On 16-18 May 2018 over 200 senior representatives of the specialty feed ingredients sector came together at the Millennium Hilton Hotel in Bangkok, Thailand to discuss trends in the current market and the strategies required for success in the future.
During the three-day conference, founders, CEOs and business leaders from global feed additives producers and buyers heard from academics, expert advisors and their own peers in a series of presentations and groups discussions.
In an overview of the ongoing consolidation in the global animal nutrition sector, Simon Duke, Editor-in-Chief of Feedinfo News Service, pointed out that diversification continues to be “the name of the game.”
Giving the inaugural presentation, Duke said all signs indicate that consolidation in the feed additive industry is expected to continue in 2018 and can be described in two forms: horizontal consolidation and vertical integration. The vertical trend is driven by the industry’s ambition to bring to market solutions that address key issues like antibiotic reduction.
“Providing strong global brands will remain key as the market is eager to invest in reliable products with proven R&D knowhow,” he commented.
Mr Duke also detailed how foreign firms consider China a “low-cost production hub.” Examples of toll manufacturing agreements include Evonik’s and Fufeng’s threonine manufacturing cooperation in Northern China, as well as Ajinomoto’s sub-contracting of lysine and threonine production to Meihua, as part of the Japanese firm’s strategy to accelerate a shift to specialty feed additives.
To demonstrate the current importance of China in the global amino acid and vitamin production map, he cited Professor Qi Guang-Hai, of the Chinese Academy of Agricultural Sciences (CAAS), who spoke at Feed Additives Global 2017 in Frankfurt in September last year. The CAAS professor has estimated that China produces 70% of feed grade vitamins in the world, and the nation also produces 41% of feed grade amino acids.
Duke, however, warned that Chinese vitamin production can be expected to become more expensive as China’s many vitamin factories can be affected to various degrees by the enforcement of environmental protection measures.
Continuing the discussions on the Chinese market, the second speaker of the day Dirk Jan Kennes, Global Sector Strategist, Farm Inputs at Rabobank believes China will need to invest in its livestock industry to upgrade it to bridge the gap between its sector and that of the rest of the developed world.
“It is necessary for China to invest to bridge the gap and they will also need to focus on improving their breeding strategies,” Mr. Kennes said.
In terms of antibiotic growth promoters (AGP), he said that companies in the region need to apply better farm management practices to be able to move away from AGPs. The farmers need to be educated so that they can enable themselves to improve their practices.
Following presentations from Charoen Pokphand Foods (CP Foods) and the Food and Agriculture Organization of the United Nations (FAO), Feedinfo News Service Lead Analyst, Martijn de Cocq presented attendees with a pricing update for the major vitamins and amino acids covered by Feedinfo.
“It has been a roller-coaster ride in the past year for nearly all vitamins, and it is still ongoing as we speak.”
“Although fundamentals (e.g. increased cost price due to new environmental regulations in China) – exacerbated to some extent by BASF’s Citral force majeure are obvious, it was almost unbelievable to see how much sentiment was involved and how much insecurity there was at end-user level about the fulfilment of their supply chain and pipeline,” he added.
“By now a lot of vitamin prices have stabilized at a high level and/or are coming down again,” de Cocq said. “More than with amino acids we do on the one hand expect to see volatile markets going forward, but we also expect prices to come down.”In the near-term Feedinfo remains bearish for the biggest part of the vitamin group, with good examples being Vitamin E and D-Calpan at the moment. “But longer term 2018-2020, though fundamentals should indicate a steadier and somewhat bearish market, we expect that the main drivers for the trend will be for example sudden supply chain interruptions, shortage of intermediates and market sentiment,” he commented.
OVERCOMING LOCAL CHALLENGES
In addition to presentations from industry veterans and experts from around the world, Feed Additives Asia featured several panel discussions with leaders of the Asian industry talking candidly and honestly about the issues facing the region.
The second day of the conference began with Kevin Liu (Vice President – Technical Services & Business Development Asia Pacific, Adisseo), Robert Redman (General Manager, DSM) and Ramakanta Nayak (General Manager, Trouw Nutrition) taking on the challenge of describing the shape of the industry in 2050.
Liu, Redman, and Nayak were in agreement that among the biggest challenges for feed additive companies in Asia are limited raw material resources, animal diseases management, regulatory barriers, optimal farm management and lack of institutional support.
Limited resources and using them in an optimal way can be quite a task.
“There is such a variety of raw materials that it is important to have the right feed additives to maximize digestibility as well as consider the health of the animals,” Nayak said. He also argued that optimization of feed management to ensure food safety will gain more and more importance in the region.
Liu, meanwhile, pointed out that the APAC region lacks adequate assessment testing facilities to measure the efficacy of feed additives. “How do you judge the accuracy of feed additives?” he said, “This is still an issue in the area.”
The impact of animal diseases is also very consequential in the Asia-Pacific region. For instance, in 2004 when avian influenza rocked Thailand, there was hardly any chicken available, Redman commented.
“And the big challenge is the management of diseases,” he added, especially now that AGPs are being phased out in some countries of the region.
“There is above all a need for farm management strategy to help with disease management,” he went on to say. “Good biosecurity first, then we can support the growth with feed additives.”
Looking at the case of fish farming, Nayak said genetic breeding lines are also a challenge. “Fast growing fish creates more disease risk,” he said.
Changes in government policy in Thailand and Indonesia or in other countries without industry involvement can be quite damaging too.
The panelists also believe regulatory barriers are tough and cost to register feed additives products in Asia-Pacific markets can be enormous.
“It can sometimes take years and millions of dollars in investment,” Liu commented. “The best innovative products are in danger of not getting on the market in time.”
“The registration processes are very time-consuming and sometimes you’re missing the innovation. It’s then too late to respond to the current needs,” Redman added before saying that banning AGPs without having first trained the farmers or consulted with the industry can be fatal.
Additionally, the industry should not underestimate the negative publicity it receives. The panelists agreed that this will continue to haunt the sector in the coming years. And social media will only help accentuate the issue.
Feed Additives Asia concluded with technical seminars covering aquaculture, gut health, and regulation.