What feed manufacturers should be aware for the coming year
Taxes, regulations, operations, competition and profitability are what all businesspeople constantly have on their minds.
These are universal worries for any and all industries, worldwide. But, what about our own, the animal feed industry – not just the additives – which we must protect and promote so that our farmed animals continue to receive wholesome feeds, at a profit for all, without upsetting our communities?
If I were to speculate for 2020, I would pay particular attention to the following six “hot” topics, some of which may prove to be nothing but hot air, whereas others might create a massive wave of reaction or even the downfall of some business models. Perhaps, with keeping in mind of dangers ahead, some enterprising minds might even find opportunity where others see disaster.
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Corn and soybeans
We are still unsure how the global supply of these two staple ingredients will be. This is reflected by wide speculation regarding quantities available and pricing, at least until we have an idea about next year’s yield. The loss of one-quarter of global pig production due to the African swine fever (ASF) virus has certainly added to the complexity of the issue.
At the moment, there appears to be an oversupply of soybeans, which may translate to less expensive soybean meal, and consequently less expensive feed-grade amino acids. A question often being asked these days is whether formulas should be reformulated to contain more soybean meal and less feed-grade amino acids (the ingredient, not the nutrient). This proposition comes with positive and negative aspects that nutritionists and veterinarians should discuss carefully.
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Competition from waste feeding
A couple of decades ago, human food waste recycling through animal feeding was considered as negatively as recycling of certain rendered animal waste products today.
But, some regions reconsider food waste feeding as a measure against expensive imports of cereals, and perhaps as a way to reduce waste landfill space and expense requirements. This latter aspect is becoming more and more important in overpopulated and/or environmentally conscious areas. It is highly unlike that human waste will be converted into a stable and predictable feed ingredient.
It is most likely it will remain a local business, and perhaps it might compete with dry feed (compound) feeding if a way is found to feed wet waste without any health concerns.
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The Green New Deal
Large feed manufacturers that serve mega-farms could do worse than ignoring what what politicians propose in their agendas. I am not convinced that the “Green New Deal” propositions are either new or green, but I would pay close attention as I have a feeling that they may not be favorable to certain existing business models that depend on concentration of resources and high volume capacity and output.
The same can be said for mega-farms, but these have even larger problems as their byproducts (manure) are already under severe regulatory pressure. In other words, feed manufacturers should rethink their positions toward small and medium animal producers as part of their own “sustainable” business model for the near future.
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The questionable future of mega-farms
It is interesting to note that lists of mega-farms abound in the press. In fact, it remains he dream of every salesperson to enter in business with such entities. It is not so much for the profitability, because such huge enterprises always squeeze the ever-shrinking margins and they seldom remain loyal to one supplier, but the sales instinct and the marketing fascination emanating from such interactions are hard to beat.
Nevertheless, several politicians have started about the restriction of mega-farms or, as some call it, the banning of factory farming.
Feed manufacturers with a very narrow client basis, and one that is composed of high-volume clients would do best if they devoted some of their interests in expanding their clientele to include a wider variety of customers, for obvious reasons. In addition, feed manufacturers could also benefit from rethinking the type of products they can (or cannot) offer to future mega-farms.
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ASF and the prospect of severe quarantines
The devastating spread of the ASF virus does not appear to be abating. If anything, the disease continues to spread with alarming speed not only within countries but also among non-neighboring regions. Some veterinarians even discuss when (and not if) it will cross the oceans spreading to the American continent.
One major issue that is already being discussed is the quarantining of certain susceptible ingredients, especially those sourced from already affected areas. This will increase stock and expenditure in capital for additives and ingredients, but it can prove disastrous if the same is applied to complete feeds due to the enormous volumes involved.
Already, some entities have increased their stockpile of sensitive materials and complete feeds – always taking into account the sensitive nature and expiration deadlines of any such products. Others enter into alliances to ensure flow of products will continue through alternate routes, yet others prefer to bring feed production much closer to home.
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Availability and volatility of micro-ingredients
These suppliers are recent players in the animal nutrition industry. They arrived with a big bang and they seem to disappear as noisily. Although we see more sellers of micro-ingredients (including additives) today, this does not mean business volume is increasing. It means that such micro-ingredients are now sourced very cheaply and easily from east Asia.
We are experiencing a fatigue in this area and a lack of new and enterprising concepts. This segment of the industry remains largely dependent on the recent initiative to abandon antibiotics and coccidiostats in some parts of the world, something that cannot be sustained indefinitely.
The recent ASF issues, coupled with a trend toward convincing humans of the benefits of plant-based food protein might indicate a less profitable or contracted animal industry, at least short term, that will force high-margin seekers out of this industry. Most of these companies have a human division branch and they have just realized there are even greater margins there and as such, they have been divesting from their animal nutrition divisions.
It is simply a matter of margins and this might translate a shift in availability for certain additives in the animal nutrition industry.
