A year feed manufacturers would like to forget

This year was a tough one but prospects are improving for 2010.

Ed Clark Headshot

No question, this year was a tough one for the balance sheet of many feed manufacturers, regardless of where they were business. Many factors came together to create nothing less than the perfect storm.

A weak global economy created negative economic growth in many countries, particularly in the West, which in forced consumers to cut back on their meat consumption. This, in turn, forced a reduction in animal units and a phase down in feed demand. In Europe, for instance, overall feed demand was expected to be down 4% to 8% overall, with more than a double-digit feed volume anticipated for ruminant feed sales.

H1N1 added insult to injury

As if this was not enough negativity for one year, 2009 also will be remembered as the year that H1N1 hurt livestock producer returns severely in a number of key producing countries, and in turn feed sales. The outbreak of H1N1, early on misnamed “swine flu,” severely hurt the livestock industry in Mexican where it was first discovered which would be expected.

But it also caused a major hurt for livestock producers in the U.S. and Canada, due to export bans. For instance, the export ban instituted by China on U.S. pork was only lifted in October having been in place for nearly six months. The loss of such exports was a major blow to U.S. and Canadian producers as the North American swine industry is heavily dependent upon exports.

The livestock and feed industries fared somewhat better in Asia, in large part because Asian economies performed far better in 2009 than did the economies of North America and Europe. Admittedly, Asian economies grew at a slower rate than in previous years during this decade, but they still grew, thus demand for animal protein continued to increase, good news for the feed industry in Asia.

So all told, the story is that 2009 was a tough industry for the industry worldwide, but the pain was not equally shared, as it never is.

Europe must resolve GM issue

Some additional pain for Europe, as we reported last month, is that European Union rules barred the import of U.S. soya bean  products, because a minute amount of genetically modified (GM) maize was found in a shipment. This could not have come at a worse time for European producers and the feed industry there, and could result in astronomical gyrations in soya bean meal price hikes.

Premiums as much as $90 per metric tons were being reported for soya bean meal in Europe, and some countries were in danger of running out of soya feed products period.

One reason why the issue became such a huge one is that virtually no exports were available from Argentina and Brazil, because of the worst drought in decades.

At press-time, it was not clear just how or whether, the EU would resolve the issue. It’s not a scientific issue as EU scientists have concluded that soya beans containing the small amount of GM maize is totally safe, but rather it’s a political issue, with politicians thus far being reticent to stand up to the politically powerful non-governmental organizations.

Outlook brighter for 2010

Combined, this makes for a goodly amount of bad news, but the outlook, fortunately, is brighter for 2010.

A growing number of economists believe the global economy is improving. The recession is coming to a halt, and sooner rather than later in many nations. Look for positive GDP numbers worldwide during the second half of 2010, at least. Both North America and Europe are expected to be recession-free sometime in 2010, and economic growth in Asia is expected to be more vibrant this coming year than it was in 2009.

This is only increasing optimism for the short term, over the next few months or so. Longer term, demand for animal protein will increase dramatically, creating increased demand for feed.

In early October, Jacques Diouf, director general of the Food and Agriculture Organization of the United Nations (FAO), said that agriculture must become more productive if it is to feed a much larger world population while responding to the daunting environmental challenges ahead, FAO Director-General Jacques Diouf.

Opening a two-day forum on how to feed the world in 2050 Diouf told delegates that over the next 40 years: "The combined effect of population growth, strong income growth and urbanization ... is expected to result in almost the doubling of demand for food, feed and fiber."

"Agriculture will have no choice but to be more productive," Diouf added, noting that increases would need to come mostly from yield growth and improved cropping intensity rather than from farming more land.

World population is projected to rise to 9.1 billion in 2050 from a current 6.7 billion, requiring a 70% increase in farm production.

Indeed, the challenge for the global feed industry in coming years will be how to produce enough feed to meet the growing demand for animal protein by the burgeoning global population, with the lion’s share of this increasing demand coming from Asia.

Page 1 of 55
Next Page