The European feed situation

by Teresa Acklin
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Feed output to remain stable amid further industry rationalization.

   By Brian Rutherford

   The European Union's compound feed industry developed strongly from the mid-1970s until the mid- 1980s, when recession and overproduction resulted in output stabilizing at around 95 million tonnes. Since 1990, annual production has been on the increase again, but somewhat more slowly.

   In 1993, E.U. production increased to 115 million tonnes from 112.7 million in 1992. This 2.1% increase was most encouraging.

   Table A shows 1993 E.U. compound feed production by category and by country. The most significant increase in 1993 was in pig feeds, where total production of 40.8 million tonnes represented a 3.9% increase from 1992.

   Production of sale compounds for cattle, poultry and others also increased in 1993, although by smaller percentages than pig feeds. But production of milk replacers continued its declining trend, dropping 1.5% in 1993 from 1992 levels.

   Among the countries, only Spain experienced a decline in feed production, which was down 6.2% from 1992. The size of Spain's percentage decline was attributed to an overestimate of the previous year's production.

   Ireland's 1993 production was up 10.2% from 1992, and Denmark's output was up by 6.6%. Compound feed production in Belgium and France increased by 4.9% and 4.5%, respectively, while the remaining countries experienced slight to moderate increases.

   National developments in each feed category varied by country. Cattle feed production was down by less than 1% in Belgium and Italy, while Portugal and Spain recorded much larger decreases of 9.2% and 16.8%, respectivley.

   Pig feed production increased in every country except Spain. In poultry feed, Ireland reported the largest jump in output, at 7.3%, but Germany, the Netherlands, Spain and the United Kingdom reported modest production declines.

      NUMBER OF FEED MILLS ON THE DECLINE.

   In recent years, the number of E.U. feed mills has declined, dropping from 4,770 in 1988 to 4,157 in 1993. This decline of 613 mills, or 13%, is seen in Table B on page 32. We must keep in mind that Germany's total since 1990 has expanded to include mills in the former East Germany; further, the number of mills in the U.K. increased by 63 in 1993, reflecting revisions in coverage and the addition of very small plants.

   Rationalization and contraction will continue in the years ahead, with the aim of removing surplus capacity and reducing costs to become more efficient and competitive. The smaller producers will decrease in size, while the larger producers will increase, benefiting from economies of scale.

   Larger producers also will be better able to master the deluge of legislation engulfing the E.U. feed industry. Smaller producers can neither cope with this legislation nor finance it.

   Before discussing the future for E.U. compound feed production, let us look at E.U. livestock production from 1990 to the 1994 and 1995 estimates.

   The first thing we notice in Table C is that total meat production continues to rise, by more than 1 million tonnes in five years. Beef production also is starting to increase again after veterinary problems, especially in the U.K., cut into demand in Europe and elsewhere.

   Pork production has risen significantly in the past five or six years, but currently is rather static at about 15.3 million tonnes. Poultry production, consisting of broiler, turkey and duck meat, continues to increase steadily, while egg and milk production are static.

   The table indicates 1995 meat production is expected to increase by 400,000 tonnes from 1994, mainly on account of beef. But I would expect further expansion in total meat to come from poultry.

   Although egg consumption is said to have reached a plateau, I believe we are more likely to see an increase here, rather than the reverse. Milk production still is managed by the quota system, and thus there will be no increase. The prospect is for percentage point declines in the quota and thus, production, in the years ahead.

      CEREAL USE DECREASES.

   The total use of raw materials for livestock products in 1994-95 is estimated at about 175 million tonnes, as seen in Table D on page 34. It is worth noting that of the total, some 115 million tonnes will be used in compound feeds for sale, with the 60 million tonne unallocated remainder used by integrated or on-farm units. I will discuss integrated production a little later.

   During 1994-95, cereal use is estimated to decline by almost 1 million tonnes from the previous season; this is a disappointment to E.U. officials, who expected cereal use to increase by maybe 5 million or even 10 million tonnes because of reforms to the Common Agricultural Policy and the General Agreement on Tariffs and Trade. In any event, partly because of currencies and partly because of plentiful supplies of protein and competitively priced byproducts, cereals have not been sufficiently competitive to increase their share of the raw materials market.

   Manioc use is expected to decline, which is a little surprising in view of the low price of protein. Imported byproduct consumption should increase 1.2 million tonnes, mainly because use of corn gluten feed is expected to rise 800,000 tonnes to 6.3 million.

   Total use of vegetable proteins is estimated to increase by 700,000 tonnes, based on increases in soymeal consumption and sunflower meal production. I suspect that the fats estimate, 1.4 million tonnes within the molasses/fats category total of 5.5 million, still understates fats use; considerable quantities of oilseeds are used as such in feed, and I do not believe these quantities are included in the 1.4 million tonne figure.

   E.U. cereal prices in the first half of the 1994-95 season have been well above support prices, which are due to fall a further 8% in November 1995. Thus, the possibility still exists of significantly lower E.U. cereal prices, especially as the set-aside now is 2% less than the previous year.

