February 2, 2018
New countries, surprising species: World feed and livestock switch gears, seeking new growth drivers
China is being replaced by a multi-polar growth locomotive dispersed across the Eurasian landmass. Swine feed takes up the slack created by ailing poultry and seafood sectors. Are your assumptions about world feed and livestock being turned upside down?
By Eric J. Brooks
An eFeedLink Hot Topic
As we enter the final years of our decade, longstanding assumptions about the world feed market and global agribusiness are being replaced by surprising -and completely unanticipated- new realities. Regions that powered world feed demand growth are now holding back its overall expansion. Protein lines once considered the most promising are either stagnant or in retreat -but even so, feed output and its livestock end-products are expanding at their fastest pace in five years.
In preparation for the upcoming 2020s, a new cast of emerging nations taking up the slack created by all of the above. Most ironic of all, livestock lines considered unfashionable and regions considered 'mature' are powering a significant proportion of overall growth.
Based on figures from the annual 144-country Alltech Global Feed Survey, 2017 saw feed production expand by 3.6%, to 1.0697 billion tonnes from 1.0322 billion tonnes in 2016. For the first time since 2012, growth has now exceeded 3% for two consecutive years.
It the largest feed production increase since 2012 and significantly higher than the 2.5% annual expansion rate over the five years since 2012. -But while it may remind us of feed output expansion rates taken for granted prior to 2010, this revival in output is powered by new geographical realities and an unexpected mix of protein lines.
In percentage terms, Africa's torrid double-digit feed demand growth suddenly hit the brakes. After rising by a third from 30.3 million tonnes in 2012 to 39.5 million tonnes in 2016, Africa's feed output fell back 1% to 39.1 million tonnes.
This was unfortunate. Petro-economy Nigeria for example, saw its feed output rise a whopping 451%, from a million tonnes in 2011 to 5.51 million tonnes last year. Everything from political and economic problems in leading producer South Africa to low oil prices took their toll. Going forward with oil prices recovering and the world economy picking up, we can expect Africa to retake its lead in percentage feed demand growth. Even so, at under 40 million tonnes, Africa's 3.7% share of world feed production is insufficient to move world markets.
Curiously, Europe has taken over as the world feed demand. With Russia rapidly pushing out imports with fast-rising domestic meat production, European feed output rose 29.9% (to 37.6 million tonnes) in 2017 and at a 9.9% annual rate over the last five years. With some assistance from Turkey rapid 8.1% five-year average feed growth rate, Russia made European feed production rise at a 5% annual rate in the five years since 2012. While former Soviet states are becoming important markets in themselves, world feed production's real growth locomotive is found further to the south.
Asia is the past, future -but not current- driver of global feed demand. After leading world feed output growth for decades, Asian feed output grew at an unexpectedly slow 1.4% annual rate in the years from 2012 through 2017 inclusive -the second slowest growth rate of any region after North America. Asian feed output grew by a little over 7% over the past five years -but there was a time when this continent's feed output would expand by 7% or more in a single year.
Nowhere is Asia's slowdown in feed demand growth more pronounced than in China, a country which once powered world agribusiness growth. From 29.19 million tonnes in 1992, Chinese feed output rose at an annual 10.1% rate over 20 years, peaking at 198.3 million tonnes in 2012. -In the five years since then, it has fallen at an average -1.2% annual rate, declining to 186.86 million tonnes in 2017.

The reason has little to do with Chinese meat demand (which is higher than ever) but is more a side-effect of a slew of misfortunes. After 2012, China's pork, poultry and seafood production all went into steep recessions. With the artificially high feed costs that once undermined hog farming returns now under control, pork output is gradually recovering.
Unfortunately, nation's poultry and aquaculture sectors have not even started rebounding from the disease issues plaguing them. With 2018's projected chicken meat output and aqua feed production languishing 19% and 25% below 2012 levels respectively, the leading feed producer's output will stay below its 2012 peak of nearly 200 million tonnes for the remainder of this decade.
From a peak 21% of world feed output in 2012, China's share of world feed output has retreated to 17.4% in 2017. Its share of Asian feed output has fallen from 58% in 2012 to 48% this year.
Moreover, even when its troubled aquaculture and poultry sectors get their disease problems under control, Chinese feed demand can be expected to resume long-term annual growth of 2% to 3%, which is the same as the overall expansion in world feed demand. With its agribusiness sector approaching maturity, the decades of 5% to 10% annual Chinese feed demand growth are long gone.
The good news is that Asia will soon resume driving world feed production increases -even without China's assistance. While feed output flattened out in China after 2012, the past five years has seen it rise at a 4.1% annual rate in the rest of Asia -and the pace of expansion is increasing.
