Eight Wonders from the 2017 Alltech Global Feed Survey
1. Barn to bank account
2. Agricultural businesses
3. Europe reforms
4. Heading South to India
6. Demand for sustainability
7. The world's Favourite Meat
8. Pampered Pets
India delights in dairy, fish and poultry
India is expected to soon pass China in total population, making it the most inhabited country on the planet. Its economy is projected to grow at 8%, thanks to the Goods and Services Tax, according to Forbes. This is strongly reflected in the country’s high dairy feed production which indicates the populace’s love of milk, particularly as a source of protein for the roughly 40% of Indians that are vegetarian. India is second in Dairy feed production to the US, up 14% over last year, and overall No.6 in feed production.
India’s fish farming is exploding, egg consumption growing and consumption of chicken increasing substantially over the past 5 years, although it saw a slight decrease in 2017 due to external factors.
India is clearly the shining light in farming’s future.
Barn to bank account:
Feed prices directly impact the price of food.
The cost of our food is directly affected by the cost of the food that our food eats: approximately 70% of the cost of producing milk, meat and eggs is determined by the price of feed, which in turn is driven by the price of grains and vegetable proteins such as soybeans. This year the GFS showed global drops in the cost of feed for pigs (5%), laying hens (7%) and chickens (7%) compared to the previous year. Although these price drops come at the expense of margins for crop farmers, they reduce the cost of raising animals.
Unfortunately, lower feed costs don’t translate immediately to price cuts at the grocery store: decreases vary significantly by region, and more importantly, it takes time before the benefits trickle down to store shelves.
Agricultural businesses are growing but consolidating.
The feed industry is showing both rationalization and consolidation. Over the last five years, while global feed production has grown steadily at 1.6% per annum, there has also been a drop in the number of feed mills (7% in the last year). Fewer mills producing more feed reflects the continued consolidation of the feed industry.
This consolidation parallels the growing demand for animal protein which is expected to increase 73% by 2050 as incomes rise, and encourages farmers and feed-millers to find more efficient ways to produce milk, meat and eggs.
The European Union (EU) established the Common Agricultural Policy (CAP) in 1962. Designed to ensure food security for the continent, it was spectacularly successful, leading to excess production and what the press termed “mountains” of butter and “lakes” of wine and milk, as farmers increased the productivity of their farms in response to attractive prices. As a reaction to this the EU capped production through quotas, which led to further market distortions.
A substantial reform in the last two years restructured CAP payments, so that European farm prices are now linked to global prices. Quotas were eliminated, but the EU maintained a single payment subsidy to encourage farmers to remain on the land.
China: Every year is the year of the pig.
China and the U.S. account for more than one-third of global feed production, but there are notable disparities in their focal areas: China leads in feed for pigs, chickens and aquaculture, while the U.S. leads in beef and dairy.
China produces more than 25% of the world’s pig feed: 75.5 million metric tons (mmt), double the next largest producer (the U.S.). However, the Chinese market is changing dramatically, as their government moves to address food safety, pollution and other environmental concerns. A disproportionate number of these problems have originated on smaller farms, many of which are being forced out of business.
It is estimated that the number of sows in China has decreased by nearly 40% over the past three years. Still, pig feed and pork meat production statistics have been relatively unaffected. The remaining farms are larger and more efficient, and have increased their productivity to pick up the slack. Other countries, particularly the U.S. and Brazil, have increased exports to China to meet the demand for pork by Chinese consumers.
Fish: Riding the wave of consumer demand for sustainable, healthy protein
Last year farmed fish production surpassed wild-caught fish for the first time. Aquaculture is the now fastest growing sector in the feed business, up 12% in 2016. As the health benefits of omega-3 fatty acids (particularly DHA) have become known, the demand for fish has increased. Aquaculture will be an essential part of meeting prosumers’ demands for sustainable fish.
Chicken: Challenging pork for the title of 'World's favorite meat'
There are more than 50 billion chickens raised each year in the world. Domesticated about 3,000 years ago, the chicken is easy to raise and indigenous to most cultures and cuisines. Requiring fewer natural resources to produce than any other land species and with a short lifecycle, chicken production has grown rapidly. Large scale farms now dominate the industry, accounting for more than 75% of production.
Growth in chicken production has driven the total amount of feed required, which is not yet being offset by genetic improvements in chicken digestion. According to the USDA, the world broiler meat production was 89.5 million tons in 2016 and is set to increase to a record 90.4 million tons in 2017. Continued growth will make chicken the world’s favorite meat within the next 5 years, moving pork into second place.
Pampered Pets: Food demand reflects prosperity.
Pet food production statistics are not generally released, but there are ways to estimate production numbers. Seven of the top 10 producers are based in the U.S., and the U.S. produced an estimated 8.1 million metric tons (mmt) of feed for the pet industry. Brazil was second, with an estimated 2.5 mmt. Collectively, the EU produced over 8 mmt.
Pet food trends mimic those of the food business in general, and spending on pet food mirrors economic development and progress. The pet food industry is growing robustly, with a 22% increase over the last five years (4% per annum). Additionally, it should be noted that consumers are trading up to premium feeds, so the value of pet food is increasing even more than volume.