We live in an extraordinary world where poultry should be the most profitable protein, but often is not. The key drivers of food consumption continue to favor poultry, yet supply regularly is out of sync with demand. Feed cost, traditionally representing 70% of the cost of production, has doubled or trebled in the past years, yet passing this change in cost on to the consumer has been extremely difficult. Political and social trends may make current growing practices impossible and perhaps even illegal in the future. Faced with these challenges it is amazing that integrated poultry operations continue to acquire production capacity, consolidating locally and expanding their geographic reach, but they do. Within the past 12 months US poultry integrators have been acquired by Brazilian, Ukrainian and Korean corporations and this mirrors a trend ten years before when international groups were making similar acquisitions in Brazil.
According to Watt,
- The poultry market grew 42% between 1999 and 2009, compared to pork at 16% and beef at 15%
- North America had the highest level of poultry meat consumption, at 49.2 kg per person peryear
- Sales of eggs in developed economies remained steady, despite recessionary pressures
- Food-service outlets now account for 42% of US chicken sales
- Turkey meat consumption is becoming less seasonal, with year round sales growing
- In 2010, 95 million metric tons of poultry meat were produced globally and 63 million metric tons of eggs
- Production of poultry meat is expected to grow by 29%, and eggs 16.5% over the nextdecade
- Market share of broiler exports by the US should remain broadly stable
Global trends suggest that there are significant opportunities for growth in the poultry meat market, sometimes at the expense of other meats. These trends can be considered through the PEST framework (Political, Economic, Social and Technological):
- Animal Welfare will restrict the ability to grow animals in the current intensive ways. This appears to be particularly true for the egg industry, but is likely to spread to other species as consumers apply anthropomorphic principles to their judgments of current practices. While growers may object to this, ‘how does it look on the front page of the New York Times?’ may increasingly be a bigger driver in political decision making than science.
- Converting feedstuffs such as corn into ethanol seems to be losing political favor in Washington and Brussels, but still accounts for 40% of the US crop. While it is unlikely that this level will increase further, it shows no sign of decreasing. As a result, the large amount of corn being used has affected the fat market and resulted in the availability of a large quantity of DDGs being dumped on the market.
- During the current recession the number of consumers eating out ped significantly, even among consumers whose income was not affected. It is clear that restaurant visits are highly correlated with consumer confidence. Equally the protein consumed at a modern restaurant, with a considerable degree of wastage, is much higher per meal than the same amount being consumed when the person dines at home. Recovery of the world market should have a disproportionate affect on meat and animal protein consumption.
- Consumers continue to show a desire to consume foods with special labels, particularly ‘organic’ and ‘natural’. Their willingness to pay for these labels is still unproven however. Frequently there is a considerable divergence between consumer survey responses, and their behavior in the supermarket. However, it appears that if such products can be delivered cost effectively, or cost neutral, consumers will respond.
- Animal proteins are favored in recently developed markets. Such consumption can be coupled with the over consumption of calories by a proportion of the population. In the western world obesity in children is reaching 20-30% but even in the cities of Africa and India there are some signs of the relative availability of cheaper food. Again it is likely that this will affect political decision making.
- Food miles, used as a proxy for the carbon footprint of food, are increasingly appearing as a discussion in the mainstream media and on packaging in the markets such as the UK. While the food miles debate runs the risk of being used by producers as a form of protectionism from imports, it is likely that the carbon calculations will become more common. Publications, such as the FAO’s ‘Livestock’s Long Shadow’, have focused negative attention on the carbon impact of ruminants. Although the FAO has accepted flaws in the calculations made in that report, the clear implication is that beef production is not carbon-friendly. The inherent efficiency of poultry, from food conversion, environmental and intensity points of view, makes this trend potentially favorable to poultry production.
- The desire to consume ‘super foods’, or functional foods, may also favor animal production. The ability to enhance meat through animal nutrition with antioxidants, vitamins, key organic minerals and omega 3 has the potential to add value to meats and enhance consumer loyalty to poultry products.
- Wider acceptance of GMO technology in the global marketplace, especially against the back of some of the issues raised above, is clearly a fundamental part of reaching the food goals set by the UN in their Plant Genetics and GMO Directive.
- Poultry continues to lead the way in genetic advances, particularly with broilers. While not as heady as the improvements made in the 70s and 80s, the ability of the breeders continues to improve the performance of broilers. In turn, these advances continue to reduce the cost of production of broiler meat. While turkeys and eggs may lag in terms of food conversion advances continue apace here also.
