Issuu

Summer 2022 Issue

CHINA:

The dizzying pace of change

Regulation, economics, disease, and more have transformed how China feeds its animals and itself VITAMINS INTERVIEW

AMINO ACIDS DEMAND

CONSUMER INSIGHTS

Meet emerging vitamin B3 manufacturer Anhui Redpont

Feedinfo analyst forecasts dramatic deceleration

Is peak Chinese pork consumption behind us?

Pages 24 - 26

Pages 20 - 21

Pages 28 - 30

YOUR CONNECTION TO THE GLOBAL ANIMAL NUTRITION AND FEED INDUSTRY

FROM THE EDITOR Welcome to the SUMMER 2022 edition of Feedinfo Review

China: the dizzying pace of change China has spent much radical reshaping of the of the first half of 2022 pork industry in the wake attempting to keep to of African Swine Fever its zero-COVID policy, (ASF) – and how the ASF locking down cities virus itself has changed and even provinces within China. We will talk in the process. This is, about China’s ban on presumably, not news to in-feed antibiotics, and you. The impacts have about what has changed – been widely discussed and what hasn’t – in terms in the international of biosecurity. We will talk press as they reached about growing production major export hubs costs, upwardly mobile such as the port of labour, and changes in Shanghai, contributing consumer demand. We to a prolongation will talk about changes Shannon Behary, editor, Feedinfo of the global supply in corporate strategy chain chaos. as a Chinese pesticides However, the wider world might producer branched out into vitamins, and perhaps be less aware of just how changes in how the country approaches deeply China itself has been disrupted food security as it seeks to open up to by this situation. As rules on testing and more domestic cultivation of GMOs. quarantining shifted regularly in function China has not only seen change on a of the local disease burden, truckers, remarkable number of issues within the mostly independent contractors, were animal nutrition and animal production unwilling to risk getting stuck in an area space, but that change has also taken which might soon be locked down. Given place in a very rapid timeframe. With that nearly three quarters of all of China’s a few exceptions, most of these issues freight is primarily transported over the have really come to the forefront in the road, a share far surpassing that moved last few years. “China speed” is now a by rail or barge, this has created huge concept that you can apply not only to obstacles to the normal functioning of the country’s economic development, domestic supply chains. Agriculture, like but also to its developments in animal other industries, has been affected. agriculture. To be clear, this issue of Feedinfo It can be difficult to get your head Review is not primarily about China’s around so many changes which have reaction to COVID-19 and the supplytaken place so quickly. But it is worth chain issues that has engendered. It doing so. China is not only the most is, instead, about the consequences of important producer of vitamins and change. There have been a great many amino acids, but also weighs heavily on changes to China’s production and the consumption side. With one fifth consumption environments in recent of the world’s human population, one years, changes which you have likely half of the world’s pigs, and the number heard about primarily through the lens one spot in terms of compound feed of how they impact the wider world, but production volumes globally, China which, like the zero-COVID policy, are matters. The choices it makes about how having deeper, transformative impacts to feed itself will have implications on domestically that you might not have billions of lives, human and animal. fully considered. We will talk about the In other words, it is a mistake to take

SUMMER 2022

your eyes off of China. In a few short months, yet another new development will have emerged.

Summer 2022 Senior editor: Shannon Behary Design manager: Glenn Juszczak Digital content production: Alice Rotherham Content contributors: Simon Duke Lydia Ma Sam Weatherlake Perspectives editor: Morné Brandt Perspectives managers: Ollie Theocharous Elisabeth Mork-Eidem Magazine promotion: Ariane Jacobs House ad production: Jo Goodwin Magazine production: Melissa McChesney To discuss advertising or Perspectives partnerships: Lisa Guiraud lisa.guiraud@feedinfo.com +33 6 37 46 86 47 Ben Cronin ben.cronin@agribriefing.com +44 7 780 47 47 63

Cover photo © Dmitrii Iakimov / shutterstock.com Feedinfo Review is an AgriBriefing publication. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical including photocopying, recording, or any information storage or retrieval system without the express prior written consent of the publisher. The contents of Feedinfo Review are subject to reproduction in information storage and retrieval systems. ISSN 1777-5566

