March 2, 2021
A strong feed mill performance in a difficult decade
Resisting COVID-19 far better than could be expected, the world feed sector simultaneously expanded, consolidated, and turned export-driven in a decade pockmarked by animal health setbacks.
By Eric J. Brooks
An eFeedLink Hot Topic
It has been a difficult ten years but the world feed sector is performing well under the circumstances. It grew around 2.6% annually in a decade of non-stop livestock, seafood, and human disease outbreaks. That's less than before but admirable, given the difficult circumstances.
In 2020, boosted by buoyant Latin American meat and seafood exports and China's strong economic recovery, world feed output resisted COVID-19's deflation. Despite the most serious recession in nearly a century, world feed output increased 0.9%, from an Alltech Global Feed Survey 1,176.7 billion tonnes in 2019 to 1,187.8 billion tonnes in 2020.
Granted, this is far less than the 2.6% rate feed output grew from 2012 through 2020 or the 4.3% annual growth that occurred from 2015 through 2018, when African swine fever (ASF) struck. On the other hand, this is impressive in a year when the world's largest economies contracted at their steepest rate since the Great Depression.
Species-wise, 1% higher broiler(334.6mt) and swine (286.4mt) feed output counterbalanced flat production of layer (128.8mt) and dairy (128.8mt) feed and a 1% fall in cattle feed (116.2mt). With some help from a 3% rise in aquafeed production (49.4mt), overall feed output grew by 0.9%.
Among feed types, layer feed saw exceptionally strong 4% growth in Asian nations –but this was more than just the substitution of cheaper proteins by consumers who had lost their jobs to last year's recession: In China, Vietnam and Philippines, ASF-induced hog inventory losses resulted in record pork prices and the substitution of eggs and poultry meat in place of pork.
The only bright spot seems to be aquaculture: Alongside a 50 million tonne upward revision in Chinese feed numbers, 2020 saw Alltech make a strong upward revision in both current and previous aqua feed production estimates.
Rather than 41 million tonnes, 2019's aqua feed output was revised from the original 41 million tonnes to 48.04 million tonnes. For 2020, despite being the increasingly economically and biologically constrained output of shrimp and salmonids, aqua feed output rose 3%, to a record 49.4 million tonnes.
For the years prior to 2019, this is mostly due to Chinese feed production. The decade-long trend of China having near-flat aqua feed output remains – but the annual 2010-20 production amount appears 30% to 40% higher than initially estimated.
For 2020 however, Latin America took over from Asia as aqua feed's growth driver. The turn of the decade saw booming Chilean salmon output and Ecuadorian shrimp output take over from faltering European salmonid growth and falling Asian shrimp output: A 20% decline in the 2020 shrimp output of both China (500,000 tonnes) and India (600,000 tonnes) was counterbalanced by aggressive, 17% expansion of Ecuadorian production (700,000 tonnes), as it took over from India as the top shrimp producer. With a new wave of South American aqua feed mills coming on stream, Latin America's 8% rise in aquafeed output outpaced Asia's 2% rise and flat production in most other regions.
Unfortunately, with aquafeed accounting for less than 5% of global milling output, a bright seafood outlook will not be sufficient to counteract the austere trends in world meat supply and demand. But both in China itself and through its purchases of Latin American meat, China came to the world feed sector's rescue, buying the lion's share of Ecuador's world leading shrimp production and a rapidly increasing proportion of global salmon exports.
Moreover, China's record-setting 5.15 million tonnes of pork imports coincided with sharply rising import volumes in Vietnam, Philippines, and Thailand. This created a Latin American swine export boom, where low production costs were further cheapened by falling Brazilian and Argentine currencies.
With China's recovering hog herd counterbalanced by shrinking pig numbers in Southeast Asia, Asia Pacific's hog feed output stayed flat. On the other hand, China's pork import binge caused Latin America's swine feed output to rise 7% on-year – and played a large role in Latin America's 4% feed output growth, the fastest of any major world region.
Thus, China's swine-driven, recovering agribusiness sector did much to stabilize world feed production, as did its demand-pull impact on South American feed and livestock, particularly its red meat sector and seafood growers.
Going forward, the future is both promising but uncertain. Can agribusiness get ASF and productivity limiting seafood disease outbreaks under control? Can South America continue avoiding the animal diseases which have decimated northern hemisphere livestock and aquaculture? Can COVID-19 be made irrelevant by some time in 2022? If so, the world feed sector can easily revert to the faster growth it took for granted in the late 1990s and 2000s.
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