- Food borne pathogens (such as E.Coli, Salmonella and Campylobacter) have always been a feature of poultry production, but the advent of increasingly sensitive equipment is allowing detection at lower and lower levels and with greater accuracy. This will undoubtedly continue the trend towards a view of these pathogens as food adulterants.
New Challenges – New needs
As we move forward it is clear that it is time for the poultry industry to engage in some ‘joined up’ or ‘integrated thinking’. The key is to move beyond commodity, bulk and price driven production behavior and on to a deeper understanding of how to get greater branding on the supermarket shelf. The key to this is to offer demonstrably better products.
In branding products Alltech is not just looking for greater consumer loyalty, to make it more ‘sticky’, but for the customer to connect to the value proposition inherent in the product. A customer who recognizes the value of a product is more likely to not only pay a premium, but is less likely to switch product based on small price changes.
Further, the difference between the genetic potential of modern genotypes and the actual performance achieved is generally estimated to be in excess of 30%. As we improve animal performance, most of this relates to continuing genetic improvements and not maximizing the performance of a given genetic base.
Much of Alltech’s recent thinking has revolved around increasing performance and decreasing feed cost. The ability to enhance quality through the Programmed Nutrition program is a more recent discovery and directly looks at how to enhance the consumer experience. The Programmed Nutrition initiative addresses four key areas:
Traditionally, improved performance could be measured through looking at feed conversion, weight gain, eggs produced and chicks hatched. Bio-Mos®, Sel-Plex®, Bioplex® and Mycosorb® were part of a group of new technologies that rapidly gained acceptance in the poultry market, particularly over the last 10 years.
Increasingly, however, poultry producers need to achieve growth under antibiotic free conditions, and restrictions on coccidiostats seem sure to follow. The next generation of growth permitters is beginning to emerge. One of the first of these, Actigen™, has been shown to improve weight gain by over 100 grams, improve feed conversion by 5% and reduce mortality.
Although reported feed conversions of 1.5 kilograms of feed for every kilogram of meat produced would suggest that poultry are reaching their genetic limits on a dry matter for dry matter basis the actual number is probably closer to 5 to 1. This offers a more accurate perspective of the potential for improvement still available. Allied to this are the challenges of feeding a bird with a live weight of 2 kilograms a diet providing 600 kcal per diem, or equivalent to an average male consuming ten times the recommended daily allowance, is part also of this paradigm.
- Decreasing the costs of feeding
The solid state fermentation technology was the first to allow the production on enzymes directly in contact with specific feedstuffs. The resulting fermentation exhibits a range of over 50 enzyme activities and the ability to release energy, amino acids and minerals from a considerable range of substrates and feedstuffs. More recently the use of Nutrigenomics has allowed nutritionists to reduce the levels of expensive vitamins such as vitamin E and look holistically at the overall formulation to maximize.
- Alternative raw materials
The requirement to consider novel feed materials has grown tremendously in the past 5 years. One U.S. nutritionist noted that ‘DDGS are no longer an alternative raw material; we are looking at more and more novel and unusual ways to feed our chickens’. In regions such as Africa and Asia the need to feed byproducts, highly fibrous materials and non-traditional materials is a critical part of the commercial viability and sustainability.
Another new frontier in poultry production may be the advent of Algae as a font of novel proteins and fats. Already widely used as a source of omega 3, it seems clear that new strains of algae may be grown in fermentation facilities or on land otherwise not appropriate for growing other crops, even where water resources are limited. Algae has the potential to address many issues simultaneously and are likely to be a staple in animal feed twenty years from now.
The use of technologies which accurately evaluate the impact of nutritional ingredients on key genes, and the up and down regulation of those genes can be central not only for improving animal health and performance, but also to improve meat quality. Taste, moisture retention, antioxidant levels in the meat; freshness, shelf-life, fat content, and color; and the bite characteristics of the meat on the plate may all be influenced by the presence or lack of presence of nutrients in the diet, and the timing of their delivery.
The University of Kentucky has joined Alltech’s Coldstream Alliance in a series of 14 trials to examine the nutrigenomic impact of dietary changes on gene expression. New research is moving towards epigenetic approaches, seeing how the feeding programs used with the breeding hen, and the in-ovo feeding techniques, may positively influence those same key genes.
Poultry producers may struggle as the industry challenges genetic, metabolic and sanitary barriers. The Political, Economic, Social and Technological environment, though generally favorable for poultry producers, requires a level of flexibility and market orientation not always familiar to a cost driven commodity business. The key drivers of sustainable, profitable poultry business in the future will be the ability to deliver to consumers a product that is tasty, safe, attractive and grown in a manner which is consistent with their expectations.