   If we have good or increasing harvests, the imported byproducts are likely to face stiffer competition. My guess is that byproducts will be competitive and that cereal use in E.U. animal feed, and definitely for human use, will not increase to any great extent.

   The 475,000 tonnes of millfeed agreed under GATT market access arrangements have not yet received import licenses and are not likely to do so in the 1994-95 season. The annual Thai manioc import quota of 5.25 million tonnes ended Dec. 31, but 50% has been rolled forward to cover the first half of 1995. It is expected that quotas from all countries, which total about 6.6 million tonnes, will be confirmed within the GATT and will be the maximum available annually for E.U. import after June 30.

   For the record, E.U. cereal production during the past four seasons has declined because of weather, set-asides and CAP reform. Thus, internal supplies are more limited and intervention stocks have dropped.

      FEED OUTLOOK.

   In brief, the E.U. feed situation can be summarized along the following lines:

   • little increase in compound feed production expected. Current output is 115 million tonnes annually, although this will increase from 1995 because of the addition of the E.U.'s three new members.

   • milk production curtailed by quotas, and number of cows declines.

   • no expansion foreseen for consumption and production of milk and red meat.

   • poultry meat consumption and hence production to increase.

   • egg consumption static.

   • farm units growing larger in size.

   • feed mills decreasing in number and output per mill increasing.

   • livestock production limited by environmental problems and disposal of manure.

   • a torrent of legislation continues on health, safety, salmonella, additive usage, water discharge, dust emissions, excess noise, welfare of animals in transport and so on.

   • concern remains as to the effects of GATT on exports of livestock products and increased egg imports. GATT commitments on market access may lead to more imports, while exports of subsidized eggs will be cut, which could lead to a potential egg supply increase of 5% of E.U. production. This situation could lead to price declines of up to 10%.

   • above all, feed industry strives to produce the best quality feed at the most economic price and urges raw material suppliers to deliver high quality materials with consistent analysis.

   The situation with integrated production is noteworthy. For the past four years, U.K. officials quietly have been obtaining production data from large integrated poultry units, that is, units in excess of 50,000 birds.

   These units are referred to as integrated because they produce both poultry and feed within the single organization. The feed produced is for the organization's own use and is not sold to outside customers, as is the case for the animal feed compounder who produces for sale.

   The figures are fascinating. In 1993-94, 1.98 million tonnes of poultry feed, 50% of which was broiler, were produced in Great Britain by integrated units — compared with sale compound production of 3.9 million! In addition, of the 3.9 million tonnes, 0.662 million was integrated production.

   Certainly, there is a need for sale compounders to ensure their statistics only cover sale compounds. And there is an urgent necessity for all countries in the E.U. and elsewhere to collate figures for integrated production of all classes of stock. We would then find that our 60 million tonnes of unallocated raw materials would dwindle as they were apportioned to integrated units of all types.

   A WIDER VIEW OF EUROPE.

   The fall of the Berlin Wall and the desire of more countries to join the E.U. have widened the concept of Europe. So let us look at compound production in these areas.

   In the countries of the European Free Trade Area, compound feed production in 1993 increased 3.3% to a total of 7.48 million tonnes, as seen in Table E on page 36.

   Austria, Sweden and Finland joined the E.U. on Jan. 1, and their agricultural policies now are subject to E.U. rules and regulations. We will watch developments, but even though total annual EFTA feed production increased between 1984 and 1989 to 7.7 million tonnes from about 6.7 million, there has been no overall increase in the past five years.

   A future problem with the addition of the three countries is that their sale compound production of 4.4 million tonnes will make comparisons with E.U. statistics from earlier years that more difficult.

   Throughout Central Europe, per capita beef and veal consumption has declined dramatically with the change to market from centrally managed economies.

   As an example, Bulgarian beef and veal consumption in 1990 was 14.6 kilograms per peron per year; the 1994 forecast was 7.6 kg. Relative figures for Poland are 20.4 kg in 1990, compared with 14.1 in 1994; and for Romania are 18.5 kg versus 9.3 kg.

   Pork consumption also is down significantly, with Bulgarian consumption dropping to 27.5 kg in 1994 from 44.9 kg, Hungary's consumption down to 41.7 kg from 70.8 kg, and Poland's intake down to 46.6 kg from 49.4 kg. Lamb consumption declined similarly in Central Europe, with Bulgaria's intake virtually cut in half.

   These dramatic reductions in consumption and exports, especially to Russia, have played havoc with Central European compound feed production. Table F illustrates that in 1989, the 10 states of Central Europe had a feed production capacity of 32.55 million tonnes and that production was 30.42 million.

   During the transition, reliable figures were not obtainable. But compound production in 1992 was estimated reliably at 17.22 million tonnes — in other words, the industry was operating at 53% capacity.

   Poland has managed to maintain a viable feed business with a reduction of “only” 1 million tonnes, but the reduced production in most other countries has been catastrophic. Some improvement was seen in 1993 for some countries, but Central Europe as a whole operated at only 57% of capacity.

