Population growth and increased affluence have resulted in dietary changes and a large increase in animal and feed production over the past 2 decades. Shortage in the supply of nutrients to feed ever more animals is a concern.
By the year 2020, there will be some 800 million additional people to feed on the planet. This together with higher income for food spending will put a tremendous demand on crop production. Large increases in production of grain and oilseeds are already taking place in Brazil and Argentina, and increased production efficiency is being made possible in the U.S., Argentina and other countries through the use of transgenic herbicide and insect resistant soy and corn. Over the past ten years, China has gone from being a net exporter of oilseeds to the world’s largest importer of soybeans. Corn imports to that country are expected to exceed corn exports in the next few years as demand increases and more cropland is converted to higher value horticulture and vegetable production. Increased use of corn for production of ethanol and soy oil for diesel fuel is placing even higher demand on these important crops and will change the scope and pricing of nutrients available for animal feed production. As the situation develops, technology in the field of crop science and animal nutrition will called upon to produce and extract more available nutrients from feed ingredients. Technology to rapidly measure energy and available amino acids in ingredients will become more important as it will allow higher value raw materials to be identity preserved for the economic benefit of the animal producer. This paper will examine some of the supply and demand trends and technology affecting the global feed industry.
More people and more meat
Population predictions indicate the feed industry is a good place to be as most everybody in the world enjoys eating meat. The world’s population is project to increase from 6 billion in 2000 to over 9 billion by 2050. Countries with large population bases and high growth rates are Indonesia- 240 m, 1.5%, India - 1,065 m, 1.4%, Pakistan - 161 m, 2.0%, Bangladesh -143 m, 2.1% and Brazil - 185 m 1.1% (Anon, 2006).
Figure 1 shows global demand for meat over the past 5 years. Pork has led the way with steady increases each year. China now leads the world in total pork production at 49.6 mmt of carcass weight equivalent. The U.S. leads the world in poultry production with a yearly production of 18.2 mmt ready to cook equivalents (Anon, 2006). Total demand for beef remained flat in the 1990’s indicating beef consumption has lost significant market share.
Figure 1. Global consumption of beef, pork and poultry meat 2001-2006
Figure 2 shows the relationship between per capita GDP and consumption of all meats including caught fish and aquaculture fish (Anon, 2005; Grainger, 2002). When GDP increases to developing country status, growth in meat consumption rises quickly reflecting consumer desires. In many countries, per capita income levels have more than doubled over the past two decades. Although purchasing power has increased for almost everyone in the world over the past decade, patterns of household spending on food differ dramatically between high and low income countries. Bread and cereals account for around 12% of food expenditure in high-income countries while they are 27% in low-income countries. High-income consumers spend more on meat and dairy products than do low income consumers. Low-income consumers will alter their food choices more readily when prices change. A 10% increase in income would result in a 1% increase in food expenditure in the U.S., a 6.5% increase in the Philippines and 18% in Tanzania (Seale and Bernstein, 2003).
Figure 2. Meat and fish consumption by per capita GDP
At around U.S. $1,000 per capita income, food expenditures change greatly with significantly more money spent on meat. Countries growing from the $500 to $5000 per capita income range thus can be expected to have rapidly growing feed industries if there is economic growth and a stable political system. Local production of raw materials and a lack of trade barriers are considered beneficial to feed and animal production industries. Above U.S. $10,000 per capita income, the meat consumption graph flattens and additional income does not have as large an effect on food consumption patterns.
Global feed production
The top 15 countries that produce animal feed accounted for 73% of a total production of 625 mmt in 2005 (Gill, 2006). The leaders were the U.S.- 150.2 mmt, China- 72.7 mmt, Brazil- 42.7 mt, Mexico- 24.3 mm and Japan- 23.0 mmt. Of these, only Japan is not a major grain and/or oilseed producer.
According to the World Feed Panorama survey conducted by Feed International, global industrial feed production grew for the fifth straight year to a record of 625 mmt in 2005. Some markets declined however due to concern and culling of broiler flocks related to avian influenza.
Additionally, late 2003 and early 2004 saw record low ending stocks for grains and oilseeds due to unfavorable weather and poor U.S. harvest conditions. This drove up prices and lowered demand further due to culling of poultry and swine.
While the Feed International survey numbers are extremely useful, they do not give the complete picture of grain and oilseed consumption by poultry, swine, aquaculture and other animals. The numbers are derived from feed production surveys in plants producing over 2,500 mt per year. They do not include expanded premixes or feed production in smaller commercial plants or on-the-farm production.
