2023 Grains to Feed Additives Market Outlook – EuroTier 2022

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16 November 2022 – Feedinfo hosted a 2023 Market Outlook Briefing on the first day of EuroTier 2022 to provide some insight into factors impacting the whole of the diet – from grains to feed additives.

In her presentation, Feedinfo Senior Analyst Heather McGuire Doyle gave an overview of the main market dynamics that Feedinfo’s and sister company Stratégie Grains’ analyst teams are observing.

“The animal feed and feed ingredient industry has had some severe disruptions. It’s not been quiet at all. All of these global factors and rising costs for growers have greatly increased the overall prices of feed, fertilizer and raw materials,” Doyle said.

Disruptions have been hitting hard over the last few years, she observed, listing African Swine Fever in China, the US-China trade war, Covid in 2020-2021, supply chain issues and inflation in the post-Covid era, heatwaves, and more animal disease outbreaks.

“All of this caused great disruption in the feed and feed ingredient market, even before Russia invaded Ukraine. So when the war began, that led to a large disruption in global grain, vegoil and oilseed trade, which caused grain, phosphate and energy prices, just to name a few, to hit all-time highs to start off 2022,” Doyle said.

“Since then, prices have collapsed for many commodities. We’ve seen feed demand and production greatly impacted by the La Niña weather pattern, significant bird flu in Europe and the US, swine disease, and heatwaves and drought. Culling rates increased during the Northern Hemisphere summer as feed costs became too high for many livestock producers,” she added.

Moreover, many countries are facing a strong inflation rate, affecting consumer purchasing power and food choices. Very high gas prices are also affecting industrial margins in all sectors, putting a toll on grain and oilseed demand, as well as feed additive production, Doyle pointed out.

“With the Ukraine war still going on, there is a big uncertainty about the volumes that will be traded globally in the months to come, especially regarding grains out of Ukraine and Russia. Indeed, grains could still face large disruptions during the 2022/23 marketing year,” she went on to say. “But for a few months, the big question everyone asked was what would be the impact of very high crop production costs on grain and oilseed production, especially during 2022 spring sowings. We can now say that crop margins were sufficient to support sowings by farmers all around the world – except in Ukraine, of course, where the sown area was limited.”

In feed additives, after the supply chain difficulties observed in the first half of 2021, the second half of that year developed somewhat differently.

“After fighting so many delays and issues in the first half of the year, purchasing managers – whoever had the storage and cash/credit, that is – switched from buying just-in-time inventory to just-in-case,” Doyle said.

“What resulted was that the first half of 2022 was relatively slow in purchasing feed additives. Those who needed to stock up did early on, but then buyers began to work on getting out of their positions. With all that stock overbought, now demand had begun to turn,” she added.

“The Russia-Ukraine conflict began, and we first saw some heavy purchasing of products like phosphates, then huge concern for general economic conditions and downstream demand from the feed and protein sector. Europe and the US dealt with the impact of swine disease and bird flu. La Niña made for severe heatwaves and drought conditions. Spot buyers not only went back to just-in-time buying, but were buying hand-to-mouth. The dollar also caused some switches in trading. China wanted the US dollar and continued to lower its prices through the summer months.”

Looking at the feed situation for 2022, Stratégie Grains expects EU-27 compound feed production to decline by 3.6% year-on-year, or by approximately 5 million tonnes, to reach 136.9 million tonnes.

“Higher prices for feed raw materials due to the war in Ukraine, increased energy, and other input costs faced by European livestock and poultry producers have influenced purchasing decisions and will lead to a reduction in compound feed consumption in 2022,” Doyle said. “We expect that the inflation seen in the EU-27 will likely reduce consumer spending and demand for meat, eggs, and dairy products.”

“Export market demand for EU meat and dairy products will also be impacted as global growth is unlikely to be dynamic and inflation will remain high in 2023 in those markets as well. Perhaps poultry production can be slightly up in 2023 over 2022 [on] bird flu recovery, but not above 2021 levels,” she observed.

In 2022/23, Stratégie Grains expects a decrease in global feed consumption due to low economic growth resulting from the war in Ukraine and high inflation, Doyle concluded.