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BD3202Q

MBD ANIMAL FEEDS MARKET DEVELOPMENT: August 2003

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This report covers: Animal Feeds, market development,

Companies covered include: Arkady Feed (UK), BOCM Pauls, Carrs Billington Agriculture, Cranswick Mill, Countrywide Farmers, Favor Parker, Grosvenor Grain & Feed, Trouw (UK), William Thompson (York),

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Table of Contents
Executive Summary
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TABLE OF CONTENTS

No.	Title	Page
1	EXECUTIVE SUMMARY	1
2	INTRODUCTION	5
2.1	Definitions	6
2.2	Abbreviations	6
2.3	Market Positioning	7
2.4	UK Economy	7
2.5	Market Factors	11
3	MARKET SIZE AND TRENDS	14
3.1	Chapter Summary	15
3.2	Market Size	16
3.3	Market Segmentation	20
3.3.1	Segmentation, by Volume	20
3.3.2	Segmentation, by Value	22
3.4	Market Trends	22
4	SUPPLY SOURCES	24
4.1	Chapter Summary	25
4.2	Production	26
4.2.1	Overview	27
4.2.2	Segmentation	28
4.2.3	Raw Materials	28
4.2.4	Regional Production	30
4.3	Imports	31
4.4	Exports	32
5	INDUSTRY STRUCTURE	34
5.1	Chapter Summary	35
5.2	Industry Development	35
5.3	Structure by Employment	37
5.4	Structure by Turnover	37
5.5	Company Profiles	38
5.5.1	Arkady Feed (UK)	38
5.5.2	BOCM Pauls	39
5.5.3	Carrs Billington Agriculture	40
5.5.4	Cranswick Mill	42
5.5.5	Countrywide Farmers	43
5.5.6	Favor Parker	44
5.5.7	Grosvenor Grain & Feed	45
5.5.8	Trouw (UK)	46
5.5.9	William Thompson (York)	47
6	FORECAST	49
6.1	Chapter Summary	50
6.2	Market Size	51
6.3	Market Segmentation	51
6.4	Production	52
6.5	Industry	54
No.	Title	Page
7	FURTHER SOURCES & CONTACTS	55
7.1	Trade Associations	56
7.2	Trade Magazines	56

List of Tables

No.	Title	Page
1	Livestock in the UK, by Type, 1998-2002	11
2	UK Market for Animal Feeds, by Volume, 1998-2002	17
3	UK Market for Animal Feeds, by Value, 1998-2002	18
4	Development of Average Prices of Animal Feeds in the UK, by Type, 1998-2002	20
5	Segmentation of the UK Volume Market for Animal Feeds, by Type, 1998-2002	20
6	Segmentation of the UK Market for Compound Animal Feeds, by Type, 1998-2002	21
7	Segmentation of the UK Value Market for Animal Feeds, by Type, 1998-2002	22
8	UK Production of Animal Feeds, by Volume, 1998-2002	27
9	Segmentation of the UK Production of Animal Feeds, by Type, 1998-2002	28
10	Raw Materials used in the UK Production of Animal Feeds, by Type, 1998-2002	29
11	UK Regional Production of Animal Feeds, 2002	30
12	UK Imports of Animal Feeds, by Value 1998-2002	31
13	UK Imports of Animal Feeds, by Volume, 1998-2002	32
14	UK Exports of Animal Feeds, by Value, 1998-2002	33
15	UK Exports of Animal Feeds, by Volume, 1998-2002	33
16	UK Production of Animal Feeds, by Company Type, 2003	36
17	Analysis of the Changes in the Structure of the Animal Feeds ManufacturingIndustry, 1998-2002	36
18	Analysis of the Employment Structure of the Animal Feeds Manufacturing Industry, 2001 and 2002	37
19	Analysis of the Financial Structure of the Animal Feeds Manufacturing Sector, 2001 and 2002	38
20	Financial Analysis of Arkady Feed (UK), 1997-2001	38
21	Key Financial Ratios for Arkady Feed (UK), 2000-2001	39
22	Financial Analysis of BOCM Pauls, 1997-2001	40
23	Key Financial Ratios for BOCM Pauls, 2000-2001	40
24	Financial Analysis of Carrs Billington Agriculture, 1997-2001	41
25	Key Financial Ratios for Carrs Billington Agriculture, 2000-2001	41
26	Financial Analysis of Cranswick Mill, 1998-2002	42
27	Key Financial Ratios for Cranswick Mill, 2001-2002	42
28	Financial Analysis of Countrywide Farmers, 1998-2002	43
29	Key Financial Ratios for Countrywide Farmers, 2001-2002	44
30	Financial Analysis of Favor Parker, 1997-2001	44
31	Key Financial Ratios for Favor Parker, 2000-2001	45
32	Financial Analysis of Grosvenor Grain & Feed, 1998-2002	45
33	Key Financial Ratios for Grosvenor Grain and Feed 2000-2001	46
34	Financial Analysis of Trouw (UK), 1997-2001	46
35	Key Financial Ratios for Trouw UK, 2000-2001	47
36	Financial Analysis of William Thompson (York), 1998-2002	47
37	Key Financial Ratios for William Thompson (York), 2001-2002	48
38	Forecast UK Market for Animal Feeds, 2003-2007	51
39	Forecast Segmentation of the UK Market for Animal Feeds, by Type, 2003-2007	52
40	Forecast UK Production of Animal Feeds, 2003-2007	53
41	Forecast Segmentation of the UK Production of Animal Feeds, by Type, 2003-2007	53

