Feed Bussiness Worldwide: March 2015
Turmoil, transformation and recovery in the world feed sector
by Eric J. BROOKS
It has been an interesting and most surprising time for the world feed sector. In 2014, China's feed output fell for a second consecutive year while America's production increased. Moreover, since 2011, counter to intuition, the American feed sector's cumulative average growth rate (CAGR) of 1.4% actually kept pace with China's relatively weak 1.5% annual increase over the same time. Over the past few years, a combination of bad weather, disease outbreaks, deteriorating economic conditions and emerging market growth shifts have made for an interesting time.
What may catch many observers by surprise is that from 2011 to 2014 inclusive, world feed output expanded at CAGR of 3.9%, which is higher than its average rate of slightly over 3% seen in the first decade of the 21st century.
However, from 2012 to 2014 inclusive, the rate of growth greatly decelerated to a mere 1.3% annual rate. The reasons for this sharp slowdown can be captured in a handful of words: Chinese chickens, US cattle, inflation, recession and Brazil.
Grain costs, bird flu turn against feed
At the turn of the decade, low feed prices and a fast, post-world recession recovery enabled agribusiness to grow quickly in 2010 and 2011, particularly in developing countries. Thereafter, several factors turned strongly against feed demand growth.
First, record high prices for corn and soy in 2012 and early 2013 slowed down the growth in world meat consumption, thereby putting the brakes on feed demand's expansion. Neither feed mills nor livestock farms were prepared for the cost of key feed inputs to more than double from 2010 to 2012. In both rich and poor countries, meat demand and feed input costs were impacted accordingly.
Second, in China, food safety scandals overlapped with two years of recurrent H7N9 outbreaks, which proved lethal to both chickens and people. At one point in 2013, for example, the required mass culling needed to bring bird flu under control reduced the country's broiler population by over 25% in less than two months.
China's persistent bird flu crises were both preceded and followed by food safety scandals involving gross overuse of antibiotics and banned antivirals in broiler feed, the recycling of stale, discarded chicken meat into fast food and a mass dumping of countless dead, diseased pigs into China's largest rivers. These crises had barely abated when China's economy turned in its worst performance in over two decades.
Although China's feed output had previously been expanding by 4% to 8% annually, these events seriously dented the leading producer's feed consumption. According to data from four years of Alltech Global Surveys, from 81 million tonnes in 2013, combined broiler and layer feed output fell to 65 million tonnes in 2014.
To this can be added an unprecedented levelling off of China's aqua feed output. Disease outbreaks, bad weather and high fishmeal prices produced a rarity: aqua feed output fell by 5 million tonnes or 21.7%, from 23 million tonnes in 2013 to 18 million tonnes in 2014.With China accounting for two-thirds of world aquaculture output, this profoundly dented the production of the fastest growing feed line.
Not even including the troubles of its depressed hog sector, the poultry and aquaculture production problems of the last year has probably cost China's feed mills about 20 million tonnes in lost production last year alone.
In all, since its poultry sector troubles began in early 2013, China has probably lost close to 25 million tonnes of feed production. Moreover, as the attached graph shows, these unprecedented downturns in China's protein lines played a great role in virtually halting the growth of world broiler, layer and aqua feed output.
The full article is published on the March 2015 issue of FEED Business Worldwide. To read the full report, please email to email@example.com to request for a complimentary copy of the magazine, indicating your name, mailing address and title of the report.