   The situation in the countries of the former Soviet Union is similar to or worse than that in Central Europe. Feed compounders are pressed by inadequate supplies of raw materials, rising prices, lack of credit and money and a sharp fall in consumer demand because of increased meat prices and a general imbalance between production centers and demand.

   From 1990 to 1994, beef consumption in Russia, for instance, declined to 22.4 kg per person from 36.6 kg. Russian pork consumption in the same period fell to 16.4 kg from 26.5 kg.

   The International Feed Industry Federation estimates total F.S.U. feed production in 1990 at 96 million tonnes and suggests that 1993 production was a maximum of 60 million.

   Of total F.S.U. feed capacity, indications are Russia accounts for about 50 million tonnes, yet its feed production may have decreased to as low as 20.6 million in 1993 from 37.4 million in 1989, a drop of 45%. Another source put the 1993 figure at 25.2 million tonnes.

   Production in Russia in the first nine months of 1994 was running at 70% of the 1993 level, implying that 1994 production would be between 15 million and 20 million tonnes; what a catastrophe for the Russian feed industry!

   In Ukraine, compound feed production has fallen from 25 million tonnes in 1989 to an estimated 13 million in 1993. As in Russia, Ukraine's feed is not nutritionally balanced, being short of protein and vitamin type premixes.

   In May 1994, the I.F.I.F. helped the Russian feed industry with speakers and the organization of its first international conference in Moscow. Since then, the I.F.I.F. has been trying to obtain international support for the industry in its time of crisis.

   It is possible that both financing and advice may be forthcoming from the E.U. Tacis program, which has been established to help Russia and other F.S.U. countries. The Tacis program provides grant funds for the exchange of expertise and technology in priority sectors identified in agreement with the partner countries.

Table A: 1993 E.U. production of sale feed compounds in million tonnes

CattlePigsPoultryMilk replacersOtherTotal
Germany7.96.94.00.120.619.6
France3.86.48.00.581.520.3
Italy4.12.54.40.201.212.4
Netherlands4.18.03.50.720.516.8
Belgium1.23.11.00.060.25.6
U.K.4.32.53.90.020.911.6
Ireland1.70.60.40.010.33.0
Denmark1.73.60.60.010.16.0
Spain2.65.14.10.071.113.0
Portugal1.01.51.2-0.23.9
Greece1.50.60.7-0.052.8
Total33.940.831.81.796.65115.0
Totals may not add because of rounding.
Source: European Feed Manufacturers Federation (FEFAC)

Table B: Number of E.U. compound feed units

198819891990199119921993
Germany*672648691674655616
France561528516491471460
Italy1,3911,2509821,1051,0601,060
Netherlands326369391377367360
Belgium959187868584
U.K.**494488458417390453
Ireland997877767575
Denmark470450416386386360
Spain317317e420420e386e352
Portugal938689888885
Greecee250250250250250250
Luxembourg222222
Total4,7704,5574,3794,3724,2154,157
*includes former East Germany beginning in 1990 **revised in 1993 per U.K. authorities database eestimated
Source: FEFAC

Table C: E.U. meat and animal products production in million tonnes

19901991199219931994e1995e
Total meat29.129.829.730.130.330.7
Beef and veal8.18.78.47.87.98.3
Pork14.714.314.415.315.315.2
Poultry6.36.86.97.07.17.2
Milk117.0114.0111.6112.1112.2112.1
Egg use4.85.04.94.94.94.9
Source: European Commission

Table D: E.U. use of raw materials in feed in million tonnes

1993-941994-95
DomesticImportedTotalDomesticImportedTotal
Cereals84.32.086.382.92.585.4
Manioc-6.56.5-6.16.1
Sweet potato-0.50.5-0.50.5
Byproducts19.311.130.419.212.331.5
Molasses, fats2.03.55.52.03.55.5
Vegetable proteins13.428.742.113.829.042.8
Animal proteins2.10.82.92.10.82.9
Total121.153.1174.2120.054.7174.7
Source: European Commission

Table E: EFTA countries, compound feed production by livestock class in thousand tonnes

AustriaFinlandSwedenSwitzerlandNorwayTotal
Cattle19921574219403259202,763
19931603991,1103249392,932
Pigs19922123016006064102,129
19932322936705764052,176
Poultry19924631944612592441,621
19934621894702582421,621
Other199223710450105232728
19932539150107252753
Total19921,0691,0202,0511,2951,8067,241
19931,1079722,3001,2651,8387,482
Source: International Feed Industry Federation

Table F: Central Europe, compound feed production in thousand tonnes

Annual
productionProductionProductionProduction
capacity198919921993
Albania150120205
Bulgaria4,0003,5001,8001,800
Czech Republic2,8002,7001,9002,000
Estonia700700250150
Latvia1,0001,000200260
Lithuania1,5001,400350600
Hungary6,2006,0003,0004,000
Poland6,0005,5004,5004,500
Romania7,5007,0003,5003,500
Slovakia2,7002,5001,7001,700
Total32,55030,42017,22018,515
Source: International Feed Industry Federation

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