In 2015, Spain produced 23.3 million metric tons compound feed, up 3.7 percent from 2014 and nearly 12 percent over the past decade.
While Germany remains the largest compound feed producer, Spain overtook France this year. However, Jorge de Saja, general director of CESFAC, Spain's confederation of compound feed manufacturers, expects the ranking trend to alternate in the years to come between the top three feed producing countries.
“Our expectation is that, in the next five years, the three countries will move between positions,” he says. “The Spanish feed industry has not considered ‘No. 1’ to be a strategic objective.”
While compound production is up due to strong growth in the animal protein sector, according to de Saja, perhaps the makeup of the companies producing compound feeds tells a more compelling story.
“In Spain, approximately two-thirds of animal feed does not enter the free market,” he said. “One-third [consists of] feed-producing companies, another third produces its own feed (integrated), and another third – a very solid one – is the cooperative production. The last two do not directly enter the market.”
de Saja attributes three contributing factors to the strength of Spain’s feed industry: supply chain savvy, a unique integration model, and strong export markets.
The resilience of the Spanish feed producer
According to de Saja, the Spanish feed industry has thrived due to its reliance and successes within Spanish livestock production over the past few decades.
Low agri-food commodity prices have hit European producers hard over the past decade. But, as de Saja notes, compared with its European competitors, such as France and Germany, Spain has always relied on imported raw feed materials, giving Spanish feed manufacturers a supply management advantage during such crises.
“Spanish production has always had a shortage of raw materials and [is used to] managing this deficit; while other countries, those who traditionally had less deficit or surplus, were not,” de Saja explains. “When prices began to increase, they were better prepared to entrepreneurially manage scarcity.”
For example, he says, Spanish feed producers are accustomed to quickly changing formulation matrices to adapt to market availability or price conditions, and they can utilize the unique financial risk management tools the country has in place.
Integration in Spain
Another factor contributing to the industry’s success is the business relationship between the Spanish farmer and the feed manufacturer, which de Saja feels is closer than in other countries.
“Poultry and swine integration is not a mere verticalization of the activity,” he says, noting that in Spain, integration is actually “a very close strategic alliance of partners, a very close alliance in particular between major swine producers and chicken producers, in feed manufacturing and animal protein processing and marketing.”
de Saja notes that the model produces good, cheap Spanish animal protein, and “has been very useful to ensure competitiveness of pork and chicken exports.”
“The farmer gets the feed produced, all production is bought to them at previously agreed prices, veterinary services are provided, as well as other related production inputs,” he explains. “Companies then transform, market and export animal protein products.”
An example of this success: Spanish poultry meat exports were up 10 percent in 2015, reports Magrama, the Spanish Ministry of Agriculture, Food & Environment.
Strong Spanish exports
The third factor is the ability of the Spanish export industry to take advantage of niche markets or export opportunities.
“The integration model has had much to do with the success of exports because of the ability to reach any market with a lot of flexibility, without any limitation,” de Saja says.
For example, de Saja said, when the Russian trade sanctions are lifted, Spain will be well positioned to open trade lines again, despite its location.
“We knew that when the veto would be lifted, we were going to come into in the market with strength. Unfortunately, veto has not been lifted, nor will in 2016. However, the Spanish pork exporters have consolidated much in the Asian market.”
Spain’s geography gives the country an important advantage allowing it to import and export through eight ports across the peninsula.
“2016 also looks good. At first we were a little more pessimistic. Now that half a year has elapsed, we think that it will be just as good, because exports to third [world] countries are going really well and I think we will reach levels very similar to 2015,” he says.