A further drop expected in 2017 due to avian influenza and environmental restrictions.
BRUSSELS, BELGIUM —The industrial compound feed production for farmed animals in the E.U. in 2016 reached an estimated level of 153.4 million tonnes, down 1% from 2015, according to data provided by European Feed Manufacturers (FEFAC) members.

The Netherlands and Poland have seen their production of cattle feed increase by more than 8%, whereas France moved in the opposite direction, reflecting the diverging national milk production following the abolishment of dairy quotas, FEFAC said. Overall, due to low milk prices, dairy farmers were not encouraged to purchase high performing feed to maximize milk production, resulting in an aggregate downturn of E.U. cattle feed production of 1.5%.

Although poultry feed production was expected to perform rather well in 2016, the Avian Influenza outbreak at the end of 2016 severely affected several poultry producing regions of Europe, in particular France, where a 4% decrease in poultry feed production was recorded. All in all, E.U. poultry feed production remained almost stable and is still the leading segment of E.U. industrial compound feed production, well ahead of pig feed.

According to FEFAC, after two years of moderate growth, pig feed production decreased by 1.5% in 2016. This decrease partly may be explained by the effects of African Swine Fever in Eastern Europe, which weighed heavily on the development of pigmeat production, but also by low market prices for pigmeat in the first half of 2016 and large availability of feed grade cereals at low prices that benefitted on-farm mixing.

For the third year in a row, Poland was one of the best performing countries, with annual growth of 4.7%, boosted by the demand for poultry feed that has turned Poland into the largest poultry producing country in the E.U. The Netherlands, boosted by the demand for dairy feed, recorded 1% growth versus 2015. Germany, Spain and Belgium saw their total compound feed production fall by 1% to 2%, whereas France saw its production drop by 4%. Germany strengthened its position as a leading E.U. country in terms of total compound feed production, ahead of Spain and France.

The final estimate and detailed breakdown of the 2016 figures will be issued in June 2017.

FEFAC said its market experts are relatively pessimistic concerning industrial compound feed production in 2017. The dairy sector still needs to recover from the severe milk price crisis, thereby likely negatively impacting the dairy herd in 2017, while also national adjustments to meet environmental criteria play a role. These developments may lead to a further reduction of cattle feed production by 2%. The expected stabilization of pigmeat production in Europe may induce a moderate reduction in demand for pig feed (-1%). Poultry exports will continue to be affected by Avian Influenza, thus putting pressure on E.U. poultry production and subsequently the feed segment (-0.5%). Overall, this would lead to a further 1% decrease in compound feed production in 2017 versus 2016.

A number of parameters will evidently affect this outlook. The evolution of outbreaks of Avian Influenza and African Swine Fever will be decisive, in particular in terms of E.U. export capacities preservation. The scope for reestablishment of Russian imports of E.U. pork as a result of the World Trade Organization’s (WTO) conclusions on the illegality of the Russian sanitary ban introduced in 2014, may on the other hand offer some opportunities for certain E.U. countries, although it is unlikely that this development will lead to action in the short term, FEFAC said. This case is one among many political factors that undoubtedly will affect the market in the E.U. and worldwide.

Cereals market quotations are now on a moderate upward trend, after reaching a record low level in autumn 2016. However, the relatively comfortable level of end stocks at global level, the good prospects on the South American harvest and the good state of E.U. winter cereals plantings should maintain prices at a low level in the first half of 2017. As regards soybeans, signals from South America are positive both in terms of acreage and yields for the spring harvest. An additional positive indication is predicted increase in the U.S. soybean acreage for 2017. Nevertheless, with the demand for soybeans and soybean products increasing at global level by 4% per year, the balance sheet remains tight, FEFAC said.