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But given that Covid-19 has
proven to be such a problem for markets and predictions, how can
that still be the case? Several different financial research
companies have their own ideas as to how such growth could happen.
For a little background, according to the U.S. Department of
Agriculture (USDA), livestock and poultry account for over half of
U.S. agricultural cash receipts. The total value often exceeds $100
billion per year. Additionally, trading data from the ITC suggests
that the U.S. exported $2.8 billion worth of animal feed products to
the global market in 2019, representing over 11% of the world’s
total animal feed exports in the year.
Furthermore, the Alltech Global Feed Survey 2021 report studied
annual total feed production in 6,000 feed mills. These mills
produced “214.4 million tons in 2019, and then increased in 2020 and
reached 215.9 million tons. For comparison, China produced
approximately 240 million tons in 2020. Brazil, third in world
rankings for such production, produced almost 1/3 of the feed of
these two countries.”
So why is this growth happening? One reason is likely US corn
production.
According to a report published by The Institute for Feed Education
and Research (IFEEDER); “corn made up slightly more than half (52%)
of the total amount of compounded feed consumed in 2019. Corn
combined with soybean meal and dried distillers’ grains represented
more than 75% of all feed tonnage consumed in 2019.”
The IFEEDER report works in tandem with a second report by economic
and analysis firm Decision Innovation Solutions (DIS) to examine
this data. DIS found that the “baseline consumption at the beginning
of 2020 at 252.6 million tons (excluding forages and roughages) with
an estimated value of $66.7 billion, under normal production
circumstances without the pandemic; with COVID-19, the consumption
rate fell roughly 1.7% to an estimated 248.4 million tons, a
difference of 4.2 million tons less feed consumed worth $1.6
billion, leaving the industry with a total post-COVID-19 value of
$47.5 billion.”
Furthermore, these same reports suggest that in a worst-case
scenario, “where the industry encounters further disruptions in
processing and slaughter numbers or potential trade issues, DIS
estimated 2025 animal food consumption could further decrease 4.5%
to 237.2 million tons at a value of $45.4 billion.” However, this is
not the scenario experts are envisioning for the food market.
The expected-case scenario, where the industry continues on with
less disruptions, suggests that by 2025 animal food consumption
could increase by “2.5% to 254.6 million tons worth roughly $48.8
billion.”
The best-case scenario, where trade conditions across the world
improve, DIS estimated that by 2025, “feed consumption could
increase 5.9.% to 263.1 million tons, valued at $50.4 billion.” This
scenario is unlikely, but consistently viewed by experts as being
more likely than the worst-case scenario.
These analyses also point to health concerns as a likely reason for
animal feed market to grow. Health is on everyone’s mind, and that
includes farmers working with livestock. Experts suggest there is a
“rising focus on animal health and growing momentum of proponents of
natural growth will also drive animal feed market growth…Increasing
consumer awareness of the benefits associated with the use of feed
additives to reduce disease decline has supported the need of the
animal feed market.”
This means that it’s not enough to track the feed market; we also
have to consider the mineral market. Minerals additives included in
the animal feed for optimal growth, development, overall health, and
well-being, and for the prevention of diseases can tell us a lot
about the current state of agricultural finances.
Such minerals are not usually produced in an animal’s body, and need
to be added in the feed externally for better standards and quality
of animal-derived products. These minerals include salt, calcium,
phosphorus, sulfur, magnesium, potassium, iron, and so on.
But the spirit of economic competition is also a reason for the
market to continue to increase. China, one of our top competitors in
both markets, is heavily influenced by the governmental initiatives.
China’s efforts to “modernize and find efficiencies in its structure
and practices, and the increasing demand for meat and animal
products to meet the protein needs of the growing population are
among the major factors driving the growth of the animal feed
additives market.”
The conclusion all of these reports and analyses point to is the
growth in consciousness regarding the health and mineral intake of
livestock. Those things were originally the driving force for the
animal feed market at this point in time.
