South Africa’s livestock industry, recovering from the impact of a recent devastating drought and disease outbreak, is likely to create demand for feed additives thanks to an increasing population, a surge in demand for quality meat products and a spike in consumer spending, especially among the middle class.
Preference of meat as a key source of protein in South Africa helped raise consumption levels to 3.8 million tonnes in 2016, and together with a recovering poultry industry is expected to drive the performance of the feed additives market.
Although demand for meat, eggs and milk in South Africa had increased in previous years, negative growth was posted in 2015-16 due to outbreak of diseases that opened floodgates for imports, especially of poultry products. The effects are still being felt across the feed supply chain.
The Animal Feed Manufacturers Association (AFMA), the official industry representative body of the South African feed industry, said feed sales for 2017-18 showed a negative growth of only 0.7% “compared to the enormous drop in sales of 6.2% experienced during 2016-17, the highest percentage decrease in feed sales AFMA members have ever experienced.”
“The dramatic feed sales loss experienced in 2016-17 was the direct consequence of the challenges the livestock and poultry industries had to face and overcome,” said AFMA’s De Wet Boshoff in a July 2018 statement
The sales of dairy, beef and sheep, layer, broiler, breeder and other feeds was 6.9 million tonnes in 2015-16 but dropped to 6.5 million tonnes and 6.4 million tonnes for 2016-17 and 2017-18, respectively.
“One hundred percent of the decline in layer feed sales was due to Avian Influenza (AI), and we expect a full recovery of these lost volumes by the end of the next financial year, if we are able to remain AI-free during this period,” Boshoff said.
Nevertheless, meat consumption in South Africa, a key driver in the demand for feed additives, has been on the increase since 2000, according to the country’s Department of Agriculture, Forestry and Fisheries (DAFF).
Consumption of red meat increased to 29 kg per person in 2016 from 22 kg per person in 2000, while consumption of broiler meat per person increased to 40 kg from 22 kg for the same period, according to DAFF.
With farmers keen on enhancing the performance and health of their livestock to meet this increased demand for meat, the potential for a spike in demand in South Africa for additives, flavors, sweeteners, vitamins, minerals, acidifiers and antioxidants is huge.
Drought and disease
A key constraint in meeting South Africa’s increased meat consumption demand since 2015 has been the prolonged periods of drought, especially up to the end of 2016. The impact from that drought is still being felt across the livestock sector.
At the height of the devastating drought, farmers off-took large numbers of livestock, hence substantially reducing the herd numbers, according to the Food and Agriculture Organization (FAO).
It was not until the rains returned in 2017 that South Africa farmers started rebuilding their livestock herds, the FAO said.
But the number of animals available for slaughter had been reduced substantially, leading to a decline in meat output by 11.9% to 1 million tonnes, the lowest since 2013.
“Feed sales experienced a blow with the worst drought in South African history having devastating effects on other livestock species, specifically beef and sheep due to the lack of absence of grazing,” Boshoff said. “This left producers with no option other than reducing their herds dramatically and retaining only their breeding stock, so as to rebuild their herds again after the drought.”
South Africa’s feed market is dominated by AFGRI, Bokomo Voere, Epol, KK Animal Nutrition, Meadow Feeds, Noordwes Voere, Brencho Feeds and Senwesko Voere.
For poultry, the number of broilers slaughtered declined from 965 million, or 1.3 million tonnes of meat, in 2015 to 936 million, or 1.2 million tonnes, “due to drought, which led to an increase in feed costs.”
In addition, the general performance of South Africa’s feed industry and, in particular, the country’s feed additives market, are still recovering from the recent outbreak of the highly pathogenic avian influenza (H5N8), which has put the poultry industry under pressure, eating into the broiler numbers after 3.2 million birds were culled and triggering a surge in imports and a slump in the country’s exports.
“The threat of further spread of the highly pathogenic bird flu virus (H5N8) is a major contributor toward uncertainty around the sustainability of certain sectors of the local poultry industry,” said Chris Schutte, chief executive officer for Astral Foods, in the company’s 2017 annual report.
