Research
The Global Compound Feed Market Is Shifting to a Lower Gear
'Tis the season for annual reports—also for the feed industry. While 2017 was an above-average growth year for the global compound feed industry, regional markets are shifting gears. Volume growth in the world’s largest feed market, China, is slowing down, while other markets, such as Russia, are accelerating. Overall, the growth pace of the global compound feed industry is declining, but the outlook for 2018 remains positive.
Growth in 2017, despite downward trend
Global compound feed production in 2017 was estimated at 1.1bn tonnes, according to the latest Alltech[1] figures, equating to 2.6% growth from 2016. This is higher than the average growth rate of the last five years (2.3% for 2013 to 2017), but also substantially lower than the growth rate of the previous five years (6.5% for 2008 to 2012). The global compound feed industry continues to grow, albeit at a slower pace. This trend can also be seen in the moving average five-year growth rates: the growth rate is decelerating (see Figure 1). A key reason for this is that the regions that produce the largest feed volumes—Asia Pacific, Europe, and North America, which together account for a near 80% market share—are consolidating rather than expanding.
[1] Alltech Global Feed Survey 2018
Figure 1: Slower growth in global compound feed production, 2012-2017
Consolidation instead of expansion
We see a paradigm shift in the global feed market caused by the world’s largest feed market, China, where compound feed volumes are stabilising. After significant production expansion since the turn of the century, growth rates are now declining, even noting a 0.2% decrease in 2017, driven by local market circumstances. In this next plateau stage in the development of China’s feed market, the emphasis is on modernisation of the country’s feed production infrastructure and livestock farms. Other mature markets, such as the US and Europe, have been producing at relatively stable market volumes for several years now. Compound feed production in the EU in 2017 reportedly grew by 0.2% to 156.7m tonnes[2], and the average annual growth in the last decade was 0.4%. The same parameter in the US averaged only 1.3% over the last ten years. And when including Canada in the equation, this percentage is even lower.
[2] FEFAC 2018
A positive short-term outlook
Those looking for some above-average growth rates are more likely to find these in emerging markets like Latin America, Africa, Russia, and India. Compound feed production in these markets is growing relatively fast. And also for 2018, our Animal Protein Outlook holds a positive view on global animal protein production expansion, which is expected to grow above the ten-year average. The Brazilian livestock sector is expected to realise the most growth, relatively speaking. Europe, China, and even the ASEAN countries are only expected to grow about 1%.
In sum, beyond the annual volatility in specific markets, the global compound feed market is shifting gears. As plain volume expansion is reduced, the continued modernisation of farming systems in markets such as China provides opportunities for next-generation feed specialists.
Author: Karen Heuvelmans