Developments and Changes in the Global Compound Feed Sector

Report Highlights

• The compound feed and respective ingredient markets reached 606 million tons in 2001. The market is expected to increase at a low AAGR (average annual growth rate) of 1% to 637 million tons in 2006.
• Compound feed production for poultry and pigs will continue to climb, while that for cattle will become smaller and smaller.
• Major growth is seen for aquaculture feed.
• Due to continued price pressure, the market value of feed additives will increase at an AAGR of only 0.2% through 2006.
• Upcoming ingredient specialties such as probiotics, prebiotics, and especially yeast, have recently experienced a fast and broad expansion of their markets.

INTRODUCTION

STUDY GOAL AND OBJECTIVES

As the world's markets have become less insular and subject to increasing international competition and opportunities, the need for international information is increasing. Many markets undergo important changes as marketing environments and political frameworks change.

This may apply increasingly to the compound feed industry and its respective ingredients markets. Compound feed manufacturers are confronted by developments on the client side and from farmers. They also face developments on the supply side and in international markets for raw materials and premixed ingredients. The present study is an update of report, GA-101 Developments and Changes in the Global Compound Feed Sector and their Impact on the Feed Ingredient Industry, 1998. This revision has become necessary because of the following recent developments:

• From 1997 to 1999, the Asian economy faced a severe recession with strong implications for the feed market. Since 1999, several Asian countries have begun to recover.
• China developed into a major compound feed user and political decisions strongly support this trend.
• Economies in Eastern Europe, until now, did not recover as previously thought and in many sectors, a further decline was, and still is seen.
• Food, and especially meat consumption in Europe, but also in Japan and U.S. has reached a saturation point and tends to decrease.
• Several Latin American countries saw, in the past few years, unprecedented growth rates in meat production, with major impacts on demand for compound feed.
• Many ingredients used in the compound feed industry have become cheaper. The most prominent example is vitamins. This not only is a result of increasing competition, but also of antitrust decisions by U.S. and EU courts.
• The awareness by consumers of quality meat products and decisions to support environmentally friendly husbandry techniques has driven some changes in the use of feed ingredients.
• Also, the EU ban on the use of meat and blood meal has affected certain feed ingredients.

As a consequence, the compound feed sector is growing moderately and the market value of many ingredients being used has decreased. Due to strong developments in Asia (China especially), this area now is at least as important for feed compounders as the U.S. or Europe. Also, in Brazil and Mexico expansion of the poultry and pig sectors has been dramatic, with strong increases in demand for most ingredients. In Europe especially, the phasing out of in-feed antibiotics drives the demand for natural substances. Such developments not only have an impact on compound feed production, but also on the companies supplying ingredients.

Feed additives usually are fine chemicals that strategically fit into a number of other product segments. However, the trend clearly shows that for most ingredients, companies become specialized and those offering ingredients for many different applications, are now fewer. There is no doubt, that in future, compound feed production will grow, but most of the growth will not be in the traditional regions, i.e., the U.S. and the EU. It will take place more in Asia and to some extent, in Latin America.

As for many main ingredients, further production capacity either is planned or already under construction. Price decreases can be expected, as oversupply will prevail within the next five years. As a consequence, volume growth for many ingredients will be compensated for by price decreases and market value will not grow much.

REASONS FOR DOING THE STUDY

This report first reviews the compound feed market by region. It outlines changes and new developments in regional agricultural policy, developments in pricing and availability of different raw materials and analyzes, in detail, the respective compound feed markets. Based on such analysis, a detailed study of various feed additives follows. In addition to the main and most important products, some smaller ingredients also are discussed in detail. This is because such ingredients already have benefited from recent changes, or do show substantial potential for the future. The ingredients reviewed are:

• vitamins
• amino acids
• colorants
• antibiotics
• probiotics and prebiotics
• yeast and yeast cultures
• botanical ingredients
• choline
• betaine and inositol
• enzymes
• antioxidants and preservatives.