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CONTENTS SUMMER 2022 NEWS BITES

Headline news....................................... 4 Production news................................... 5 M&A....................................................... 6

PORK PRODUCTION

The astounding pace of change in China’s swine sector........................9-16

INDUSTRY PERSPECTIVES

AB Agri leadership talk recent restructure to support company in “growth mode”............................... 18-19

ANALYST’S CORNER

2022 feed additive demand forecasts cut on lower pork and poultry expectations.................................. 20-21

INDUSTRY PERSPECTIVES

Importance of gut health in reducing antibiotic use still underestimated by poultry producers.......................... 22-23

VITAMIN PRODUCTION

2 | SUMMER 2022

FEED PHOSPHATES MARKET

Anhui Redpont charts a course as a standalone nicotinamide producer........................................ 24-26

War exposes importance of Russian feed phosphates exports.............. 37-38

DEMAND INSIGHTS

Industry moves.................................... 40

FEED RAW MATERIALS

Feedinfo Summit to unpack industry’s most pressing concerns............... 42-43

Evolutions underway in Chinese meat consumption................................. 28-30 China’s evolving stance on GM crops....................................... 32-33

COMPANIES APPEARING IN THIS ISSUE AB Agri.....................................................18, 19 ABZ De Samenwerking.....................................34 Adisseo....................................................11 ADM........................................................... 6, 43 Agribriefing.....................................................42 Agrimprove.................................................... 27 Agtegra Cooperative........................................40 Aker BioMarine................................................40 Aliphos..................................................... 37, 38 Alliance for Science | Cornell University...... 32, 33 Alzchem Group AG.................................... 15, 40 Anhui Redpont Bio...........................................24 Atlas Holdings.................................................. 6 Balakovo.........................................................37 Barentz...........................................................34 BASF Animal Nutrition.............................. 20, 29 BEC Feed Solutions.........................................40 Beijing Capital Agribusiness and Food Group..... 5 Beijing Dabeinong Technology Group Co Ltd.....32 Beta Pura GmbH............................................... 5 Bosgoed Diervoeders.......................................34 Calysseo.......................................................... 5 Calysta............................................................ 5 Cargill......................................................... 6, 31 Cargill Animal Nutrition....................................43 ChemChina.....................................................33 CJ CheilJedang............................................. 5, 6 CJ Selecta........................................................ 6 Danish Crown..................................................40 Darling Ingredients........................................... 6 De Heus..........................................................34 Delacon........................................................... 6 Denkavit..........................................................35 DLG................................................................40 DSM Animal Nutrition & Health.................... 6, 39 Eastman Animal Nutrition................................. 3 EasyJet...........................................................43 EasyMining.....................................................38 Ecophos Group................................................38

VIEW FROM EUROPE

Dutch animal feed sector experiences consolidation as prices soar and volumes contract.......................... 34-35

RECRUITMENT UPDATES FEEDINFO SUMMIT

Bold listings are clickable

EFS-Holland....................................................34 EnviroFlight®, LLC.......................................... 12 EuroChem..............................................5, 37, 38 Evonik, Animal Nutrition Business Line............. 7 FAMI QS......................................................... 35 Feedinfo Summit....................................... 42, 43 FASA, Grupo..................................................... 6 Feijen Diervoeders...........................................34 Firmenich......................................................... 6 ForFarmers............................................... 34, 40 Foster Farms.................................................... 6 FRAmelco Group.............................................. 5 Fransen Gerrits................................................34 FrieslandCampina............................................35 Gro Intelligence...............................................32 Hangzhou Mojia Biotechnology......................... 5 Hendrix Genetics.............................................40 Herbonis.........................................................40 Hongda Biotech................................................ 5 Hua’an Securities....................................... 32, 33 IHS Markit.......................................................33 Inner Mongolia Miraculous Crop Science Co., Ltd..................................... 5 Jingliang Longjiang Biotechnology Engineering Co., Ltd....................................... 5 Kruse Western, Inc............................................ 6 Lantmännen....................................................40 Liben Crop....................................................... 5 Lifosa....................................................5, 37, 38 Lonza.............................................................24 Mars, Incorporated..........................................40 Mazen Animal Health........................................ 6 MiXscience...................................................... 8 Mosaic............................................................37 Nanjing Red Sun........................................ 24, 26 Natural Biologics.............................................40 NAVETCO......................................................... 4 Novus International........................................ 41 Nuproxa..........................................................40 Nutreco...........................................................43