The discrepancy is illustrated for China. The tonnage given by Feed International (Gill, 2005) for “industrial” feed production was 63.1 mmt in 2004. The amount quoted by the China Food and Agriculture Service (Anon., 2004) was 149.5 mmt. Feed consumption calculated by conversion from animal production estimates using dressing percentages and feed conversions for pigs and broilers of 70%, 3.0 and 75%, 2.0, respectively gives an estimate of 230 mmt for poultry and pigs only. An examination of all the data sources and estimation methods gives a useful appreciation for the potential of China in terms of modernization, improving efficiency, milling equipment and additive sales. Other countries with significant small-scale feed production are Philippines, Thailand, Indonesia and Vietnam.
According to the FAO, the world-wide total production and use of animal feed exceeded 4,000 mmt in 2002 of which some 550 mmt were milled feeds (Bruinsma et al., 2002). The largest proportion of the 4,000 mmt of feed was used by small farmers in developing countries. There is a continuing rise in the demand for animal products and particularly those from poultry and pigs. FAO and other institutions suggest that global production of animal products will rise impressively over the next 20 years. Industrial feed production will gain at the expense of on-the-farm or rural feed production due to increased public concern about contaminants and health, and demand for safety, regulation and traceability. The use of high quality feed ingredients from known sources will increase in the future as subsistence animal agriculture gives way to a more efficient and business minded integrated approach.
Ingredient supply outlook
The U.S. dominates world trade in corn. The U.S. share of world corn trade is expected to grow from about 60% in recent years to about 70% by 2013 as few countries have similar capabilities to respond to the rising international demand. Domestic U.S. demand for corn will increase and domestic production will decrease in China as corn production gives way to higher value horticultural products. Argentina is the world’s second largest maize exporter. Increases in planting area are expected to result in a rise in exports from 10 to 14 mmt over the next ten years. South Africa will continue to export small amounts of maize (about 1 mmt). Eastern European maize production is expected to double to about 6 mmt over the next ten years. Brazil will continue to export about 5 mmt but amount will likely not be increased significantly due to strong domestic demand.
Soybean meal consumption has increased more rapidly than corn, wheat or rice over the past 14 years. Soybean meal consumption grew by 110%, while corn consumption grew by 40% and wheat by only 7% over that period.
The soybean production increase has been driven by demand for soy oil and meat consumption. The 2005/2006 U.S. soybean crop has been recently projected to be 84 mmt. Global oilseed production for 2005/2006 is projected to 390.1 mmt of which soybeans account for 220.2 mmt (Wescott et al., 2006). Figure 3 shows the projected global soybean exports to 2014.
Figure 3. Global soybean exports projected to 2014
The EU has been the world’s leading importer of soybeans and soybean meal in the past (Mielke, 2005). Changes in tariffs and subsidies (Agenda 2000 price cuts) and grain made available by acceding countries will ultimately make more local grain and oilseed stocks available. This will slow the growth in soybean imports. Over the same future 10-year period, China will account for over 70 percent of the world’s growth in soybean imports. Japan, Korea and Taiwan will import more meat and fewer ingredients over the next ten years. Limited expansion in acreage and increasing domestic use will further constrict U.S. exports of both beans and meal (Wescott et al., 2006).
Brazil will expand its production by opening vast tracts of land to soybean production. Brazil has the equivalent of new land available as all of the cultivated land in the U.S. (Sato, 2004). New varieties that are resistant to soybean rust will increase the lead of Brazil as the major exporter. The EU will remain as a major importer of soybean meal. Growth markets will be Latin America, North Africa, Middle East, Southeast Asia, Russia, Central Europe and Eastern Europe. The countries of Brazil and Argentina will increase their share of soybean meal exports while the U.S. will experience an erosion of its share. Value added high nutrient soybean meals will emerge from the U.S. where technology and transport systems allow for measurement, segregation and inspection.
Will supply keep up with demand?
If global feed production grows at its current annual rate of rate of around 2%, the world will be producing around 750 mmt of industrial feed by 2015. This will require an additional 20% of grain and oilseed meal which translates to a yearly global production of 1168 mmt of coarse grain (additional 195 mmt) and 255 mmt oilseed meal (additional 43 mmt) by 2016.
