16 June 2008

4 minute read

Romania and Bulgaria account for around 3.5 mio. t. Approximately 1.5 mio. t representing the estimated production of Luxembourg, Malta and Greece have to be added to obtain a complete picture of the compound feed production in the EU-27.

The key factor that influenced the compound feed market was the dramatic price increase for all key feed materials, with two main consequences: i) the high cereal prices encouraged farmers to put their cereals on the market rather than using them on the farm and ii) livestock producers facing a huge increase in feed costs, which they could not pass on to consumers of animal products, turned to use the most efficient feed, i.e. industrial compound feed.

This was in particular the case in the pig sector and, which explains the 3.6% increase in pig feed production for 2007 on an EU basis. All EU-15 Member States experienced a growth in pig feed production, although on different scales (from +0.3 and +0.7% resp. for Denmark and Spain up to +8 and +11% for resp. Germany and Austria). Poland registered a spectacular +23% growth, while the Czech Republic and Hungary went down by -11%. Spain remains the first EU producing country for pig feed with 9 mio. t, but Germany has almost closed the gap between both countries with 8.8 mio. t.

As regards poultry feed, the market share of industrial compound feed vs. home mixing is much higher than for pig feed. This is why the evolution of compound feed production is more closely correlated with the development of both poultry meat and egg production. In this sense, the increase in poultry feed production is largely influenced by the recovery of poultry consumption in countries such as France or Italy which were seriously affected by the Avian Influenza crisis. These 2 countries with resp. +3.4 and +4.2% however recovered only half the tonnage they lost in 2006 compared to 2005. On a European level, poultry feed production is in significant increase, i.e. +2.6% compared to 2006, but only +0.9% compared to 2005. France is still by far the leading producing country for poultry feed.

The most significant increase is for cattle feed with +5.3%, but as for poultry, 2006 was a “bad year” for industrial cattle feed production. For some countries, this increase may be explained by the high feed material prices, which traditionally leads cattle farmers to preferably buy compound feed rather than straight feedingstuffs. As in 2006, Ireland behaved in 2007 the opposite of other countries with a -11% which follows a +16% in 2006 vs. 2005. The disappointing results in 2007 may be explained to some extent by the impossibility to import corn gluten feed from the USA due to the application of the zero tolerance policy for the presence of non-EU approved events, this having particularly affected Ireland.

The total compound feed production for 2007 is estimated 3.4% higher than in 2006. France, Germany and Spain remain the three leading countries in terms of compound feed production.

Outlook for 2008

According to the FEFAC experts, the following factors are expected to influence the development of compound feed production in 2008:

• Feed material prices: as in 2007, prices of feed materials are expected to remain at a high level. EU livestock farmers, in particular pig producers, can no longer support a +50% production cost increase and need to pass it on to consumers, otherwise we must fear that a significant number of pig holdings will close in 2008;
• The reduction in pig production: in 2007 pig meat production reached the top of the cycle and the production in 2008 is expected to decrease, hence a likely reduction in the feed demand.
• The 2% increase in dairy quotas for 2008/09 should in principle result in a higher demand for feed and especially compound feed, as dairy farmers may not have had time to adapt and increase the number of animals; therefore, the only solution for them to increase their production could well be to increase animals’ yields.
• The full recovery of the Avian Influenza crisis for countries which have not seen a complete return of the market to the pre-crisis levels. As a consequence, the FEFAC experts foresee for 2008 a +1% and +2% increase resp. for cattle and poultry feed and a reduction of pig feed by 1-2%, hence a total stagnation of the production.

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