Nutrifeed.........................................................35 Omya........................................................17 OQ Chemicals.................................................40 Orion Corporation............................................. 6 Perstorp........................................................ 5, 6 PhosAgro........................................................37 Pinnacle Asset Management............................. 6 Prosol............................................................ 33 Rabobank........................................................21 SADA, Grupo.................................................... 6 Selko...................................................22, 23 Shandong Denghai Seed..................................33 Shengda Bio-Pharm.......................................... 5 Sinochem........................................................38 Soon Soon Group.............................................43 Suguna Foods.................................................43 SwineTex......................................................... 9 Symbrosia.......................................................40 Syngenta.........................................................33 TechMix Europe...............................................40 Tessenderlo.............................................. 37, 38 Thai Union Group.............................................40 Theeuwes Mengvoeders..................................34 Trouw Nutrition.....................1, 22, 23, 34, 35, 40 Tyson Foods..................................................... 6 Vaccinar.........................................................40 Vall Companys Group.................................. 6, 43 Valley Proteins................................................. 6 Veramaris.......................................................40 Vion................................................................40 Viserion Milling................................................ 6 Viterra.............................................................. 4 VMD NV........................................................... 6 Western Milling, LLC......................................... 6 Women in Food and Agriculture...................... 36 Xingmao Group................................................ 5 Yara................................................................37 Zhejiang Garden Bio......................................... 5

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NEWS BITES

Headline news The Vietnamese Ministry of Agriculture and Rural Development (MARD) issued an approval for the commercial use of a vaccine against African Swine Fever. This will be the world’s first licensed vaccine against the virus. The vaccine was developed by NAVETCO based on the ASFV-G- ∆I177L technology licensed from the USDA ARS.

UKRAINIAN GRAIN EXPORTS DISRUPTED With Black Sea ports out of commission For the first time in the century since because of a Russian blockade and Ukrainian the ASF virus was identified, a commercial vaccine will be available. mines, Ukrainian grain exports have fallen as the country must shift to less practical truck, train, and river barge transport. These channels are swamped with demand and areas. It is believed that the project may lead to a reduction of hindered by incompatible infrastructure (for example, the different 30% in Dutch livestock numbers. Nitrogen emissions have been gauge for rolling stock between former USSR territories and EU a hot topic in Dutch politics since at least 2019, and the level members like Poland). Moreover, facilities and infrastructure are of responsibility of the animal agriculture sector in particular is being degraded by military action (for example, a Viterra grain contentious. terminal in the port city of Mykolaiv was hit by a missile and set on NEW ZEALAND RELEASES DRAFT PLAN TO CHARGE fire in June). And as last season’s harvest struggles to get out of FOR LIVESTOCK METHANE EMISSIONS Ukraine, it is left with little space to store the new harvest, set to begin soon. On June 8, New Zealand’s government released a plan requiring Ukraine accounted for nearly a fifth of global corn exports and farmers to pay for the enteric methane emissions of their animals 12-14% of wheat exports, and the absence of those stocks on by 2025. If enacted, it would make the country the first in the markets is expected to cause shortages in many parts of the world to put a price on the greenhouse gas generated directly world. In just one example, the rise in feed and food prices in by ruminants. It is understood to include incentives for reducing Malaysia prompted it to ban exports of chickens to neighbouring emissions via feed additives. Reuters reports that a final decision Singapore and Thailand in early June, although the ban was on the project is expected in December. partially relaxed a few weeks later.

