Production volumes by commercial and integrated feedmills around the world have shown remarkable resilience in 2007, according to latest accounts assembled for the exclusive feed database maintained by Feed International. Despite handicaps ranging from ingredient price rises to animal disease, the total tonnage produced last year by all industrial sources achieved an increase of more than 3.5 percent.
Figure 1 illustrates how the annual total of 680.4 million metric tons estimated for world animal feed production in 2007 compares with recently revised figures for earlier years. Our database suggests the global volume has increased by 14 percent in the last 10 years and by 11 percent since 2000.
As always, we must thank all the organisations and individuals who have helped us compile and verify tonnage from every national feed industry of note. Feed International is proud to have received such support from them once again. This year, for the first time, we have also had valuable assistance from the membership of the International Feed Industry Federation (IFIF). It has more than compensated for the fact that industrial feed statistics are not well-documented internationally, something which the federation itself is currently working to address.
Effect of grain prices
Expensive cereals have become a fact of life for all of us, but the remarks put forward by the various sources suggest that the jump in grain prices may even have boosted global feed growth last year. One example came from the European Union. The most recent analyses say the output of feeds in the EU-27 community of Europe in 2007 seems to have increased to 147 million tons after most member countries saw an expansion of demand, especially during the last three months. The extra performance in that quarter was attributed to the high price of cereals and other raw materials motivating livestock farmers to buy a complete feed from an industrial mill rather than producing it for themselves.Europe (inside and outside the EU zone) and Asia are now almost neck-and-neck in terms of the amount of feed they produce annually, as shown by the pie-chart in Figure 2. However, the region comprising North and Central America continues to have the largest single share of world production at around 31 percent compared to all-Europe's 26 percent and Asia's 27 percent.
In line with our usual practice in these annual reviews, we have identified the places we consider to be the 10 largest in the world for feed volume in 2007. This list (Table 1) treats the EU-27 as a single entity. The 10 territories collectively accounted for 553 million tons of production last year. Supplying over 81 percent of all industrially made feeds worldwide. The biggest four (USA, EU, China and Brazil) provided about 437 million tons or 64 percent.
Reports from each of these countries or communities have spoken repeatedly of increases in mill output. A statement released by Dr Ariovaldo Zanni, chief executive of Brazilian feed industry association sindicato nacional da indústria de alimentaçäo (Sindiraçoes), confirmed a 15.4 percent growth in members' production for January-September 2007 and spoke confidently of an 11 percent increase for the year.
An early forecast from the federation had been for Brazil's year-2006 total of 48.36 million tons to rise by 6.5-7 percent after growing by 8.6 percent between 2005 and 2006. The relative downturn was thought likely mainly because animal disease had affected the country's international trade in meat. Feed manufacturers nationally have gained this year from a recovery of broiler production (depressed in the first half of 2006 by avian influenza) in response to a strong export demand for Brazilian chicken, together with a parallel lift from exports for the pig and cattle businesses. Dr Zanni also noted a higher feed requirement from dairy herds as producers began to receive better prices for their milk products.
As he pointed out, however, increased production has not meant extra profits for the mills. They have had to pay more for energy, labour and transport as well as grains and additives included in their diet range. Poultry units remain the main customers for compound feeds in Brazil, at about 55 percent last year while the pig sector took 26 percent and cattle about 12 percent.
Reduction in animal inventory
Industrially made compounds are thought to have represented 63 million tons of total feed volume recorded in China for the first nine months of 2007. Our sources have reported that annual production seems to have increased by about 3 percent to 84 million tons this year, from 81 million tons in 2006, despite the reduction in animal inventory caused by poultry and pig diseases. The sources say losses occurred mainly on backyard sites that were not using feeds from an organised supply. For 2006, figures from the China Feed Industry Association had shown 111 million tons of all feeds produced, of which 73 percent were compounds from industrial mills.
Rates of expansion have varied from one part of China to another. Accounts by the China Feed Industry Association indicate most growth occurring last year in the central and north-east regions. More feed gains were for poultry and aquaculture than for pigs or cattle, however, so it may be worth noting that China's poultry originates principally from the south-eastern coastal region whereas most pork is produced in the central part of the country and milking cows are found mostly in the northern provinces. Until now, approximately one-eighth of all feeds produced industrially in China have been made in mills in the southern province of Guangdong, where the market usually is divided into 55 percent poultry, 23 percent pig and 21 percent aquafeeds. But that may change soon, as officials in the Dongguang city zone along the banks of the Pearl River have declared their intention of banning pig units from the locality on the grounds of adding to environmental pollution.