List of Diagrams
No.	Title	Page
1:	Average Price of Animal Feeds in the UK, 1998-2002	19

EXECUTIVE SUMMARY

1	The volume of UK sales of animal feeds generally declined between 1998 and 2002, falling by a nominal 4 percent over the review period. Although sales volume increased by 1 percent during 1998 and 1999, animal feed sales are reported to have declined during 2000 by 3 percent to some 19.8 million tonnes. This decline is largely attributed to a continuing downward trend in the levels of manufactured pig feed which is in line with reductions in pig populations. A decline in compound feed usage for dairy cattle is also thought to have occurred compared with 1999 where high levels of feed usage were needed to boost levels of milk production.
2	An increase in sales volume of 2 percent during 2001 partially offset the decline during the previous year. The increase in the usage of cattle compounds, that represent the majority of the market, caused by several factors such as shortages of quality silage, movement restrictions due to foot and mouth, are thought to have boosted sales volume during the year. However, in 2002 sales volume fell by 4 percent to nearly 19.5 million tonnes, thought to be principally due to the decline in numbers of livestock following the foot and mouth epidemic of 2001.
3	The value of the UK animal feeds market is believed to have fallen to £2175 million in 2002, some 11 percent lower in nominal terms than at the start of the review period. Indeed the market declined in each year during the period, with the exception of a 10 percent increase in 2001, reflecting an increase in volume sales combined with higher price levels due to an increase in compound feed value. Moreover, there were difficult trading conditions within the farming industry in recent years, including falling farm revenues for all livestock categories.
4	The downturn in the value of the animal feeds market can be largely attributed to the implications of the BSE crisis, which caused a significant decline in sales of commercially produced animal feeds. At the same time, farmers suffering from the decline in cattle sales were attempting to offset this by increasing their direct sales of farm-produced feeds.
5	During the 1999 and 2000 the average prices of animal feeds in all sectors declined to what where recorded as period lows, with the exception of the other feeds category. During 2001 all types of feeds with the exception of inter/intra farm sales of feeds, saw an increase in average prices. In 2002 however, compound, straight feed and inter/intra farm sale prices declined, while other feed average prices increased.
6	Although nominal declines in average prices were recorded in all categories of animal feed during the review period, inter/intra farm sales have seen the value of feeds reduced by the largest amount, with prices falling by some 16 percent between 1998 and 2002. In comparison average compound feed prices fell by 6 percent, straight feed prices by 8 percent and other feed prices by 4 percent.
7	UK demand for compound feeds declined by 4 percent in terms of volume between 1998 and 2002, falling from 10.4 million tonnes to a level of 9.96 million tonnes. Despite a general decline in the volume over the review period, the sector remained by far the largest in the total UK market for animal feeds, accounting for 51 percent of total volume sales in 2002.
8	Straight feeds accounted for a further 30 percent of the total UK market for animal feeds in 2002 in terms of volume, with sales of some 5.9 million tonnes. Unlike the compound feeds sector, where sales have fluctuated over the review period, sales of straight feeds increased between 1998 and 2001 by 14 percent, prior to a decline in sales of 11 percent during 2002.
9	Demand for feeds purchased from other farms declined by 18 percent between 1998 and 2000. However sales volume increased during the remainder of the review period by 2 percent in 2001 and by 5 percent during 2002 to nearly 3.1 million tonnes.
10	Sales of non-concentrate feeds have remained relatively static, during the review period. The demand for non-concentrates is the smallest, representing only 3 percent of the total UK animal feeds volume market throughout the review period, with sales of just over 0.5 million tonnes.
11	Compound cattle feeds accounted for 40 percent of the total UK compound feeds market in 2002 in terms of volume, amounting to some 4 million tonnes. Although the share of total volume sales declined during the years prior to the review period due to BSE, nominal growth in the cattle sector of 8 percent was recorded between 1998 and 2002. Sales peaked during 2001 at nearly 4.3 million tonnes principally due to movement restrictions due to foot and mouth and shortages of quality silage.
12	Sales of compound poultry feeds increased somewhat in proportional importance during the review period, partly due to the BSE scare and partly due to changing dietary habits of the UK population as a whole. Volume sales have increased during the review period with the exception of 2000 when sales declined by 4 percent to nearly 3.1 million tonnes. The increase in poultry compound feeds during 2002 reflects a move from feed manufacture for own use to those by retail compounders.
13	In 2002, pig feeds accounted for some 18 percent of the total volume of compound animal feeds sold in the UK, with sales of some 1.8 million tonnes. However, the market size together with the proportional importance of the sector have been reduced during every year of the review period, largely reflecting the reductions in pig populations.
