What state is the feed industry in?

By Jane Byrne contact

- Last updated on GMT

Respondents alert to potential feed price reduction demands in the dairy sector
Respondents alert to potential feed price reduction demands in the dairy sector
We ran a reader survey earlier this year to find out what the major headaches are for the feed sector - a majority of respondents reported the Russian sanctions as detrimental for business. 

The participants also mentioned mycotoxin contamination as an issue last year.   

Looking ahead, some of those polled saw the need for greater traceability in the supply chain and they put sustainable raw material sourcing as high on their agenda. 

Also a large percentage of respondents — 73% — said animal welfare is one of the top priorities in their company, with 77% of respondents calling for heightened regulation in this regard.

All told, FeedNavigator collated over 175 survey responses from feed industry professionals - the topics covered in the survey included market and trading conditions, environmental management, animal welfare, investment and employment and NPD.

Toxins, sanctions, and TTIP

In response to our first question on external factors impacting business, the majority of respondents (17%) said the Russian import ban had the most impact on their operations in 2014. This was followed by mycotoxin contamination (14%) and the ongoing European Food Safety Authority (EFSA) feed additive re-evaluation (11%) process.

Graph1 | Create infographics

July saw the Russian ban on agri-food produce from Western nations extended until August 2016. The sanctions have put huge pressure on EU producers, especially pig and dairy farmers, with EU compound feed production contracting as a result.

And mycotoxins continue to be a major animal health and welfare concern in livestock husbandry.

Pedro Caramona, of the Alltech mycotoxin management team, last month told us that the above average temperatures and soil moisture deficits in certain parts of Europe have created concern for mould and mycotoxin issues for this year’s harvest.

“Across parts of Southern Spain, Eastern France and Southern Germany, summer crops have been impacted by very high temperatures,” ​he said. “Soil moisture is already critically low in parts of these regions. Farmers and producers need to be proactive rather than reactive when it comes to mycotoxins.”

However, early fears on the possibility of high mycotoxin levels in feed crops have not been realized in some Corn Belt states in the US, agricultural experts told this publication in October.

Volatility in commodity prices

With an eye on 2015 and beyond, some respondents said less volatility in commodity and feed prices would be welcomed. Others see antibiotic free feeding along with the implementation of the Veterinary Feed Directive (VFD) in the US as bringing opportunities along with major challenges.

Some of our survey participants said the outcome of the Transatlantic Trade and Investment Partnership (TTIP) deal will be critical for the industry.

The competence of new entrants in the sector was also highlighted as an issue: “Being a feed manufacturing company, [we believe] the lack of new milling skills coming into the industry is a concern,”​ said a business development manager. 

Optimism reigns

However, the majority of survey participants were positive about the future of their company, despite the various challenges they faced over the 12 months prior to July 2015.

Greening the industry

And environmental management seems to be high on the agenda this year as the majority of respondents express that they’re undertaking various initiatives in this regard.

Interestingly, May 2015 saw the publication of the new LCA guidelines, developed under the LEAP project, a multi-stakeholder initiative coordinated by the UN’s Food and Agriculture Organization (FAO) to improve the sustainability of the livestock sector through better metrics and data.

The EU trade association, FEFAC, said the guidelines were ‘game changing’ as they synchronized the plethora of existing feed impact assessment methods and provided the feed sector with one set of rules to reduce its environmental footprint.

“It is said that if you can measure it you can manage it but feed producers need environmental footprint results that are comparable and understood by the whole supply chain.

The new harmonized and credible methodology​ derived under the Livestock Environmental Assessment and Performance (LEAP) partnership will enable, for the first time, such transparency and, as such, it is a milestone,”​ Nicolas Martin, policy adviser at FEFAC, told us back then.

Pricing perils

Results indicated that a large proportion of respondents (72%) believe raw material prices will cause bigger headaches for them in the coming year.

“I anticipate that the rock bottom prices for milk will prove to be unsustainable and [will] remove a number of the smaller farms from the production pool - this will give more power to the larger producers to negotiate higher prices meaning that raw material costs will increase again. However, that power will also be apparent on the feed side with demands on feed price reduction in the dairy sector at least,”​ said one respondent.

And some participants — 49% — reported that currency fluctuations had a negative impact on their business in the 12 months prior to July 2015.  

Animal well-being

A high percentage of survey participants (73%) stated that animal welfare is one of the top priorities for their company.

Indeed, Cargill and Tyson have long been citing a concern over cattle mobility as the reason why they would refuse to take cattle fed the controversial beta-agonist, Zilmax, back into their supply chain.

“This is not a food safety issue,”​ Tyson officials said recently. “It’s about animal well-being and ensuring the proper treatment of the livestock we depend on to operate.”

The Merck produced drug is still off the market in the US. 

This time last year, Henrie Verwayen, marketing manager, ForFarmers, told FeedNavigator that on top of the unrelenting pressure on milk, meat and egg prices, the industry was seeing greater focus in several regions on criteria such as feed safety, animal welfare and sustainability.

He said these factors will see margins in the feed to food chain squeezed, especially in net exporting countries like the EU, with a knock-on impact on profitability at farm level: “For our farmer customers this means they need to further increase scale.”

Meanwhile, Dr Christianne Bruschke, chief veterinary officer in the Netherlands, told AgriVision 2015 delegates this year that good animal health management, especially where large numbers of animals and humans are in relatively close contact, is essential for the economic viability of each farmer and the overall sector.

She said scientists, through knowledge, governments through policies and the private sector, through commitment, must work together to achieve agribusiness economic viability and greater societal acceptance of livestock production.

Will least cost economics knock innovation on its head?

Looking at pipeline R&D projects, 58% of respondents strongly agreed that their companies were planning to invest more in new product development (NPD) this year. However, more than half of our respondents also pointed out their customers were more focused on price than innovation.

Nevertheless, some of the major players in the feed industry have been reporting this year how traditional approaches will only get them so far. They are increasingly turning to cutting edge technology, looking to transform big data into information for research and development needs and relying on new avenues of study with the end goal of precision nutrition in mind.  

Epigenetics - the study of external or environmental factors that turn genes on and off and affect how cells read genes - could allow the feed sector to differentiate the pathways that are altered by nutrition early in life and that can impact later productivity, said Viggo Halseth, chief innovation officer, Nutreco, back in June.

“While epigenetics may seem remote today, it may well deliver the applications we need in 10 years’ time,”​ he said.

The FeedNavigator State of the Industry Report 2015 can be downloaded here​.

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