European feed tonnage drops in 2009

Expectations are quite low regarding raw material tonnages this year in Europe, but not for industry innovations. That’s the view from the 50th anniversary of European Feed Manufacturers Association (FEFAC) in Brussels and from the annual International Trade Fair for Livestock in Rennes, France (SPACE).

One hot subject was sustainability, illustrated by FEFAC’s first European feed environment report. The 28-page report investigated the environmental impact of feed production and feed use and highlighted European feed manufacturers’ initiatives, which might be individual or collective. The report is accessible on FEFAC’s Web site, www.fefac.org.

Concern over GMO, ruminants

The proactive stance of feed manufacturers on sustainability didn’t erase the two main subjects of anxiety: the increasing gap in genetically modified organism (GMO) approvals between protein exporting countries and the EU (in mid-September 200,000 tons of soybean with non-quantifiable levels of GMOs were blocked in various European harbors), and a strong decline of feed production in 2009.

Due to the economic crisis and, in consequence, the decrease of animal product consumption either in the EU or in the trading bloc’s main export markets, feed production may decrease between 4% to 8% this year. The worst situation is in ruminants, with feed use falling by 15% to 20% this year. Illustrating this is the outburst of milk producers’ anger and “milk strike,” showing how bad producer fortunes are. No real end in the crisis is expected before the second half of 2010.

The trend in volume is the same in France: A strong decrease in ruminants feed of about 20% is already logged for the nine first months in Brittany, the largest feed region in the nation. The pig industry, meanwhile, is afraid of a new crisis, with the last one  not yet really finished in some nations. Even though pig prices increased before summer, giving pig producers a precarious equilibrium between sales prices and production costs, they collapsed again in September following the German market. Poultry feeds are less impacted overall, even though turkey feed sales are down 8%.

The only solutions in such a mature market are economies of scale and innovation. The French market is quite significant in this regard and the SPACE show was a great place to be to scrutinize it.

LDC group (the largest poultry producer) bought Arrivé (fourth largest) and its feed plants. Provilys (new name for the Provimi operation in France) has invested nearly €7.2 million in two years. Glon Sanders (brought last year by Sofiproteol) launched a new “raw material” based on rapeseed and urea to compete soymeal.

Merger announced at SPACE

The biggest SPACE announcement was that the InVivo feed and animal health and Evialis merger will soon be fully operational, starting 1 January in a new company called InVivo NSA (nutrition et santé animale).
Two years after the InVivo friendly takeover of Evialis, InVivo group chief executive and Evialis chairman Patrice Gollier stated that Thierry Van Vynckt will be InVivo NSA’s chief executive. Patrick Gollier will stay as chairman. Evialis and other products will stay as commercial brands.

“Each of the entities and subsidiaries within InVivo NSA will retain their own brand identity. The identity of InVivo NSA will be expressed essentially at a corporate level,” said Gollier.

With €1.4 billion and 5,000 employees around the world, the company is focused on animal nutrition: compound feeds (48 plants of which 18 in France); premix and specialties; animal health and hygiene (200 authorized medicinal premixes), account respectively for 66%, 24% and 10% of turnover.

Already strongly placed in the French market (61% of its turnover), the group has clearly placed itself in the international competition. InVivo NSA’s Compound Feeds business is operated by Evialis Nutrition France (Nicolas Quennec is in charge) and Evialis Nutrition International (driven by Pierre Bruwier). Evialis Nutrition France produces 1.2 million metric tons of feed a year at 16 wholly-owned factories and two joint ventures (DFP and DNA) represent 225,000 metric tons.

Market restructuring underway

“With market concentration underway in France, our objective is to help structure feed factories in InVivo’s network of cooperatives with those of Evialis,” explained Patrice Gollier. In the process, three plants might be closed next year, either Evialis or cooperatives ones. “Our rule as leader is also to help to restructure the market.”

In 2008/2009, Evialis Nutrition International produced 1.4 million metric tons of compound feed. It has established good positions in Indonesia (PT Citra, PT Wirifa), Vietnam (Guyomarc’h VCN and Guyomarc’h VN), Brazil (Evialis Socil, Purina, Zoofort), Mexico (Malta Cleyton) and South Africa (Monti Feeds).

In its second business line, Premix and Specialties (Under the responsability of Thierry Détrée), InVivo NSA has large ambitions and the assets to rapidly establish itself alongside the global market leaders. Its premixes are integrated in 15 million metric tons of feed around the world.

In France, SFPS and Inzo and their subsidiaries are already number one in the premix, breeding minerals, nutritional specialty and lick block markets. Sources said the group might consolidate its position by taking over Primex, the premix and firm service branch of feed compounder Nutrea, a joint venture in which the InVivo share is 34%.

This branch is also present internationally in more than 50 countries. It has built up a network of plants in Italy (Filozoo and Iza), Spain (Setna and Iza), Portugal (Vetagri and Iberil), the Czech Republic (Guyokrma), Romania (GH Romania and Gana), Hungary (Vitafort), Brazil (Vitagri), China (Evialis Shandong) and Russia (Rossovit). In Brazil, Mexico, Vietnam, and China, growth is also looking strong, with satisfactory potential for profitability, even though this year the sharp devaluation of local currencies and exchange rate effects have negatively impacted the finances of certain subsidiaries.

“InVivo NSA is carefully pursuing its international development,” said Patrice Gollier. “We shall start by consolidating our recent acquisitions: Malta Cleyton in Mexico and Cargill Nutrition Animal Ltd. in Brazil.”

Big idea: merge R&D

The big idea is to merge. The research and development (R&D) investment is around €8 million with 12 research stations and more than 130 experts.

Some collective actions were presented at SPACE, regarding the optimization of the supply chain. For example, in France, trucks must not charge more than 40 tons apart for delivering imported raw material from harbor to plants.

The Britanny Feed Manufacturers Association (AFAB) acts as a lobbyist to obtain an extension of this utilization for the delivery of raw materials produced in France. And competitors are working together to build collective train stations.

“By those two actions, we can gain 20% of supply costs,” estimates Laurent Morin, AFAB director.

Re-use of animal fat might also reduce supply costs said Patrick Colombier, chairman of the French renderers association. Some of them could legally be used in feed but the cataclysm of BSE (bovine spongiform encephalopathy) is still in the French consumers minds and no one wants to take the risk of any cross contamination. “The French production in thus exported,” he said.