Outlook for the global feed industry in 2023
The global feed industry has been grappling with a number of macro trends in recent years. However, 2023 is unlikely to ease and several new challenges have emerged.
National economies in several major markets have slowed, signaling a possible global recession. The International Monetary Fund (IMF) pointed out in the "World Economic Outlook Report" released in October 2022 that the global economy is expected to grow by 3.2% by the end of 2022, but the full-year growth forecast for 2023 is only 2.7%. Technically, a third of the world's economies are already in recession, defined as two consecutive quarters of contraction, the report said.
The Russia-Ukraine conflict and high inflation are driving rising energy, input and living costs, holding back the economic recovery. Meanwhile, many markets and industries are still struggling to stabilize from the aftermath of the COVID-19 pandemic. Frankly, these are turbulent and uncertain times - conditions that will certainly affect the growth and profitability of the livestock and feed industries.
In Feed Strategy magazine's annual outlook survey, animal feed industry leaders answer and identify the questions feed producers and nutrition experts should be looking at as they plan for the next 12 months.
Inflationary pressure and high input costs The
IMF reports that global inflation is expected to rise to 8.8% by the end of 2022, but may fall to 6.5% after peaking in 2023.
David Fairfield, senior vice president for feed at the National Grain and Feed Association (NGFA), said: "High inflation is already affecting the bottom line of the feed industry in 2022. The immediate priority in 2023 is how to manage inputs." costs, and generate sufficient revenue.”
In addition, price-related cost-of-living pressures are forcing consumers to adjust their diets to withstand rising food prices, which may affect the type and amount of animal protein consumers consume. The point to be made here is that the fact that emerging and developing markets are facing the threat of a global food crisis cannot be ignored. The crisis stems from Russian interference in Black Sea grain exports.
Constance Cullman, President and CEO of the American Feed Industry Association (AFIA), said: "The consumer price index for all food products increased by 11.4% year-on-year. This figure is expected to continue to rise in 2023. 2.5%~3.5%. Members of our association have recently heard from economists that rising inflation, combined with geopolitical tensions in Europe, and a dry climate unsuitable for crop production, will lead to shortages of feed supplies and high prices , forcing farmers and ranchers to reduce the number of animals they raise, which in turn could lead to a decline in global animal protein production."
Raw material prices fell as Europe's 2022 summer heat wave, historically rare dry weather and other climate issues in key regions impacted crop yields The surge will continue to pose challenges for animal feed producers.
Iani Chihaia, an animal nutrition consultant working for the European division of the US Soybean Export Council (USSEC), reports: "The European Commission lowered the EU corn crop forecast to 55.5 million tons. Some analysts warned that , which is likely to be the lowest production since 2007. In this case, the EU's total maize imports in 2022-2023 are expected to reach 21 million tons, the highest level in nearly four years, and this shortage may It will lead to higher corn prices in Europe."
At the same time, the US Department of Agriculture (USDA) also lowered its forecast for the 2022 corn and soybean crops.
Olivier Clech, co-chief executive of French plant additives supplier Nor-Feed, noted that inefficient plants are at high risk of closure as farmers around the world are under economic pressure.
Supply chain and logistics may have problems
In the post-COVID-19 era, supply chain bottlenecks and product shortages have become the most worrisome issues. However, there is little correlation between the latest round of logistical and transport tensions and the aftermath of the COVID-19 pandemic. Now, turbulent geopolitics on multiple fronts, energy crises, persistent labor shortages and labor disputes are creating new obstacles to supply chains and logistics.
"In global supply chains, logistics has become very expensive and less reliable. Now, high raw material and energy costs are compounding the situation. Especially in Europe, costs are skyrocketing," Kleich explained. ”
Ismael Roig, President of Animal Nutrition at ADM, agrees: “Around the world, supply chains for many types of commodities have been disrupted. In 2023, this will continue to be the case. Shock.”
Roeg pointed out that the persistent shortage of labor has caused delays in all aspects of the value chain from procurement, processing to delivery. These conditions also lead to transportation problems for the feed industry.
“The lack of predictability in rail and truck shipments has created issues with both the safe movement of products and on-time delivery,” Fairfield said. “Just maintaining just-in-time stock is no longer feasible because of logistical issues, leading to the need for more Inventory space, which in turn increases inventory costs.”
In the fall of 2022, the United States almost encountered a railroad strike. In the event of a rail strike, business operations could be paralyzed. Because 40% of long-distance freight is transported by rail, once the railroad strikes, the daily loss will reach 2 billion US dollars. From the current point of view, the preliminary agreement reached with various trade unions (not to strike) is temporary and must be approved by some trade unions. The final vote will be held at the end of November 2022.
Fairfield concluded: "If the agreement is not approved, the impact of the strike will be devastating."
