier areas into production. At that point, aquaculture farm management –an area where European expertise leads the world– becomes a critical factor in successfully expanding the supply of cultivated sea food.
All this promises a bright future for European aquaculture on many levels. Production wise, the continent has barely started to the tap production potential of its Black Sea coastline. When it does, pent up demand from several hundred million consumers with rapidly growing per capita incomes of around U$10,000/year are a guaranteed market.
In the western half of Europe, capital rich aquaculture conglomerates and leading aqua feed supplement makers are in an excellent positioni to supply fast growing Eastern European producers. Sooner or later, East Asian producers will find overcome their growth slowdown by importing western European aquaculture technology and farm management methods too. In its own way, all this puts global aquaculture's smallest, most mature region at the centre of its future development.
Why aqua feed will get more expensive with time
By ERIC J. BROOKS
Going forward, MarketsandMarkets estimates that from US$107.82 billion in 2017, the value of aqua feed output will rise at a 9.9% rate, totaling US$172.56 billion by 2022. This however, several factors, such as large increases in the cost of aqua feed inputs such as fishmeal and of supplements.
First, with fishmeal having traded in the US$1,000/tonne to US$2,000tonne range for over ten years, its high cost is driving the need to boost expenditures on aqua feed supplements. As plant-based inputs such as soymeal and rapeseed meal are increasingly substituted in fishmeal's place, they require a wide array of amino acids, enzymes and essential fatty acids to make them suitable for use in aqua feed.
For this reason, MarketsandMarkets concluded that, "The amino acids segment is projected to grow at a higher growth rate in the global aqua feed market from 2017 to 2022." The utilization of modern feed management techniques and high awareness levels are the main factors responsible for the high consumption of feed amino acids in the growing markets."
Second, with fishmeal supplies static and production rising, many companies ranging from Alltech to Monsanto are researching and developing alternative sources of essential omega 3 fatty acids. No one however, expects new omega 3 fatty acid sources to be any less expensive than fishmeal, which now commonly trades at record levels.
Third, with consumers increasingly making omega 3 fat levels into a reason not to buy farmed seafood, producers are going to have to boost production costs of high-end lines such as salmon to ensure they do not lose market share to wild catch.
Fourth, many Asian aquaculture diseases such as EMS and WSSV are now known to break out more easily when nutritionally poor feed inputs are used. Over time, this will boost the amount spent on feed materials. Particularly in East Asia, we can expect not just the quantity of feed inputs used to increase but also their quality, with the latter directly impacting unit costs.
Finally, even standard, relatively low cost feed ingredients such as soy and rapeseed have bottomed out in price and are expected to become steadily more expensive over the next decade. All this means that while the value of aqua feed produced will rise by approximately 10% annually, the next five years will see the actual volume of aqua feed production rise by 4% to 6% annually –with aquaculture production volume rising by approximately 1% faster.
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