In 2015, the global agricultural market for the most part again experienced reduced raw material prices and was also more balanced and less price-volatile than in recent years. Demand for premix and feed specialties had been under pressure over the last few years due to significantly higher raw materials prices, which eased over 2014/2015 with a significant supply growth of wheat, maize and soybeans. Nutreco’s Animal Nutrition business performance is driven in part by trends in herd sizes and meat production. Globally, meat production grew slightly overall, with a drop in beef production being offset by an increase in mainly poultry. Overall meat prices fell more than 20% due to slower economic growth and excess expansion supply in poultry and pork following historic price highs in 2014.
The addressable global aquaculture feed market for Nutreco, including salmonids, shrimp and high-value whitefish, is estimated at approximately 22 million tonnes and over the long-term is expected to grow by an average of 5% per year.
Pig meat production grew slightly, but China decreased considerably due to lower consumption and margin pressure as a result millions of smaller farmers leaving the industry. This was compensated for by increased supply in the EU, US and Canada.
Poultry production had a second year of limited growth of around 1% as excessive supply expansion has outstripped continued strong fundamentals – robust demand, ongoing low feed prices and relatively high protein prices. This has pressured producer profitability in most regions of the world. Markets in China and Thailand are likely to be impacted by avian influenza (AI)-related import restrictions on breeding stock by the US in the second-half of 2016, potentially affecting global poultry markets.
Beef production decreased by more than 1% as decline continued in developed countries. Dairy production again increased by approximately 2%. Although in the second-half of the year, the rate of milk production growth from the major exporting countries eased, excluding the EU, as farmers responded to lower global dairy prices. EU growth was positive following the removal of quotas in April.
The compound feed market overall probably grew again slightly to close to 1 billion tonnes and a value of US$ 400 billion with overall higher animal production being offset by increasing efficiency and feed conversion ratios. The global feed specialties market continues to grow as increasing professionalisation drives farmers to greater efficiency and search for return on their animals.
The principal markets for salmonid feed are Norway and Chile, where more than 75% of the world’s farmed salmonids are harvested. The average long-term annual growth in salmonid feed volumes from 1998 to 2015 was more than 5%, but in recent years fish health issues, particularly in Chile, have impacted the supply. Consequently the global market for salmonid feed in 2015 saw a reduced growth. In Norway, there have been significant sea lice issues with high treatment costs. The Chilean salmon industry faced a reduction in salmon prices of approximately 15% in the final months of 2015 and also experienced significant biological challenges. Both factors have strongly impacted the profitability of many of our Chilean customers.
Most of the world’s shrimp feed is produced in China, Thailand, Ecuador, India, Indonesia and Vietnam. The global market has a long-term growth rate of approximately 5% per year but is subject to regional supply volatility due to shrimp disease risks. In Asia, feed production in Vietnam and Thailand grew as the industries began to recover from the early mortality syndrome (EMS) disease problem of recent years, driven by improved farming practices with more interest in higher quality feed. It has been a challenging period for Thai, Chinese and Vietnamese shrimp feed producers due to the presence of EMS in those countries, although recovery is now underway. Despite recoverythis revival, production in 2015 was still 10% lower than 2013 levels. The tightened supply did help shrimp prices in 2014, but prices have now fallen with the China economic slowdown significantly impacting demand. Although it is expected that those countries will recover to pre-EMS production levels in the coming years, countries such as Ecuador that did not suffer from EMS might still have an advantage in the world markets for some time.
The third-party market for compound feed is shrinking, which is mostly the result of a shift towards integrated farming operations. This has been driven by low profitability for farmers over the last few years, cash-flow challenges, and investment capital requirements in order to meet new animal welfare regulations. Overall herd sizes have declined slightly for most species apart from beef cattle and broilers. The general demand and supply situation for poultry products in Spain was more stable in 2015 compared to 2014, relatively worse prices for poultry meat compared with 2014, but mitigated with lower production cost.
The market for pork meat is growing, driven by increased export demand. Pork prices in Spain declined as the year progressed, driven by lower feed costs. Iberian pig prices remained at very high levels throughout the year.