Feed Report

Analysis of the Global Animal Feed Ingredients Market

Varied farming practices, contagious zoonotic diseases and high-profile food scares are but a few of the challenges emerging in the animal feed market. Despite the

potential restraints of supply, demand, awareness and cost, natural ingredients are bound to surpass synthetic counterparts in the long run.

by Christopher Shanahan

s p e c i a l r e p o r t

November 2013 US$39.00

Animal Nutrition Insights Analysis of the Global Animal Feed Ingredients Market 2 animalnutritioninsights.com

Analysis of the Global Animal Feed Ingredients Market

by Christopher Shanahan

There is a close relationship between the quality of animal feeds and the safety of the final food product. Livestock products that are shown to be contaminated with harmful chemicalssuch as dioxin and melaminehave caused some damage to

the reputation of the industry as a whole. Specifically, if a contaminated product is

identified at a later stage of the supply chain, traceability of the security breach

becomes difficult in the existing value chain system. Consequently, the incidence of

any such contamination directly affects the consumption of animal product and

indirectly the feed and feed ingredient industry that supplies to the concerned animal

species, independent of the particular actions of any one ingredient supplier.

Consumer awareness about the use of chemicals in animal farming and the

resultant residues in food has created the demand for an alternative: natural animal

feed ingredients. Aside from the benefit of chemical use-avoidance, many such natural

ingredients have been shown to offer better functional properties than

their synthetic counterparts. Hence, animal feed ingredient companies

are striving toward effective acquisition strategies and investing in

research and development (R&D) in order to take advantage of the

benefits of the natural tag.

The global animal feed ingredients market was worth $12.19 billion

in 2012 and is expected to reach $17.28 billion in 2019, expanding at

a compound annual growth rate (CAGR) of 5.1 percent. The global unit

shipment of the feed ingredient nutrients was 5.12 million MT and is

expected to reach 7.48 million MT in 2019, growing at a CAGR of 5.6 percent

during the forecast period of 2012 to 2019. The market encompasses

a wide variety of products, including vitamins, trace minerals, amino

acids, enzymes and other ingredients such as antioxidants/shelf-life

stabilizers, probiotics and fatty acid compounds. Amino acids form

the largest segment, constituting 33.8 percent of the revenue globally.

The other ingredients brought in 23.7 percent of the revenue, and

vitamins and trace minerals have a combined share of 41.4 percent of

the total revenue.

If a contaminated product is identified at a later stage of the supply chain, traceability of the security breach becomes difficult in the existing value chain system.


Swine and poultry feed applications dominated global market

demand in 2012, taking up 73.4 percent of the total revenue

and 77 percent of the total units shipped. Cattle feed ingredients

shared 19.2 percent of the total revenue and 16.7 percent of

the units shipped during 2012. Other feed ingredients

segments, which includes aquaculture ingredients and

companion feed ingredients, hold a share of 7.4 percent of the

total market revenue; this market is expected to grow at a very

good pace in North America from 2012 to 20195.9 percent

CAGR in unit shipment and 7.5 percent in revenue.

North America forms the largest market for animal feed

ingredients, followed closely by Europe, where more farmers

and industrial producers are aware of, and consequently

need, the beneficial nutrients in order to ensure consistent,

nutritious and safe meat, dairy and egg products. Zoonotic

diseases such as avian flu and foot-and-mouth disease, with

potentially harmful effects on the livestock industry, pose a

threat to the feed ingredients industry, especially in the Asia

2012 2019Revenue 12.19 17.28

Unit Shipment 5,117.8 7,482.5

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

2

4

6

8

10

12

14

16

18

20

Un

it ('

000

Met

ric

Ton

s)

Rev

enu

e ($

Bill

ion

)Revenue CAGR = 5.1 percent; Unit Shipment CAGR = 5.6 percent

Animal Feed Ingredients Market: Unit Shipment and Revenue Forecast; Global, 20092019

Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan

Animal Feed Ingredients Market: Percent Revenue by Ingredient Type, Global, 2012

Other ingredients include probiotics, fatty acids and shelf-life stabilizers.

Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan

Amino Acids33.8%

Enzymes 1.1%

Vitamins21.1%

TraceMinerals20.3%

Others23.7%


Pacific region where recent high-profile food scares in China related to contaminated

milk and poultry products has demonstrated frequent negative shocks to short-term

demand. Despite this, Asia Pacific has a high growth potential, as expected economic

developmentand accordingly, higher per capita income levelswill drive the

demand for meat.

The global animal feed market is a relatively concentrated market, dominated by

global giants such as Novus International, Adisseo/China National Bluestar (Group) Co.