14	The market share of calf feeds of the total UK compound animal feeds market has remained relatively stable during the review period, albeit at lower level of 2 percent of the total volume market between 1998 and 2002. However, sales have declined during this period from some 0.2 million tonnes in 1998 to just under 0.17 million tonnes in 2002.
15	The sector for other compound animal feeds mainly consists of products for feeding sheep and horses. Sales in this sector are believed to have accounted for some 6 percent of the total UK market for compound animal feeds in 2002, totalling 0.6 million tonnes.
16	Compound feeds accounted for 63 percent of the total UK market for animal feeds by value in 2002, with sales of £1365 million. Although value sales of compound feeds fluctuated over the review period, peaking at £1524 million in 1998, sales declined by 10 percent. Prices of compound feeds which are reflected in the market value, declined during all of the years of the review period with the exception of 2001 when compounds were more widely used and the price increased.
17	Sales of straight feeds are believed to have been valued at some £623 million in 2002, accounting for some 29 percent of the UK animal feeds market value. This sector has seen sales fluctuate, although decline by 7 percent in nominal terms over the past five years.
18	The value of feeds purchased from other farms has fallen by some 26 percent in nominal terms during the review period, declining to an estimated £187 million in 2002. In 2002 inter/intra farm sales account for only 9 percent of total volume sales of animal feeds.
19	MBD estimate that the market for animal feeds will further contract during the first half of the forecast period, by 6 percent in real terms during the current year to a level of £2045 million. This decline is mainly attributable an anticipated reduction in compound feeds sector where cattle and pigs feeds account for the largest share of the market. However, a reversal of the downward trend is forecast in the value development of the UK animal feeds market from the year 2006 onwards, when sales of animal feeds are expected to be stimulated by renewed growth in the compound feeds sector. This can be attributed to livestock farmers increasingly utilising feeds, which are manufactured to cater for the needs of specific species.
20	The UK demand for compound animal feeds is forecast to decline during the early part of the forecast period reflecting problems faced by the farming industry in recent years. However, the sector is anticipated to marginally increase towards the end of the forecast period, as a growing number of livestock farmers are attempting to maximise the benefits of commercially produced feeds by relying increasingly on species-specific products. Nonetheless, the forecast value of sales is estimated at £1 247 million in 2007.
21	The market share of straight feeds is forecast to marginally increase during the forecast period from 29 percent of the total value in 2003 to a forecast 31 percent in 2007. During this period, the sector is forecast to gain market share from the compound feeds sector. The value of straight feeds is forecast to remain relatively stable throughout the forecast period, and is forecast to reach £613 million in 2007.
22	The value of feeds purchased from other farms is forecast to continue to decline in real terms during most of the review period, with a decline of 29 percent in real terms between 2003 and 2007.
23	MBD believe that UK output of animal feeds in terms of volume will decline during 2003 by 1 percent reflecting the depressed farming industry that has continued since the foot and mouth disease outbreak in 2001. In 2004 a negligible increase in production is anticipated further to increases in output during the remainder of the forecast period. By 2007 the level of production of animal feeds is estimated at nearly 9.7 million tonnes, equivalent to real increase in output of 6 percent compared with 2003.
24	Compound feed production for cattle and calves despite fluctuations during the forecast period, is expected to remain at fairly stable levels, with only relatively small adjustments in output. Due to previous reductions in the population of this type of livestock, cattle and calf feed production is thought to increase by a negligible amount.
25	Production of compound animal feeds for pigs is estimated to decline during the first half of the review period, thought largely due to previous reductions in livestock numbers. In 2006 animal feeds output is expected to increase before a further decline in production to 1.7 million tonnes in the final year of the forecast period.
26	The level of production of compound animal feeds for poultry is expected to increase throughout the forecast period reflecting the rise in the population of fowl and the increase in demand for poultry meat and products by consumers. Output is anticipated to rise 11 percent over the forecast period to nearly 3.2 million tonnes in 2007.
27	Production of animal feeds for other animals including horses and sheep, is expected to fluctuate over the review period, although a real increase in output of 13 percent is estimated between 2003 and 2007.

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