For soybeans, it has been estimated that Brazil has the capacity to produce an additional amount equivalent to total current U.S. production (Sato, 2005). U.S. production of soybeans was projected to be 87 mmt in 2005/2006. Brazil then obviously has the capacity to cover the oilseed requirement for feed production to 2016 and beyond.
What about the requirement for grain to produce feed in ten years time?
The majority will be produced in the countries that consume it, mainly U.S., Mexico, Brazil and China. Production of coarse grains in excess of consumption for feed will occur in the U.S., Argentina, Brazil, and Central Europe. However corn consumption for ethanol production is increasing rapidly. Figure 4 shows recent and current stocks to use ratios for corn in the U.S. The overall trend for lower stocks equates to tightness in the market and higher projected prices.
With respect to formulation of animal diets, higher energy costs and lower protein/amino acid costs are predicted. Conversion of soy and other oils to diesel fuel and conversion of corn to ethanol for fuel will result in a greater supply of lower energy and higher protein ingredients.
Figure 4. US corn stocks to use ratios
Genetic enhancement of crops has had notable beneficial effects on the environment due to lower applications of more biodegradable herbicides and insecticides. Acceptance of transgenic or GE crops with improved nutritive value has the potential to reduce overall demand, keep prices in check and reduce demands on the environment to produce more crops.
Soybean varieties that are higher in protein, lower in trypsin inhibitor, possessing reduced phytate and higher in essential fatty acids have already been developed and will be commercialized when they have been thoroughly tested and are acceptable. Figure 5 shows the nutrient specifications and nutrient digestibility of commercial soybean meal and of soybean meal made from genetically enhanced experimental soybeans in a recent study (Parsons 2005). The results show that experimental soybean M703 (Monsanto) has considerable advantages over conventional commercial soybean meal in terms of digestible amino acid content and metabolizable energy.
Another development that has the potential to supply more nutrient per unit weight of corn is Nutri-Dense® corn (ExSeed Genetics, BASF Plant Science). This is a non-transgenic, conventionally bred corn hybrid that has higher levels of both oil and protein. The corn reportedly has 10% crude protein and 4.7% oil relative to normal yellow dent corn with 7.8% protein and 3.0% oil. It also has 4% more metabolizable energy. In studies reported by Parsons (2005), this corn was found to have higher levels of digestible amino acids. The reported numbers for digestible lysine are 30% higher than conventional yellow dent corn. Nutrient enhanced crops must provide enough economic incentive for both the crop producer and the feed producer after the cost of identity preservation to realize commercial success.
Figure 5. Nutrient specifications of experimental soybean meal made from genetically enhanced soybeans
Further improvements in nutrient content and reduction of anti-nutritional factors are possible using transgenic techniques. Commercial acceptance of such developments may be limited by lack of public acceptance at least for the short term. Since its development and widespread commercialization in the U.S. and Argentina some 12 years ago, an estimated 400 million mt of genetically enhanced glyphosate tolerant soy has been consumed in the world with no untoward effects. Since commercialization in 1996, over 350 mmt of transgenic Bt corn has been consumed in the U.S. This corn contains a Bacillus thuringiensis protein toxic to corn borer larvae and other insects. Again, there have been no untoward effects in humans, animals or the environment.
The animal feed industry is an integral and growing segment of the food supply chain. It supplies the feed ingredients needed to produce healthy animals that provide essential human food protein and energy. Animal products are a vital and important food source for the world’s 6.3 billion people who are multiplying at a rate of an additional 72 million per year.
Increasing broad-based income growth and urbanization are changing eating patterns leading to increased meat consumption. Industrial feed production per annum in mills producing more than 2,500 mt per year is currently at 625 mmt. Although total feed production including expanded premixes and backyard production is much higher, growth rates globally are around 2% per year. If future demand increases at this rate, the supply of raw materials is expected to cover demand for the next 10 years. The world will likely experience more tightness and price spikes in coarse grains as ethanol production increases and China becomes a net importer of corn. Production of soy will increase dramatically in Brazil and Argentina. Transgenic crops with increased nutrient content will likely gain global acceptance in the future.
Those with increased energy digestibility are most likely to be successful to fill this nutrient gap. The feed industry will continue to be a dynamic place punctuated by major technological developments.
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Author: ROBERT A. SWICK, TECHNICAL DIRECTOR
American Soybean Association International Marketing, 541 Orchard Road, #11-03 Liat Tower, Singapore 238881