GAS SITUATION IN EUROPE CONCERNING As the relationship between Russia and Europe degrades, many are concerned about the potential for Russia to provoke a deep energy crisis by withholding gas supplies from its western neighbours. It cut off Poland, Bulgaria, the Netherlands, Denmark, and Finland for refusing to pay for gas in rubles, and in late June, it reduced deliveries through the Nord Stream 1 pipeline, ostensibly over equipment issues. One week later, the situation of German gas reserves and deliveries was worrying enough for the country to move to the “alarm level”, under which the global manufacturing giant can begin using coal instead of gas and subsidising consumption cuts.

DUTCH GOVERNMENT PROPOSES NITROGEN POLLUTION CONTROL MEASURES Farmers pushed back against a plan released in June by the Dutch government to reduce nitrogen pollution in sensitive natural

4 | SUMMER 2022

VIETNAM APPROVES WORLD’S FIRST COMMERCIAL ASF VACCINE

US PASSES OCEAN CARRIER REFORM BILL; REGULATIONS OF CHICKEN TOURNAMENT FARMING LOOM

In mid-June, President Biden signed the bipartisan Ocean Shipping Reform Act to increase the oversight power of the Federal Maritime Commission. Among many others, it includes provisions meant to stop international ocean carriers from “unreasonably declining American cargo”, to require reporting on how many containers are being transported empty, provisions which are particularly interesting for US ag exporters concerned about their products having been passed over in favour of rapidly returning empty containers to Asia when containers were particularly scarce and US ports were overwhelmed. Meanwhile, the balance of power between meatpackers and farmers remains a focus of the administration; in late-May, it proposed regulatory changes meant to ensure greater transparency in the “tournament system” used to reimburse farmers who raise chickens under contract with integrators.

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NEWS BITES

Production news ADDITIONAL CHINESE VITAMIN AND AMINO ACID PRODUCTION PLANNED This quarter saw several Chinese vitamins and amino acids manufacturers announce plans for expansion. Shengda Bio-Pharm is investing over USD 74 million in a threeyear project which will add 220 tpa of biotin and 1,000 tpa of folic acid production capacity, alongside other products. Zhejiang Garden Bio will add 6,000 tpa of vitamin A500 powder, 20,000 tpa of vitamin E 50% powder, 5,000 tpa of vitamin B6, 200 tpa of biotin, and others over the next 24 months. Hongda Biotech plans to double its production of vitamin B3 to 10,000 tpa. Hangzhou Mojia Biotechnology co., Ltd. (Mojia Biotech) says it will be commissioning a vitamin B5 production plant by the end of June 2022. The company claims its bio-process is more sustainable and ensures a stable supply of vitamin B5 in a context of frequent production disruptions in China caused by tightening environmental regulations. A new player may be entering the methionine business; Inner Mongolia Miraculous Crop Science Co., Ltd, a subsidiary of crop protection company Liben Crop, is reportedly investing around USD 2 billion in a product which will make 200,000 tpa of methionine and 360,000 tpa of other ag chemical products.

LITHUANIAN FEED PHOSPHATES PRODUCTION OFFLINE

WAR IMPACTS RAW MATERIALS SUPPLIES FOR FEED ADDITIVE PRODUCTION The war has also had impacts on other feed additives. Beta Pura GmbH, a joint venture in Tulln, Austria, said in early June that the Russia-Ukraine conflict was currently blocking the transport of raw material to the factory, requiring production to shut down for an unforeseen amount of time. Meanwhile, it is also understood to be affecting the availability of necessary inputs for the production of sodium bicarbo nate in Europe, contributing to additional tightness in this market.

FEED ADDITIVES EXPANSIONS COMPLETED CJ Bio’s threonine capacity expansion at its Fort Dodge, Iowa plant is now complete, bringing CJ America’s total threonine capacity in Fort Dodge to 50,000 tpa. Meanwhile, Calysseo, a joint venture between Adisseo and Calysta, has announced that commissioning and start-up activities have commenced at its first industrial-scale FeedKind fermentation-derived protein facility in Chongqing, China, which will make 20,000 tpa of products for the aquaculture industry. Finally, Jingliang Longjiang Biotechnology Engineering Co., Ltd, a joint venture of Chinese corn starch processor Xingmao Group and Beijing Capital Agribusiness and Food Group, began making l-lactic acid at a facility Suihai, Heilongjiang earlier this year, for applications including animal nutrition.

