January 26, 2024

 

Hamlet Protein CEO offers market outlook for 2024, expects slower growth

 

Hamlet Protein chief executive officer Erik Visser recently shared about key market drivers and developments at the start of 2024.

 

Animal protein production, and with it, the production of animal feed, will keep growing in 2024 but at a slower pace.

 

South American and Asian markets are better positioned for growth than mature markets in Europe and North America. Animal diseases and geopolitical matters can potentially strongly impact the industry, and environmental, social and corporate governance (ESG) regulation will play a more prominent role in business decisions.

 

Feeding a growing world population in an efficient and sustainable manner will be the main focus for all market segments.

 

"Markets vary greatly across species and geographies. On a consolidated level, we foresee a continuous growth in animal production in 2024, but at a slower pace," Visser commented. "In Europe regulation is having a strong impact on the entire supply chain. Not only on the number of animals reared in certain geographies, but also on the conditions on farm in terms of environment and animal welfare, as well as on the supply of raw materials. Where poultry consumption is expected to grow, we foresee a decline in beef and pork."

 

Visser pointed out that economies in Asia "are under pressure which affects consumer spending".

 

"Especially in China, we expect to see continuous pressure on animal numbers if consumption levels do not return to historic levels," Visser said. "Poultry is expected to grow in China, with growth in pork expected in other Asian geographies.

 

"North America has been seeing pressure on monogastric numbers, which is expected to continue in 2024, until the market rebalances. Mexican growth depends strongly on the US, both in terms of supply of feed and consumption of animal protein. On the other hand, Canada relies on US consumption for its' pork export at the same time the US will be looking at Canada for poultry export potential."

 

 Brazil is a "powerhouse" in South America, Visser noted, highlighting that growth in the region depends on export opportunities.

 

"Development in Chinese demand would drive sales opportunities for pork, whereas poultry exports will also depend on the US' market position," he said.

 

"A healthy supply chain should allow all market segments to generate a healthy profit. That means from farm-to-fork. That has not been the case for all markets in 2023," Visser added.

 

"As 75% of the cost of production comes from nutrition, animal protein producers will closely monitor developments in global feed commodities. Corn, soy and wheat make up a large portion of the diet and their price levels will be impacted by El Niño – especially when looking at South American harvests; the continuous war in Ukraine that reduces exports from the region; a possible escalation of the Israel–Hamas conflict spilling over into a regional war; regulation on supply chain in the EU and new policies adopted by the recently elected Argentinian president to name a few."

 

However, feed costs have dropped last year, despite being at "relatively high levels," Visser said.

 

"(We) expect a further decline in 2024," he remarked. "Similarly, freight costs have come down last year, and we expect to see a further decline in the new year."

 

As for ESG, there has been more focus on sustainability "from consumers and governments alike" in recent times.

 

"With it, sustainability has moved from being 'a nice to have' in corporate strategies to a license to operate," Visser said. "The market is increasingly expecting companies to take responsibility for impacts across their whole value chain, especially related to climate and human rights. At the same time, investors and financial institutions will increasingly base their financing decisions on ESG performance.

 

"Europe is taking the lead in implementing a wide range of ESG regulations and companies will have to invest time and money to keep up with a changing landscape. That investment may generate an inflationary effect that will need to be priced in.

 

"We also see a broad range of voluntary industry standards emerging, some of them aligned with government led regulation, others driving local interests. Not all of them have an objective way of measuring impact yet. Across the value chain, companies need to manage compliance and market communication and collaborate to meet requirements."

 

According to Visser, African swine fever (ASF) and avian influenza remain key challenges for animal protein producers this year, and these will cause "uncertainty on feed volumes".

 

"Swine numbers reduced strongly in Asia in 2023, and producers will continue to feel its effects in 2024," he said. "As long as a scientifically proven vaccination is not available yet, ASF has the potential to affect the industry, particularly in those regions where biosecurity and farm management are still underdeveloped. Markets that are impacted by ASF will see small operations and backyard farming disappearing, leading to further consolidation. The European swine producers will support all efforts to control ASF — that continues to emerge in wild boars across the continent — to protect the industry.

 

"We do expect to see further outbreaks of avian influenza across the world and will closely watch Brazil as the world's largest poultry exporter."

 

Politics will also have an impact on global agriculture.

 

"With elections in 60 countries, representing half the world population, 2024 will be an incredibly important year for political institutions, policies and possible geopolitical tensions," Visser stated. "The European parliament, India, Mexico and the US, to name a few powerhouses, will all potentially see a different leadership emerge.

 

"Our industry, just like any other, benefits from clear and consistent policy making and a free flow of goods and people to drive business. That gives entrepreneurs and investors the confidence to invest for growth. For export business to thrive, relationships between countries need to be stable and friendly so companies can compete on quality and service."

 

The labor market, in general, coulld remain tight in industrialised markets.

 

"This will not only put pressure on salary levels; the ability to recruit and retain will also impact the execution of strategic plans across the industry," Visser explained. "A changing political landscape may result in further pressure on immigration, which will be felt in labor intensive industry segments like farming and processing, and may lead to disruptions in the market.

 

"The animal protein and animal nutrition industries see an ageing workforce. It is critically important that a career in these segments is considered an attractive option for students and young professionals. The sector, and individual companies as well, needs to engage in employer branding, defining a clear purpose that new hires can commit to. Feeding a growing world population in a sustainable manner creates plenty of opportunities for a strong messaging."

 

"Providing the right nutrition in the first life stage determines the overall lifetime performance of the animal," Visser said. "With increasing pressure on the use of medication, and with more and more countries banning the use of antibiotic growth promoters, we expect the focus on specialties for young animal nutrition to continue to grow in the new year."

 

These conditions lead to opportunities for Hamlet Protein to develop its global leadership in its respective market.

 

"(We) will use that position to further increase our presence in key markets with a focus on swine, poultry and ruminants," Visser said. "We estimate the market size of SSP at 1,6 million metric tonnes, and expect the market to continue to grow at an average of 3-4% year-on-year. This market growth is supported by macro-economic drivers such as a growing world population, increased regulation and further market consolidation. At the same time, we will take share of animal protein diet sources like plasma and fishmeal to further increase our volumes.

"At the end of 2023, we came out with new research data on protein kinetics. The faster protein is digested and absorbed, the more of it is available for growth. Our research, which was done in cooperation with renowned universities, clearly shows that Hamlet Protein provides the fastest protein source available in the market. Our teams will share this information with producers and work with them to formulate more efficient diets.

 

"Sustainability is core to Hamlet Protein's strategy. We have created a clear ESG roadmap to comply with existing and newly introduced laws and regulations and meet industry standards. We will continue to work with our suppliers and customers and assume our responsibility towards creating a sustainable supply chain on all levels.

 

"Hamlet Protein will continue to invest in bringing the best solutions for early life nutrition to the market. That means investing in the best technical and commercial talent, driving efficiency at our plants and working alongside our business partners to provide solutions for todays and tomorrow's challenges."

 

"We feel confident that we are well positioned to drive further growth in 2024," Visser, who is Hamlet Protein's CEO since 2019, concluded.

 

- Hamlet Protein