Powered by a 9% expansion in India, 2017 saw Asian feed output (excluding China) rise a whopping 8.1%. When one examines average annual feed expansion rates from 2012 through 2017, growth momentum has clearly moved southwards, to the India and Southeast Asian countries such as  Vietnam (10.1% annual growth over the past five years), Myanmar (46%), Philippines (8.1%), Indonesia (6.7%), India (5.0%) and Thailand (5.0%).
The collective 2 billion+ combined populations of India, Vietnam, Indonesia, Philippines, Myanmar, Cambodia, Thailand, Russia and Turkey exceed that of China by 50% --and their collective feed demand is now growing as fast as China's was in the 1990s and 2000s. China will always play a central role in world agribusiness. Henceforth however, India, Southeast Asia and Russia will matter as much as China does today.
Alongside new feed and livestock growth clusters, traditional protein lines are driving world feed demand growth much more than was expected. After rising by 10% annually for decades, everyone thought aqua feed output would continue increasing at a 4% to 5% annual rate. -How surprising then that aqua feed production has only increased at a 1.6% annual rate in the five years since 2012!
After peaking at 40.4 million tonnes in 2013, world aqua feed production fell back sharply to 37.5 million tonnes in 2014 and 35.5 million tonnes in 2015. Last year looked hopeful, with world aqua feed production partially recovering to 39.9 million tonnes -only to slump back to 37.3 million tonnes this year.
-But there is a good reason why you may have never noticed aqua feed's nasty recession: From 2013 through 2017, China' aqua feed output slumped by a  whopping 32%. At the same time, from 2012 through 2017, aqua feed output continued rising at a "business as usual" 5.8% annual rate in the rest of the world. Even so, 2017 saw aqua feed output outside of China fall 7.7%, from 23.5 million tonnes to 21.7 million.
Alongside China's steep 5% drop in 2017 aqua feed output, its production also fell in Vietnam (-9%), Indonesia (-17%), Taiwan (-9%) and Japan (-3%). Even so, rising seafood production in places ranging from India to Ecuador more than compensated for the decline in Southeast Asian aquaculture production -but not that of China.
Similarly, thanks to a serious dairy market recession, dairy cattle consumed 7% less feed in 2017 than in 2012. While dairy feed production increased 4.5% to 121.6 million tonnes in 2017, it will be at least two more years before the 130.7 million tonne record set in 2012 is broken.
Most surprising of all, though up 2% over 2016 levels, world poultry feed production remains 1% below its 2015 peak of 465.5 million tonnes. As was the case with aqua feed, broiler meat and broiler feed output continues to expand almost everywhere in the world except China. Moreover, bird flu has disrupted broiler production in dozens of countries, causing its output growth to slow down in the rest of the world.
Even so, much of post-2012 slowdown world feed production can be traced back to China. In fact, had China not encountered serious problems with poultry and seafood production, world feed output would be 25 to 30 million tonnes higher than it is today.
With fast-growing lines like poultry and seafood held back by a variety of issues, the world swine sector has come to the industry's rescue. 2017 saw hog feed production rise 5.5%, to 302.9 million tonnes, from 287.1 million a year earlier. -Nor is this a short-term trend: In the five years since 2012, swine feed's 6.8% average annual expansion rate exceeds that of poultry (2%), aqua feed (1.6%) or even that of aqua feed production outside of China (5.8%)
What is one to conclude from all these confusing (and highly unexpected) cross-currents? They imply that global agribusiness is literally "switching gears" from one set of growth drivers to another. China will always be important but it will no longer be the world's most exciting agribusiness market.
In China's place, a wide constellation of regions within the Eurasian landmass are coming to the fore: From pork-and-poultry driven Russia in the north to Indian poultry, dairy and seafood in the south. Beef-and-poultry driven Turkey is growing swiftly in Eurasia's western fringes. It is complemented by 600 million Southeast Asians poised to multiply their consumption of everything from chicken to yogurt, pork belly to seafood.
Similarly, one day Asian poultry and seafood producers will transcend the disease issues holding back their output. Together with dairy, they will steal the spotlight back from swine and beef cattle, which have been enjoying the most attention they have received in decades.
Keep In Mind The Following: While swine will give way to aquaculture and poultry as feed growth drivers, this ongoing transition from Chinese to broader Eurasian growth fundamentals is a far more important and lasting trend.
China yesterday. India, Vietnam, Indonesia and Russia today. Myanmar's day is coming -as is the prospect of mass Indian feed crop imports - All this and more is implied if one reads the sharp turns and inflection points contained in the last five years of feed market statistics.

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