FEED ADDITIVES EXPANSIONS PLANNED Sweden’s Perstorp has announced plans to double its carboxylic acid production with an additional 70,000 tpa plant. The increased capacity will help Perstorp meet growing demand in various applications, including feed preservatives. Meanwhile, Spanish monoglycerides manufacturer Sustainable Nutrition S.L., part of Adisseo’s FRAmelco Group, plans to invest over EUR 10 million in a four-year expansion of its plant.

Lithuanian feed phosphates manufacturer Lifosa, a subsidiary of Russia’s EuroChem, has been non-operational this spring. An interim administrator was appointed by the Ministry of Finance in order to help ensure the Lithuanian plant could restart in full compliance with EU sanctions on Russian oligarchs found among EuroChem’s management, but the process has proved complex. Moreover, it is understood that supply of critical inputs such as phosphate rock, ammonia, and sulphur to the plant might be problematic in the current environment. Still, despite the uncertainty about the restart of the Lifosa plant, the European MCP market appeared to be more sanguine about the supply

situation than it had been in the immediate aftermath of Russia’s invasion of Ukraine and the resulting European sanctions.

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SUMMER 2022 | 5

NEWS BITES

M&A DSM TO MERGE WITH FIRMENICH DSM announced a “merger of equals” with privately-owned flavours and fragrances company Firmenich. The Animal Nutrition & Health (ANH) business will continue to be led out of Kaiseraugst. ANH will make up around 29% of the combined group DSM-Firmenich’s revenues, compared to 36% of the net sales of DSM alone.

CJ CHEILJEDANG RUMOURED TO BE SELLING CJ SELECTA Reuters claimed in mid-May that CJ CheilJedang was looking into a sale of its soy protein concentrate division CJ Selecta (part of CJ Bio), a few weeks after the company claimed it was reviewing its various strategic options for the division. The report’s sources claim some 24 companies, including ADM and Cargill, showed an interest in CJ Selecta.

DARLING INGREDIENTS ACQUIRES BRAZILIAN RENDERER Darling Ingredients announced that it is acquiring Brazilian rendering company Grupo FASA for approximately USD 557 million, the same week that it completed its USD 1.1 billion acquisition of Valley Proteins. FASA’s 14 industrial plants process over 1.3 million tonnes of animal by-products each year, producing ingredients for both animal feed and renewable fuels.

CARGILL TO ACQUIRE ITS PHYTOGENIC FEED ADDITIVE PARTNER DELACON Cargill signed an agreement in June to acquire phytogenic feed additive company Delacon, in whom it has had a minority equity stake since mid-2017. The acquisition, which is expected to close in mid-2022, comes after five years of partnership between Cargill and Delacon.

PINNACLE-BACKED VISERION TO ACQUIRE WESTERN MILLING Viserion Milling, LLC, backed by Pinnacle Asset Management, L.P., is to acquire California-based feed supplier Western Milling, LLC from Kruse Western, Inc. for an undisclosed amount. Western Milling claims to be one of the largest industrial providers of mixed grain cattle feed products to California’s dairy industry, and offers several other animal nutrition products.

6 | SUMMER 2022

US POULTRY COMPANY FOSTER FARMS CHANGES HANDS California-based, family-owned poultry company Foster Farms was acquired by Atlas Holdings in June for an undisclosed amount. Donnie Smith, former CEO of Tyson Foods, has been named Foster Farms’ new CEO and Chairman of the Board. The company is said to generate around USD 3 billion in annual revenues and employ over 10,000 in processing jobs.

VALL COMPANYS TO BUY MAJORITY STAKE IN NUTRECO’S SADA Spanish poultry producer Vall Companys Group is acquiring a majority stake in another poultry company, Grupo SADA and subsidiary SADA Canarias, from Nutreco.

