FBA Issue 16: September / October 2007


LeanBACK: The changing supply and rising demand for animal protein



As fast-growing Asian countries approach first-world living standards, their demand for meat grows much faster than population or income. FBA interviewed Thomas Lee Bauer (TLB), Head, Strategic Advisory & Research for Rabobank International to better understand how feed raw material shortages, trade liberalisation and emerging innovations are restructuring Asia's supply, demand and production of animal protein.



FBA: What are the major issues and challenges in the animal protein supply chain, both on a global level and with particular emphasis on Southeast Asia?


TLB: World food demand is going to grow more than 50 percent in the next two decades and two-thirds of that increase will be in Asia. Basically, the bulk of it is going to be pork, poultry and beef. Because of China, the main [animal protein] market right now is pork but poultry is the fastest growing part of the overall protein market.


I think the biggest challenge is, number one, feed supplies and how emerging biofuel demand is shifting where the feed supplies will be coming from. Integrators are aggressively looking at the alternative byproducts coming out of biofuels industry and how they can capture that market since those are competitor products right now. Many integrators such as Cargill or ADM have linkages to these biofuel players but there is also quite a lot of experimentation going on. So there are still many opportunities for entrepreneurs to come in and exploit alternative feed sources to offset the high cost of traditional feeds.


The other area that is of strategic concern is aquaculture. From an economic point of view, it is an easier way to generate protein because aquaculture's feed conversion ratios are relatively high. Also, Asia because of its shorelines and access to the oceans is a natural fit for it.  China is the number one player in aqua culture and unlike other neighbouring Asian countries, its aqua culture production has already surpassed wild catches. The big issue is sustainability and the price of fish meal ¡¡¡¡¡¡ì¬¬Caquaculture is still dependent on what is being caught in the wild out in the ocean.


Looking at Asia compared to the rest of the world, in China, you have more of a grain [growing] base and so, over the long term, you will have more access to beef in China than in Southeast Asian countries which are short of land. In Southeast Asia, the animal protein side will not be competitive with China for commodity products. So they need to focus on high-end products such as high-end [chicken] breast meat for export with halal certification.


Globally, you are also going to see some shifts in trade. With trade liberalisation, there are going to be production shifts so that while the US is a great corn producer, it is not that great [competitive] a broiler producer. The US is better placed to produce biofuels from corn and other parts of the world are better positioned to produce poultry. A country like Malaysia has great export potential in poultry.



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