January 29, 2016
The world feed sector shifts gears
By Eric J. BROOKS
An eFeedLink Hot Topic
- Once fast growing markets are decelerating but ascending frontier countries are taking their place, making for more balanced overall growth
- Southeast Asia, Eastern Europe and the Indian subcontinent will drive future growth
- The low meat consumption in countries with rapidly growing feed output still cannot fully counterbalance large, maturing markets like China, resulting in a statistical deceleration
- For the first time, within Asia itself, feed demand is now growing more rapidly outside of China
When one analyzes five years of Alltech Global Feed Survey statistics, we can see that world feed and livestock is transitioning away from the growth patterns and parameters taken for granted during the previous decade.
Although world feed production increased by 11% in the five years from 2011 to 2015 inclusive, the rate of increase is clearly decelerating. From 5.5% annual growth in the late 2000s to 3.4% since 2011. Many expected feed production to keep growing at its former pace. Instead, rather than totaling over 1.1 billion tonnes by this time, world feed demand only amounts to 995.57 million tonnes.
The resulting 2015 year increase in feed production is far below its 3.4% annual rate of the past five years, or the 5%+ rates taken for granted in the previous decade. This slowdown is partly caused by a long-term deceleration in developing country meat demand growth, and also by recurrent economic woes that have dogged the world economy ever since the late 2000s financial crisis. It is also a symptom of the world's agribusiness 'shifting gears'. That is, the growth of some regions slow down, and others, too small to mpact overall numbers are accelerating.
China, which led world feed demand growth for 30 years and boosted its own output more than the rest of the world at one time, is now a stagnant deadweight, having increased by an average of 0.8% annually from 2011 to 2015 inclusive (compared to the mature US feed sector's annual 1.3% increase over the same time).
Against China's faltering 1.35 billion market, there are over 1.6 billion people in fast growing markets within the Indian subcontinent, Eastern Europe and Middle East. India, Russia, Bangladesh and Turkey and their 2011 to 2015 national feed output increased by an average of 7.6%, 10.4%, 9.3% and 22.4% respectively.
Southeast Asia's 600 million people have also taken over from China as a growth driver, with 2011 to 2015 feed output rising in Thailand, Indonesia, Vietnam and Myanmar by 9.6%, 11.5%, 13.6% and 13.5% respectively.
The problem is that while the 2.2 billion people in these fast growing countries are nearly double China's population, they eat a lot less meat. India nearly equals China's population but currently only consumes about a tenth as much meat per person.
Similarly, India overtook Mexico to become the world's 4th largest feed producer, but even so absolute feed numbers can be misleading: With 120 million people but 99% of India's feed production, Mexico's per capita meat consumption of 66kg is 10 times higher than India's.
All this is also true of Indonesia which has at most, a fifth of China or Mexico's per capita meat consumption and of Thailand and Philippines, where the average person eats a fifth less meat than his Chinese counterpart.
Until the meat consumption of these new, emerging markets approaches that of maturing markets like China, their more rapid feed expansion will continue to be offset by a low meat consumption starting base, making for slower world feed output growth.
But even so, the last five years has seen a major shift in feed output growth, particularly within Asia itself.
We also see large shifts in regional growth rates. Asia, once the perennial leader in feed expansion, recorded a mere 0.4% growth in 2015. This however, reflects Chinese feed milling's five years of stagnation, as its feed production only grew by 0.6% over this time.
In Asia excluding China, from 2011 to 2015, feed production expanded at a very high average annual rate of 7.6%, which 7.5% to 13.5% growth in places like Thailand, Indonesia, India, Vietnam and Bangladesh only partly offset by static feed and meat demand in mature economies like Japan and South Korea.
But we are in a situation where, for several years, growth will be below trend. Until China's economy recovers, until meat demand in faster growing Asian regions rises high enough to make their large percentage increases in feed demand statistically weighty, the years from now to 2020 will mostly see below-trend feed output growth, before recovering near the turn of the decade.
According to International Feed Industry Federation (IFIF) estimates, from now to 2050, feed production will grow by a little over 2% annually. This implies that from now to 2030, we can expect feed output to continue growing by around 3% annually, or twice as fast as the world's population.
The truth however, will be more nuanced and detailed: Within two decades, most of East Asia's feed demand will be growing as slowly as that of the west. On the other hand, regions such as Africa will see their meat demand peaking at that time while the Indian subcontinent and parts of the Middle East will still have much pent-up growth left.
Alongside deceleration the shifting of growth momentum from one continental region to another, what we are also witnessing the beginnings of a more balanced world feed (and agribusiness) growth. Everywhere from Russia to India, Myanmar to the Middle East, Indonesia to Bangladesh, meat consumption is rising at rates comparable to how China did over the last thirty years.
China will remain a promising market but on present trends, a day will come when the world soy market is as influenced by Vietnam or India as it is by China today. Now however, is the time for agribusiness suppliers to rebalance their marketing strategies towards feed and livestock's new growth frontiers.
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