Securing the strategic raw material supplies for a competitive EU livestock sector Guillaume Roué President of the International Meat Secretariat (IMS) President of the French Interprofessional Pork Council (INAPORC) 58th FEFAC Annual General Meeting Cologne, Wednesday 10 June 2015
Availability of row materials for animal feed in EU Grain Crop year 2013-2014 (Wheat+Barley+Corn) Production/domestic use : 108% Animal feed/total use : 51% Export/total use: 14% 300 250 Million metric tons 200 150 100 50 0 Production Import Domestic uses Animal feed Export Source : Stratégie Grains
Availability of row materials for animal feed in EU Protein-rich substances Crop year 2012-2013 Production deficit : 69% Soybean meal/total use : 60% 25 Protein crops 20 Rape and sunflower 15 Dehydrated fodder 10 Soja 5 Meat and fish meal 0 Production Use Various* * Without Grain s distillers Source : UNIP
550 500 450 400 350 300 250 200 150 100 Feed prices: increasing and volatile /metric ton 90 95 00 05 10 15 Soybean Meal Pig feed Cost of Raw materials Wheat On this chart the most obvious and remarkable Prices in Brittany (France): major husbandry area (pig, poultry, milk ) Cost of raw materials: optimized formula for finishing pigs Pig feed : compound feed for finishing pigs, price paid by farmers (from Accounts) Increase and volatility of Soybean Meal Price But...
Feed prices: increasing and volatile 300 250 /metric ton... That is also the case for feed and grain prices 200 Pig feed 150 100 90 95 00 05 10 15 Cost of Raw materials Wheat Prices in Brittany (France): major husbandry area (pig, poultry, milk ) Cost of raw materials: optimized formula for finishing pigs Pig feed : compound feed for finishing pigs, price paid by farmers (from Accounts)
Lond term trend 300 250 200 150 /metric ton Average 2000-2004 170 /t Average 2010-2014 250 00 05 10 15 Feed price: +50% => Pig cost : +30% Repercussion of cost increase on price received The geatest difficulty for farmers and other activities downstream the value chains Depends the sector (pig, poultry, milk are different) Many pig farmers in trouble (Short term debts to feed supplier, coop... or banks)
Feed price volatility (1) : major effect on farm results volatility 120% 100% 80% 60% Volatility assessment Coefficient of variation (5 years) Economic results of French pig farms Pig price Feed price Pig farms outcome less volatile for 4-5 years But effect of feed price volatility larger than that of pig price 40% 20% 0% 00 02 04 06 08 10 12 14 *
Efficiency of feed industry: important for the farmers Gross margin rate (Feed price raw materials cost)/feed price (%) 30% 25% 20% 15% 10% 5% 0% -5% -10% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Feed industry= buffer between grain market and farmers Absorbs and slows price fluctuations, by varying margins That is fair if movements are balanced Here (France as example) Is the high-margin period not too long (1,5 year)?
Cost of feed industry: a French study /metric ton Transport of raw materials and 10-15 compound feed (including salaries) Industrial costs 10-15 (including salaries at plant level) General management 10 and structure costs Total 30-40 Gross margin rate 14-16% Cost diversity Plant age and size Plant capacity utilization Distance between plant and farms Farm number and size Product range Improvement possibilities Economies of scale Less trucks on the road Smaller product range
250 200 150 100 /metric ton Global competition: Corn price Brittany Brazil (Santa catarina) USA (Iowa) Europe more competitive Raw materials in global competition After the rise => convergence UE/USA /metric ton Britany Brazil (Santa Catarina) USA (Iowa) Av. 2004-06 132 102 70 50 2004 2006 2008 2010 2012 Av. 2011-13 225 194 194 Evol. +92 +91 +123 Source : IFIP after ICEPA, AMRC, Petit Meunier
275 250 225 200 175 150 125 100 /metric ton Brittany Global competition: Feed price Brazil (Santa catarina) USA (Iowa) Europe more competitive Optimized formula for finishing pig Raw materials in global competition After the rise => convergence UE/USA % change 2011-13/ 2004-06 Britany Brazil (Santa Catarina) USA (Iowa) Maïs +70 +89 +175 75 50 2004 2006 2008 2010 2012 Soybean Meal +89 +107 +95 Raw materials for pig +75 +94 +149 Source : IFIP after ICEPA, AMRC, Petit Meunier
In a new age of expensive raw materials Europe more competitive against USA New use like bio fuel (Especially in the US) More global demand: For food (population growth) For feed: more meat consumption Climatic hazards... And exchange rate ( /$) (See right) 190 180 170 160 150 140 130 120 110 100 Corn price ( /metric ton) Jan-March 2015 /Jan-March 2014 (%) 14 15 Brittany Brittany Chicago Chicago -12% +2%
How mitigate EU dependence for Protein-rich substances (PRS)(1)? Efficiency of husbandry is largely dependent on PRS supply EU is a net importer but, in addition: Global demand is high (growth, meat and dairy consumption...): see China Prices are exorbitant (see above for Soybean Meal) Price pressure will remain strong, because of competition in land use (grain, sugar...) as well
How mitigate EU dependence for Protein-rich substances (PRS)(2)? GM policy and acceptance in Europe: the problem of asynchronous authorizations limits sourcing opportunities (no imports from US) Development of indigenous production to replace soya meal limited by agronomic and profitability issues=> few short/medium term perspectives Nevertheless, development of rape: Bio fuel (diesters) Meal efficient for pigs and dairy cows (High-Pro rape) Not efficient for poultry
Time to reconsider re-introduction of processed animal protein into animal feed? Attaining BSE-free status in Europe Using bone-meal as additive for cross-species feed (eg. Poultry bone meal as pig feed additive. Difficult from cattle?) To consider Consumer acceptance and potential risks on image and consumption Maximum price of incorporation, competition with other uses
New challenge for the feed industry A role to play in control of animal diseases 2013-2014: outbreak of Porcine Epidemic Diarrhea (PED) in Japan, South Korea and the USA Huge consequences on the market, so far rather positive for Europe, but... Right or wrong, animal feed has been questioned: use of contaminated blood plasma Such outbreak has drastic consequences (cost, image, market disruption) Completely prevent could be difficult In case of outbreak, discretion is the first reflex However rapid circulation of information necessary, for example by the way of an international network Protect the sector as a whole is essential rather than protect itself