Growth prospects of Iran feed industry

Despite the economic turmoil caused by US-led economic sanctions, Iran’s animal feed production is set to more than double in the next five years, gradually improving the capacity utilization factor and developing export supplies, according to industry sources.
Iran has a well-established feed industry with a 70-year history, said Dr. Majid Movafegh Ghadirly, chairman of the Iran Feed Industry Association. As of today, there are 645 production units in the country with a combined production capacity of nearly 21 million tonnes of feed per year.
“The actual production is around 10 million tonnes per year, which means that the industry operates at only 50% of its designed production capacity, while overall feed consumption in Iran is estimated at 20 million tonnes per year,” Ghadirly said.
The remaining 10,000 tonnes of demand is met with products manufactured by livestock companies, which in Iran commonly are not reflected in the feed industry statistics. This picture is about to change as the government recently ruled that the country’s livestock companies must stop manufacturing feed and close their production units until 2023.
For Iran’s feed mills, this would provide access to an untapped market, Ghadirly said.
“In general, Iran’s animal feed industry is developing and over the next 10 years, if the operational plans that we have foreseen for the industry (materialize), the animal feed production in the country would reach 26 million tonnes per year,” he estimated.
The industry largely depends on government policy and is affected with the price of protein products on the market and subsidies to animal feed manufacturers, both set by the authorities, said Ghadirly.
Biting sanctions
US-led economic sanctions against Iran reinstated in November 2018 have become a burden for the local feed mills. The country is heavily dependent on imported raw materials, primarily corn, barley, soybean meal and feed additives, and soaring devaluation is bad news for all import-dependent business.
“Without sanctions our annual growth should be at least 4%, while our actual annual growth is now at 2%,” Ghadirly admitted. “Certainly, the sanctions have not been ineffective, because the production and the pace of technology upgrades in Iran’s animal feed industry have been lowered while the price of finished products has been increased.”
It is believed that one of the reasons inflation is so high is because of the feedstuffs. Iran imports 80% of all raw materials used in feed production.
Free market on the horizon
In the next decade, Iran’s feed industry is set to shift to operating in free market conditions. Many believe this will bring great opportunities “to some leading feed companies and main players of the industry” and be a real threat to “the old and traditional units,” according to Iran’s Feed Industry Association.
“We forecast that in the next 10 years, the number of feed production units in Iran would halve, while the production capacity would increase,” Ghadirly said. “The reason for this claim is the (upcoming) liberalization of the economy, the complete elimination of subsidies and ultimately the formation of a free economy.”
Compared to the animal feed market, Iran’s poultry concentrate market is not as sophisticated, according to the Iran Feed Industry Association. The industry requires around 300,000 tonnes of feed additives while the domestic production stands at around 30,000 tonnes per year. The livestock industry alone requires 60,000 tonnes of premixes and the domestic production can barely meet 10% of this figure.
Feedstuffs are an issue
Iran needs 72 million tonnes of feed ingredients for feed production per year, including 7.5 million tonnes of feed corn, 3 million tonnes of feed barley, 1.2 million tonnes of soybean meal and so on.
Although import-dependence could be reduced to a certain extent, there’s little chance it could be eliminated completely, at least in the coming decades.
“Due to the fact that Iran is located in the dry region and has dehydration and drought problems, self-sufficiency in feedstuffs is not expected,” Ghardirly said. “Since more than 80% of raw material and feed ingredients are imported, overcoming the dependence on imported feedstuffs in the near future is impossible.”
Nevertheless, Iran’s government intends to reduce its dependence on imported feedstuffs. Ghadirly said this is possible through renting the agricultural lands in other countries, such as Brazil, Kazakhstan, Ukraine, and Russia, for cultivation, using alternative feedstuffs, and growing canola instead of soybeans.
Exports are a new target
The fall of the exchange rate of the national currency has another impact — it makes all export suppliers much more attractive. In 2017, Iran exported 186,000 tonnes of animal feed worth $74 million.
“In 2018, 208,000 tonnes of compound feed worth $87 million was exported from Iran to 17 countries in the region,” Ghadirly said.
This is the highest figure ever, and all forecasts now say that the export supplies will keep growing in the future.
There are 51 feed producers in Iran engaged in export operations. The target markets for Iran feed includes UAE, Iraq, Turkmenistan, Afghanistan, Azerbaijan, Turkey, Armenia, Tajikistan, Georgia, Kyrgyzstan, Kuwait, Oman, South Korea, Indonesia, Malaysia and Uzbekistan, according to the Iran Feed Industry Association.
Source: Sosland Publishing