At the same time, Kuhlman pointed out that in the next decade, the US trucking industry is expected to need to hire an average of 11 workers per year. Ten thousand new drivers are needed to fill the driver vacancies caused by economic growth and loss of personnel. This is another looming question.
According to Alexander Döring, Secretary-General of the European Feed Manufacturers Federation (FEFAC), one of the main issues for the EU feed industry is how to try to maintain a continuous supply of feed and competitive prices, while at the same time Ensuring that poultry and livestock "have sufficient, safe, nutritionally balanced feed in a war economy context.
Rising freight rates and geopolitical disputes will also put pressure on logistics and raw material supplies in 2023.
In response to raw material shortages and Supply challenges, the American Feed Industry Association is taking a series of actions, such as urging the US federal government to re-examine negotiations with major trading partners, "to assist in diversifying raw material procurement sources and expanding export markets, ensuring supply and stabilizing customer base . "
European energy crisis
40% of Europe's natural gas supply relies on Russian imports. Since the Russian-Ukrainian conflict broke out, Russia has restricted the supply of natural gas to Europe, causing European energy costs to soar in the summer of 2022. In order to solve the looming energy crisis, EU leaders have proposed price caps and consumption limit plans, but now, everyone is worried about an energy crisis in the winter of 2022.
At present, EU member states have agreed to take emergency measures, including cutting natural gas consumption by 15% this winter, requiring members China’s natural gas inventory will reach at least 80% of its gas storage capacity before this winter; in addition, in order to reduce natural gas power generation, peak electricity demand will be cut by at least 5%.
Cihaya said: “The recent increase in energy prices, especially the increase in natural gas and electricity prices , threatens the continuous supply of feed, affects the production cycle of animal protein, thus threatens the industry's ability to continue to provide basic food products to consumers, and further negatively affects the industry's ability to continue to provide raw materials to food processors.
He fears that some rapeseed crushers, feed producers and animal breeding companies in the EU may be forced to close, lay off workers or make other significant layoffs as they struggle to stay afloat .
Cihaya pointed out: "The sharp rise in energy costs is forcing feed companies to pass on price increases to farmers and consumers. Companies have warned that inflation will continue to rage in 2023. For feed producers and rapeseed crushers in Europe For China, the key lies in how to survive the high energy prices in the winter of 2023."
Doling believes that the threat and uncertainty of energy restrictions and prices may also significantly affect the supply of by-products. He pointed out that major EU suppliers have stopped drying by-products such as sugar beet meal and distiller's grains in favor of producing biogas from wet by-products.
Recurring livestock disease threats
Highly pathogenic avian influenza and African swine fever continue to test poultry and hog producers in many regions, while other countries around the world free from these two outbreaks struggle to prevent these deadly Disease is introduced.
Doling said: "Possible breakthroughs, such as vaccination, are still a few years away from actual implementation, so strict biosecurity measures throughout the industry chain are still the most effective way. Bird flu is becoming more recurrent. Persistent, more and more areas of Europe are facing unprecedented numbers of infections spreading from wild birds/fowl to farm flocks.”
Recently, according to USDA Animal and Plant Health Inspection Service (APHIS), in 2022, Outbreaks of highly pathogenic avian influenza have caused the loss of more than 46 million commercially farmed poultry in the United States.
Sustainable Innovation Drives Future Investment
Corporate social responsibility and concerted efforts to limit the environmental impact of feed and food production will continue to impact animal feed formulation, source of ingredients and production efficiency.
"The 'sustainability train' of EU legislation will continue to run in 2023, despite economic challenges that have pushed food security and feed safety up the political agenda," Doling said, noting that some of the Green New Deal measures It is proposed to "provide long-term food security".
All sources mention that the industry will focus on research and development of alternative feed ingredients and feed additives that reduce emissions and allow nutritionists to do more with less.
Kullman called on regulators to improve, update and speed up the approval process to bring safe, innovative products and new feed formulations to the market as early as possible. She also shared that she believes progress is being made on these fronts.
"We're also seeing other agencies, like the USDA, showing a greater interest than before in getting involved in driving change," Kullman said. "Using public-private partnerships to uncover barriers to entry for these climate solutions, then incentivizing and Adopt these climate solutions on the farm.”
Ewenn Helary, CEO of feed additive company NUQO, believes that innovation is key to solving some of the feed industry’s fundamental and emerging pain points. Harari said: “There has always been a lot of focus on feed cost and feed efficacy, and with all the recent events that have impacted our industry, these two factors will become even more critical. Our industry will need to adapt to regulatory challenges. changes, adapting to consumer expectations, to implement more sustainable solutions.”
He continued: “Innovation has been on the agenda for a long time. We see the need for this innovation in different regions, not only It’s an investment in the future, but also in achieving faster delivery in this industry.”