Ltd., Evonik Industries, ADM, Royal DSM and BASF. The first tier of companies tend

to either offer a wide product portfolio in an attempt to serve a broad range of user

segments, or have a deep focus on offering one type of product for a specific use. For

example, Novus offers a wide range of products across different product segments,

including amino acids, organic trace minerals and enzymes. Evonik, on the other hand,

dominates the amino acid market due to its global supply of methionine, which is

an essential amino acid for poultry nutrition. Trace minerals production is primarily

controlled by tier II industry participants.

Market Drivers & RestraintsBesides the expansion of the natural ingredients segment, global revenue potential

for animal feed ingredients will be impacted by four other factorsgrowth in:

Increasing demand for poultry and swine meat drives market demand.

By 2025, the worlds population is estimated to reach 7.9 million, with

80 percent of the population living in developing countries and nearly

60 percent in urban areas. Rising per capita income and growth in the

middle class in key emerging markets is expected to cause global meat

demand to go up by around 56 percent. However, due to the perceived

health concerns related to beef consumption, poultry and swine meat

consumption is growing at a quicker pace in the developed economies.

Average monthly consumption of poultry meat globally has increased

four-fold in the last 40 years. Today, it is estimated to be more than

80 pounds per person per year.

Increasing awareness about the benefits of feed ingredients drives

the animal feed ingredients market, especially in emerging markets.

In developed countries, this knowledge about the benefits of feed

ingredients has become quite widespread, especially in industrial

PopulationMeat

demand

Awareness of the benefits of using animal feed ingredients

Raw material prices

80+pounds

per person per year

Poultry Meat consumption estimate


animal production systems. Awareness is now expected to spread to small farmers

in developing countries through continued education via university-driven

extension programs.

On average, animal feed ingredient prices are likely to grow by a CAGR of 4 percent

from 2012 to 2019. Key factors driving animal feed ingredient prices are primarily

rooted in issues related to raw material sourcing. Raw materials for certain ingredients

(e.g., vitamins) are commodities demanded by several industries such as the human

nutrients industry, pharmaceutical industry and others, which leads to higher demand

against limited supply and price fluctuations. Amino acid and trace

mineral prices are expected to grow at a CAGR of 3 percent from

2012 to 2019 due to expected raw material cost increases. Other

ingredients, including probiotics and shelf-life stabilizers, are expected

to see a price growth at a rate of 7 percent in the forecast period, as

the cost increases for certain processing techniques, such as

microencapsulation to help to stabilize the ingredients. Vitamins

are the most expensive among all other ingredients, costing around

$28/kg to $30/kg and their prices are likely to increase by more than

2 percent CAGR due to the expected increase in competition from

other industries and improvement required in processing techniques

for better product stability and efficacy.

The Last WordThe growing sensitivity to food safety issues tied to chemical use and volatility in

raw material prices is the primary industry challenge animal feed ingredient companies

will face during the next seven years. In order to ensure these challenges result in

opportunities, as opposed to being a threat, companies must consider these critical

success factors:

Products with superior nutritional benefits and high efficacy are expected to drive revenue for companies; thus, its advised to invest in R&D that

enhances product quality and efficacy.

Having a wide range of products that can be tailored to suit specific customers (farmers and industrial producers) needs, coupled with offering

them a one-stop shop experience, is key to maximizing customer value

and protecting your companys market competitivenessespecially in light

of raw material price instability and market maturity.

In order to support price competitiveness, review your organizations supply chain and identify companies and/or industry roles that can be

internalized, thereby resulting in production cost savings.

Animal feed ingredient prices anticipated growth

2012-2019

Vitamins

Amino acid and trace mineral

Probiotics and shelf-life stabilizers

2%

3%

7%


Christopher Shanahan is the global program manager of Frost & Sullivans Food

& Agriculture Practice. Shanahan assists and advises companies with impartial

insight into the food ingredient and specialty chemical industries. He has more than

10 years experience covering a broad range of subjects including: market expertise

in functional food ingredient markets, including proteins and weight-management

ingredients, omega-3, probiotics, and animal feed and pet food markets; and

econometric-based market analysis including product innovation adoption models

and business strategy decision models, statistical benefit-cost analysis, market

forecasting and scenario engineering, and pricing strategy and supply-chain/

distribution channel optimization models. Shanahan holds a masters from Ohio

State University in agricultural economics and his work has been featured in various

trade publications, such as the Review of Agricultural Economics Journal,

Agribusiness and the International Food and Agribusiness Management Association

Review, Journal of Food Products Marketing and Natural Products INSIDER.

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Analysis of the Global Animal Feed Ingredients MarketAnimal Feed Ingredients Market: Unit Shipment and Revenue Forecast; Global, 2009-2019Animal Feed Ingredients Market: Percent Revenue by Ingredient Type, Global, 2012Market Drivers & Restraints

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