USA feed market: Tempered growth

There were significant changes among states and regions, including pig feed growth in Minnesota and broiler feed cutback in Arkansas.

Clayton GillRoy Leidahl

January 2, 2008

The USA continues to lead the world in production and consumption of animal feed, outpacing even the combined production of the 25 member states of the European Union by around 10 million metric tons of feed products. The USA produces a third-again to half-again as much as China, next in rank in industrial feed production. Overall, the feed industry in the USA remains stable and growing, supporting expansion of production in red meat, poultry, and dairy industries that in aggregate is averaging more than 1% per year.

However, the food and feed trade of the USA is increasingly intertwined with that of Mexico and Canada, and increasingly dependent upon export markets, especially for poultry meat, pork, and beef. There is also growing competition from the burgeoning fuel ethanol industry for corn, the main carbohydrate energy source for most feed products. Moreover, potentially human lethal diseases of food animals, BSE and highly pathogenic avian influenza or ‘bird flu,' hover over domestic consumer demand and export market demand for key food products that depend upon large volumes of manufactured feed. These factors together represent increased riskand greater volatilityin feed demand. They can contribute significantly to changes from year-to-year and in the longer term to the USA's feed potential.

Feed potential is the potential use of manufactured, industrial, or formula feed expressed in short tons on a complete feed basis, calculated for specific types of farm animals from state-by-state livestock and poultry inventories and other production data received from the US Department of Agriculture. Feed potential does not represent actual tons of feed products, but rather estimates the amount of complete feed needed for feeding livestock, including swine, beef cattle, dairy cows, broilers, laying hens, turkeys, etc, per location. FEED MANAGEMENT's estimates of feed efficiency and animal weight, used in calculating feed potential, were updated with the help of a team of nationally recognized experts.

Broiler feed alone accounts for nearly a quarter of potential feed consumption in the USA and, combined with egg layer and turkey feeds, represents around 38%. Potential feed tonnage for pigs ranks next at nearly 22%, followed by feeds for beef cattle at about 21% and dairy feeds at a little over 19%. Aquafeeds for catfish, trout, and shrimp are increasing in tonnage, but still amount to less than 1% of the US total. FM estimates that the USA's total feed potential for the main food animals receiving formula feedswine, beef cattle, dairy cattle, and poultryincreased to nearly 188 million short tons in 2005, about 0.5% over 2004.

Shifting challenges ahead

The twin long-term trends of increased consolidation of ownership and increased vertical integration continue to reshape the North American feed industries in 2006. However, there also is growth in local, organic, and increasingly specialized and branded animal production, which represent expanding niche markets for feed products. ‘Safe feed-safe food' is the mantra of feed industry leaders in the USA as they help to organize international participation in global food and feed trade safety standards.

Clouding the view ahead for the USA's feed industry are new worries over animal diseases. US beef exports continue to be hurt by occasional, but increasingly mysterious domestic BSE outbreaks, although there appears to be little effect on US consumer demand. The H5N1 virus poses a risk to US poultry production, although, based on experience in Europe, its main threat may be to consumer demand for poultry meat and eggs.

While the USA is a leader in aquaculture technology, including closed-cycle recirculation systems for shrimp and tilapia as well as open-ocean cage rearing of high-value carnivorous species, aquafeed production remains less than 1% of total US feed potential. The most significant species, catfish, is growing slowly in a smaller number of larger commercial operations, but still represents only about 750,000 tons of actual feed production and less than 1 million tons of feed potential. Nonetheless, aquafeed is the fastest growing sector of the global feed industry, and an increasing number of US-based companies are involved in both domestic and foreign aquafeed and integrated aquaculture projects.

Another challenge is looming larger over the US feed industry: Competition for corn, the USA's main feedstuff, from burgeoning ethanol plants, along with growing demand from foreign feed makers, especially in Asia. Also, newer ethanol plants are able to extract more energy from corn, thus increasing protein content of the feedstuff co-products, like DDGS, which may make them less attractive in pig and poultry feeds. The coming years are likely to see more innovative approaches to co-products from industrial processing of both corn and soybeans.

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Pig feed: Stronger overall, with rebound in Minnesota and key western states

Total swine feed potential showed a gain of about 1.5% from 2004 to 2005, rising to nearly 41 million short tons, while the USA's total number of hogs fed rose to a record 100 million (see table 'Swine 2005'). Iowa, by far the top producing state, fed more than 28 million hogs, which also was a record, although this represented only a 1% gain over 2004. With increasing production efficiencies, the rise in Iowa hog output resulted in only a slight rise in feed potential to a little over 10.5 million tons. By contrast, the second ranking pig state, North Carolina, showed almost no change in the number of hogs feda little over half the number from Iowaand virtually unchanged feed potential tonnage.

The nation's third largest pig producerMinnesotarebounded from 2004 into 2005 with an increase in hogs fed of about 6% and a corresponding rise in feed potential of 5%. Next in rank was Illinois, with a loss in both hogs fed and feed potential of about 4%.