Astral Foods, one of South Africa’s leading integrated poultry producers supplying animal feed, broiler genetics, production and sale of chicks, was forced to write off $3.8 million “in broiler breeding stock, as birds were culled to limit the spread of the disease.”
However, by the end of 2017, South Africa’s broiler imports had improved by 4% to an estimated 525,000 tonnes compared to the previous year, with the U.S. Department of Agriculture (USDA) predicting a further 2% increase of imports to 535,000 tonnes in 2018.
“South Africa’s broiler meat exports are estimated to decrease by about 19% to 60,000 in 2017, a significant decline from the prior year,” said the USDA, which added that it was optimistic the country’s broiler production was set for recovery.
Demand for livestock products in South Africa also could be propelled by the expanding urban population, which surpassed 65% of the country’s 58 million people in 2017.
The cost of raw materials in the animal feed industry continues to be a key concern for South Africa’s feed additives market as weather patterns make it difficult to predict production trends, especially of corn, which is the major ingredient with more than a 50% inclusion rate.
“In mid-January 2016, both white corn and yellow corn prices traded at historically high levels of $391 per tonne and $306 per tonne, respectively, when the rand (South Africa’s currency) depreciated and the severity of the drought started to be realized by role players in the South African grain value chain,” the USDA report said.
Furthermore, Quantum Foods CEO Hendrik Lourens said should the rand weaken against the U.S. dollar, “it would result in higher corn and soybean prices. This would result in increased input costs.”
But for the 2017-18 marketing period, the price of feed was expected to drop substantially because of the good rains received in South Africa in 2017.
“The local (South Africa) poultry industry faced tough trading conditions during the first half of the reporting period, on the back of record feed prices and subdued market conditions for poultry,” Schutte said.
South Africa is one of the countries in Africa with a regulatory framework governing the manufacture and supply of feed additives, but it has been spared frequent amendments in an industry where health and environmental concerns determine the longevity of product regulations and laws.
Current regulations on feed additives in South Africa classify the products into four categories for purposes of registration: technological additives, sensory additives, nutritional and zootechnical.
The Department of Agriculture lists additives under technical additives to include preservatives, antioxidants, emulsifiers, stabilizers, thickeners, gelling agents, binders, substances for the control of radionucleid contamination, anti-caking agents, acidity regulators, silage additives, denaturants, and substances for reduction of the contamination of feed by mycotoxins.
Colorants, flavoring agents and aroma enhancing agents have been classified under sensory additives while the department’s list of nutritional additives include vitamins, pro-vitamins and chemically well-defined substances having similar effect, compounds of trace elements, amino acids, their salts and analogues, and urea and its derivatives.
For the zootechnical additives, the Department of Agriculture lists digestibility enhancers, gut flora stabilizers and substances that favorably affect the environment.
Manufacturers of animal feed additives in South Africa are required by law to submit a cover letter, an application form for feed additives product label, certificate of analysis, product specification sheet, data on efficacy, safety and toxicity, including attestation to label claims that require substantiation.
But for importers of feed additives, the government requires them to be in possession of a free sale certificate and proof of compliance with local legislation in country of origin.
Key players in South Africa’s feed additives market include ADDCON, BASF, ADM, Elanco and Evonik industries.
BASF, which had been marketing phytase for feed, boosted the South African market in 2016 when it introduced Natuphos E, which it said was “a new standard in feed phytase technology that helps pigs and poultry better utilize phosphorus and other important nutrients such as proteins and calcium as well as energy.”
“The new generation phytase Natuphos E is built on BASF’s long-term experience as well as expertise and ensures a very fast and efficient release of phytate-bound phosphorous and other valuable nutrients,” the company said when it unveiled the product in South Africa.
“Adding Natuphos E to feed mixes reduces the need for non-renewable rock phosphates, contributing to more sustainable feed,” BASF said.
For South Africa, the anticipated continued surge in consumption of animal meat would create demand for more processed marine food, poultry, and dairy products, hence increasing use of animal feed that would drive increased manufacture and supply of feed additives.