The difficulty in studying
this data concerns the timing. Financial reports on the feed market
were completed before the Russian military invasion of Ukraine that
began in late February.
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That changed things for every
market, especially with the introduction of economic sanctions on
Russia from most of the world, and the limited ability for Ukrainian
farmers to continue production. As an example, according to a recent
ABC report, “In the first two days of Russia's assault on Ukraine,
the price of grain for animal feed jumped 10% on the open market in
Spain.”
Recent Bloomberg reports suggest that, “The European Union could
consider temporarily lifting a ban on imports of genetically
modified grains from the U.S. and South America to help farmers
struggling with supply disruptions…Spain and France have also
proposed a waiver on agricultural goods with traces of herbicide to
increase stocks and seek alternative suppliers of mainly corn, which
is key for the production of animal feed.”
Additionally, summaries from the Illinois Farm Doc suggest that
China has a strong reserve of grain, but may still need to look
elsewhere for certain ingredients in animal food. “There could be
secondary impacts that drive up food prices further in the coming
months…Supply shortages of sunflower oil, of which Ukraine is a
major exporter, may drive up prices for alternatives such as soybean
oil. The latter is important as China imports more than 80% of what
it consumes. Soy is also critical as feed for pigs.”
For most analysts, China’s reactions are a key element moving
forward. “The effects on global grain prices will partly hinge on
[China]…China imports massive amounts of corn, barley and sorghum
for animal feed from world markets. It could choose to buy those
commodities, as well as wheat, from Russia instead of other
countries. In such a situation, the impact of sanctions on global
grain markets would be relatively small.”
As of this moment, the world is still waiting to see who buys grain
and from where to see how the feed market reacts. A high demand for
enhanced animal products, combined with an increase in demand for
feed additives, and that same economic competitiveness that drives
every other decision, pushes the feed market higher, and will likely
continue to, even with Covid-19 and a war in Europe affecting
economic recovery in other markets.
Sources
“Animal Products”
https://www.ers.usda.gov/topics/animal-products/
“Animal Feed/Food
Consumption and COVID-19 Impact Analysis”
http://ifeeder.org/wp-content/uploads/
210301-FINAL-REPORT-IFEEDER-Animal-
Feed-Food-Consumption-COVID-19.pdf
“Alltech Global Feed
Survey”
https://www.alltech.com/2021-global-feed
-survey
“Feed Minerals Market
- Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)”
https://www.mordorintelligence.com/industry-
reports/global-feed-minerals-market-industry
“Global Feed Minerals Market – Industry Trends and Forecast to 2029”
https://www.databridgemarketresearch.
com/reports/global-feed-minerals-market
“Global Animal Feed Market – Industry Trends and Forecast to 2028”
https://www.databridgemarketresearch.
com/reports/global-animal-feed-market
“Russian war in world's 'breadbasket' threatens food supply”
https://abcnews.go.com/Lifestyle/wireStory/
russian-war-worlds-breadbasket-threatens
-food-supply-83279787
“Wheat Price Swings Wildly, as Food Inflation and Hunger Concerns
Mount Due to Russia’s Invasion of Ukraine”
https://farmpolicynews.illinois.edu/2022/03/
wheat-price-swing-wildly-as-food-inflation-
and-hunger-concerns-mount-due-to-russias-
invasion-of-ukraine/
“Europe Eyes Grains Import Waiver Amid War Shock, Spain Says”
https://www.bloomberg.com/news/articles/
2022-03-07/europe-eyes-grains-import-waiver
-amid-war-shock-spain-says?utm_medium=social&utm_source=twitter&utm_
content=commodities&cmpid%3D=socialflow-twitter-commodities&utm_campaign=socialflow-organic
“Ukraine Invasion Threatens Global Wheat Supply”
https://www.nytimes.com/2022/02/24/
business/ukraine-russia-wheat-prices.html
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