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| KN15009 |
| KEY NOTE ANIMAL FEEDSTUFFS FEBRUARY 1999 |
| Overview |
ISBN 1-85765-631-8
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The animal feedstuffs market was worth an estimated £2.32bn in
1998, with consumption standing at 15.6 million tonnes. Between 1996 and 1998,
the market consumed over 50 percent of all wheat produced in the UK. Other
grains, some vegetables, oilseeds, sunflowers, sugar beet and molasses are also
important feed ingredients.
The market is supplied by the farming
industry, which is also its major customer. Consequently, recent problems
within the farming industry have had a negative impact on many feed suppliers.
These problems have been dominated by the bovine spongiform encephalopathy
(BSE) crisis, which was originally caused by contaminated feed.
A key
factor for animal feed suppliers is livestock numbers. After fowl, the second
largest market for feed is cattle and calves, but their numbers have been
falling year-on-year. Consequently, volume feed sales for cattle fell from 4.7
million tonnes in 1996 to 3.9 million in 1998. Other animals have been
increasing in number and the largest sector -- poultry -- consumed 4 million
tonnes of feed in 1998.
The market comprises three main sectors: compounds,
straights and other feed. Compounds make up by far the largest sector,
accounting for 74.5 percent of all volume sales in 1998, followed by straights
(21.2 percent) and other feed (4.3 percent). Compounds are sophisticated
products, their protein and vitamin content being closely monitored. They are
growing in popularity as farmers increasingly strive to maintain tighter
controls on the diets and health of their livestock. Increased sales of
compounds, which are usually more expensive than other feeds, have given market
value a slight boost. However, feed sales generally have shown little value
growth, because of the low price of many raw materials and depressed demand
from the farming sector.
As a result of low prices and weak demand,
industry margins are relatively low. Many of the larger companies have
developed new, more sophisticated products to try to stimulate sales. However,
this is a relatively mature market whose customers are keen to reduce costs;
consequently, these new products have had a limited impact on sales.
The
top five companies in the market supply between 65 percent and 70 percent of
all sales, although there are still many small, specialist suppliers serving
specific sectors or local areas. A number of factors suggest that the industry
will become more concentrated in the next few years: the move to larger farms;
the demands of the large grocery retailers for more control over the food
chain; and the investment needed to develop new products and comply with the
growing amount of legislation governing the industry. The larger suppliers are
also able to supply a wide range of agricultural commodities, as well as feed,
to farmers.
Key Note forecasts limited growth over the next 5 years, with
sales rising only marginally in 1999, increasing to £2.44bn by 2003.
Demand in the farming sector will remain weak in the short term, although the
lifting of the European Union (EU) beef ban should help and the gradual
weakening of Sterling should boost exports.
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Last updated by Jacob van Eldik 19th January 2000