China's animal feed industry is valued currently at about US$40 billion and is growing at a rate of approximately 15 percent per year as the population income rises and brings a greater demand for meat products. By comparison, the value of the compounds business in Russia was estimated last year at around US$3.5 billion. Russia, too, has seen feed volumes grow in 2007. Annual gains on the order of 6 percent were reported regularly during the year, although there are still disagreements within Russia (as in many other countries) over the actual data. The amount produced by integrators is especially disputed by Russian sources, with suggestions varying from one-third to over half of the total output as corporate agrifood operators develop their projects for poultry and pork. It is known that Russian feed manufacturers are using more wheat, barley, corn and legumes as they supply the nutrition for increased pork, poultry and dairy production. Russia's output of broiler chickens seems to have risen by 15 percent in 2007 and is projected to grow another 11 percent in 2008.
Contrasts in evolution
The latest signs of increase from North America and Europe cannot disguise the contrast between the evolution of these relatively mature feed markets and those of the emerging contenders. Figure 3 depicts the differences by showing the trends of several of the largest players on a scale where 100 on the index relates to the quantity they produced in 1998. It has been adapted with thanks and acknowledgements from a similar exercise started by European feed industry federation FEFAC to present certain information contained in Feed International annual market reviews. Mexico, Brazil and China are considered to have grown their business since 1995 compared with the trend described for Europe and the USA.
Looking with the regions of the world, the European Union data from FEFAC (Table 2) are notable particularly for the way in which the positions of the largest producers have changed as the statistics for 2007 are updated. Spain was thought at one time to be increasing its production, but now is said to have cut back by about 1.5 percent while France's tonnage grew by 2.5 percent and Germany's by 0.9 percent. Moreover, a 9.6 percent rise is put forward for Poland, taking the Polish annual volume from 6.34 million tons in 2006 to 6.95 million tons in 2007.
Turkey is worth watching among the countries categorised presently as being in non-EU Europe (Table 3). Turkish feed manufacturers association Türkiyem-Bir has told Feed International that Turkey is estimated to have produced about 10 percent more compounds in 2007, after official data gave Turkey's production in 2006 as 7.5 million tons.
Emerging force
In the Asia-Pacific region (Table 4) there are several candidates for consideration as an emerging force. The 2007 estimate for Indonesia from the Indonesian Feedmills Association equates to a 5 percent increase as poultry meat consumption recovers in the wake of avian influenza. The output for last year of over 7.5 million tons would compare with under 5 million tons in 2000 and below 7 million tons in 2004. Further growth of around 8 percent is projected for 2008. A Reuters report has said the poultry sector in Indonesia accounts for 80 percent of the commercial feed demand nationally. Another 3 million tons of feeds for broiler chickens and laying hens could be required in Indonesia over the next three years, on calculations from the national association of poultry producers.
We believe Vietnam will join the Asian Top 10 list in the foreseeable future. Currently it stands at Number 11 for size, but the feed requirement in the country presents a considerable attraction to investors both domestically and abroad. The 240 manufacturers of animal feed in Vietnam today have a combined annual production capacity of about 5.3 million tons, say local reports. They probably supply no more than 45 percent of the amount required. Imports have to make up the difference. The country spent about US$597 million importing animal feed products in 2006 and another US$783 million in the first eight months of 2007. In August 2007, the month's imports relating to animal feeds set a new record by amounting to more than US$120 million. Most of the purchased materials tend to be from India, Argentina, Thailand and China.
A modest 1.5 percent growth rate has been calculated for US feed tonnages in 2007 (Table 5). The other major players in the North American region have shown contrasting fortunes. Whereas Mexico continues its upward trend, Canada displays evidence of the effect of a currency exchange rate on livestock production across the country. The relative strength of the Canadian dollar in international trading has reduced the competitiveness of its meat exports. Feed grain pricing troubles have added to the malaise, leading to forecasts of a substantial cutback in the numbers of pigs and chickens produced nationwide.
Brazil's individual size catches the eye in South America (Table 6), but the industries being watched regionally also include those of Chile and Argentina. Chile is rich in potential due to its combination of marine resources and high animal health status to promote meat exports. Argentina has the grain and land to develop further in livestock, beyond its traditional base in cattle.
Table 7 groups together the countries of the Middle East with those of Africa. Few indications can be reported yet for a material change in feed structure for this composite region. While its combined total of 30 million tons in 20007 is still rather small in world terms, extra volumes in the coming years are being projected both for the parts of North Africa bordering the Mediterranean and for southern African countries.
Drivers everywhere are population growth, improved personal incomes and greater urbanisation. The United Nations predicts global human population is growing at an average rate of 78 million per year. It could mean a total of 8 billion worldwide by 2030. As the UN added, the geographic distribution of the extra consumers will be the important point for overall meat demand and therefore for the feed supply business. So be aware of the forecast that another billion meat-eaters will be present by 2030 in emerging or developing economies, including those of India and China. Over the next two decades, the global demand for animal products is going to double.
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