The key hog producing states in the South Central and West regions all expanded production and feed potential in 2005: Oklahoma, Texas and Utah, with Colorado, and Arizona growing the fastest. Arizona hogs fed increased 18% in 2005, supported by a 15% gain in feed potential. Colorado hogs fed increased 10%, with feed potential up 9%.

The data show that the steady consolidation of the USA's commercial pig farming operations continued through 2005, with a loss of another 3% of operations last year. The five-year trend reveals the disappearance of more than 30% of individual operations, with more than 1,000 gone from Iowa alone since 2000. Over the same period, however, the record shows that hogs fed in Iowa have risen significantly compared to five years earlier.

Beef feed: Slide halted, major gains in mid-ranked states

Total beef feed potential in the USA slipped by more than 4% in 2004, feeling the effects of North American BSE outbreaks. But the slide halted in 2005, with feed potential stabilizing at nearly 39 million short tons (see table 'Beef 2005'). Numbers of beef cows fed and replacements were off slightly from 2004, with little change in states with the largest cow inventoriesTexas, Missouri, and Oklahoma.

There were gains in grain fed cattle in the biggest stateTexas (+1%)but losses in the next ranking beef feeding states of Kansas (-1%), Nebraska (-1%), and Colorado (-5%), with corresponding changes in feed potential tonnage.

The gainers in beef feeding in 2005 included a number of mid-rank states, especially Iowa, which was up 9% in grain fed cattle and 8% in beef feed potential. Likewise, Arizona increased grain fed cattle by 7% and feed potential by 6%. By contrast, there was little change in grain fed cattle or beef feed potential in Oklahoma or South Dakota, but California was off in grain fed cattle and feed potential by nearly 3%.

The five-year trend shows a general downturn in beef cow inventories in the leading states. For grain fed cattle, the major producing states of Texas and Nebraska had trended down 3-5% since 2000, while Kansas was up about 3% and Iowa, California, and Arizona showed double-digit growth.

Dairy feed: Overall demand steady, but from fewer operations nationwide, with West still expanding

Dairy feed potential nationwide was higher by about 1% in 2005 versus 2004, with much of the growth attributable to expansion in the top dairy state of California (see table Dairy 2005'). The national dairy herd expanded slightly, but the number of operations declined by about 4%, continuing the long-term trend of larger operations with fewer owners.

As in previous years, the greatest consolidation occurred in the North Central region, with Wisconsin alone losing 600 individual operations, and the region losing 1,860 or nearly 5%. There was also a 7% decline in numbers of operations across the South Central region. Nonetheless, milk cow numbers held fairly steady across most states where operations consolidated. Other top dairy states of New York and Pennsylvania also had fewer operations in 2005, but no change in feed potential.

States in the West region showed continued growth of 2.6% in dairy feed potential, leading all other regions. Dairy feed potential in California grew by nearly 150,000 tons or 2%, while Idaho added more than 140,000 tons or nearly 7%. California alone represents more than 20% of the USA's dairy feed potential, while the top five statesCalifornia, Wisconsin, Idaho, New York, and Pennsylvaniahave more than half of the country's total dairy feed potential.

Five-year trends of milk cow inventories and dairy feed potential show the continued rise of states in the West, but with the decline slowing or stemmed in many North Central states and leading North Atlantic states. The South Atlantic and South Central states offer mixed trends, with little change in Texas and reduced numbers but increased feed potential in Florida and Georgia.

Poultry feed: Risk waiting in the wings

Growth in total poultry feed potential slowed again in 2005, increasing by less than 1% over 2004, which year showed a rise of 2% over the hiatus of 2003. Results for the sector were mixed, divided among broiler, layer, and turkey feeds (see table 'Poultry 2005').

Broiler chicken consumption might have benefited more than pork in 2005, due to US consumer fears of BSE. However, the spread of human-lethal avian influenza out of Asia into Europe may have cooled some domestic demand, while continued expansion of Brazilian broiler exports hurt foreign demand for US product. Nonetheless, Russia returned as a major destination for US poultry meat. Overall, broilers raised increased 1.5% from 2004 to 2005, with a corresponding increase in feed potential of about 1.4%. The billion-bird-plus' broiler-producing states presented mixed results: Georgia, up 2% in broilers; Arkansas, off 2%; Alabama, no change. With only a little over 10% of Georgia's broiler output, Pennsylvania showed a surprising increase of 10% in broilers raised.

The national egg laying flock and its feed potential increased only slightly from 2004 to 2005, but there were changes among the leading states. Iowa, with the largest number of layers, was the largest gainer, with layer numbers up 12%. The second, third, and fourth ranked states of Pennsylvania, Ohio, and Indiana showed little change, while fifth-ranked California had a flock reduction of about 5% in 2005.

The total number of turkeys raised was off about 2% in 2005, with a corresponding loss in feed potential. Losses were about 4% in the leading turkey state of Minnesota, with nearly 8% loss in second-ranked North Carolina, but with a slight increase in third-ranked Arkansas. There was a nearly 5% loss in next-ranked Missouri and 6% loss in Virginia.