FINLAND’S ORION ACQUIRES BELGIAN ANIMAL HEALTH GROUP Finnish pharmaceutical company Orion Corporation is acquiring Inovet BV’s subsidiary VMD NV’s group of companies (Biové Laboratoires SAS, Biard SAS, V.M.D. Állatgyógyászati Kft and Inovet Indochine Co., Ltd.) for EUR 130 million. VMD is a veterinary pharmaceuticals company with products for livestock, pets and minor species. Headquartered in Arendonk, Belgium, it has a production site in Arques, France, which it is currently expanding.

NEW OWNER FOR PERSTORP PETRONAS Chemicals Group Berhad (PCG) agreed to acquire the entire equity interest in Perstorp Holding AB from PAI Partners for EUR 2.3 billion. Beyond feed & nutrition, Perstorp is active in markets such as paints & coatings, construction, personal care & food, and plastic additives.

SERIES A FUNDING ROUND FOR MAIZE-BASED VACCINE COMPANY Mazen Animal Health, a startup focusing on developing novel oral vaccines, announced in May that it had closed a Series A funding round of over USD 11 million. Mazen’s concept “uses maize as a biofactory for the production of recombinant vaccines”, and its lead product is a feed-based vaccine for the prevention of Porcine Epidemic Diarrhea Virus (PEDV). Also in the pipeline are two poultry vaccines, including a coccidiosis vaccine supposedly in the proof-of-concept stage.

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PORK PRODUCTION ASF, antibiotics regulation, corporate consolidation and more have wrought dramatic transformations

The astounding pace of change in China’s swine sector

t is cliché to say that the last few years have been full of historically disruptive events. However, the Chinese swine and feed industry has had to deal with more than the same series of unfortunate events – from war among major grains exporters to global supply chain disruption to Covid – that everyone else has lived through. It has also been undergoing dramatic transformations without parallel elsewhere. “It’s hard to gain perspective, when you’re right in the middle of it, and we are still sort of right in the middle of it. But I think if you could fast forward 10 years and look at this period, it’d be [obvious something] very remarkable was going on,” says Todd Thurman. As owner of SwineTex, a pork production consultancy with dozens of clients in China, he has had the opportunity to witness these changes firsthand. In his view, the fact that the industry is dealing with so many sources of change at once has prevented several of them from receiving the consideration they deserve. “[Something like] the ban on antibiotic growth promoters would be a massive issue all on its own. But you hardly see anybody talking about it just because it got overshadowed by something else. And this is not just some minor issue…this would otherwise have been an Earth-shattering story for the Chinese industry. And it just got overshadowed, not just by one other issue, but by multiple other issues.”

INPUTS AND LABOUR One issue commanding much attention in markets around the world is the rising price of raw materials. China’s swine sector is certainly not exempt from these concerns, particularly as, in Thurman’s words, “half the pigs in the world are produced in China, [but] certainly not half the feed in the world.” Feed prices, therefore,

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SUMMER 2022 | 9

PORK PRODUCTION physical nature of agriculture is less appealing. “As economies improve, as people get richer, they have less of an appetite for [farm] work. There’s some things we can do in our industry to address that. But that’s a big concern.” Meanwhile, on the cost side of the equation, he pushes back against the widespread misconception that labour in China is cheap. First, he says, if the idea ever had any merit, it is surely outdated, given that wages in the general economy have approximately quintupled over the last two decades. Second, he says, it fails to take into account how much value each individual is adding. “When you adjust for staffing rates and you adjust for productivity, it’s actually a high labour cost country compared to more mature markets,” he asserts. “A USDA work done in 20171 found that the labour cost per 100 pounds of pork production in the US is about US$ 3, and in China that number was close to US$ 16. So obviously if the effect of labour cost is higher, then it’s going to represent a higher percentage of their costs of production. In the US, it’s a little over 4%, and in China it was a little less than 8%.” “A lot of people can talk about the impact of higher feed costs, and that’s certainly a big issue that my clients are dealing with. But the underlying labour cost, as an input, is very significant.”

AFRICAN SWINE FEVER: LESS VIRULENT, HIGHLY PROBLEMATIC In fact, the only long-term worry Thurman’s Chinese contacts see as more pressing than labour is disease. This is understandable, given the country’s recent history with African Swine Fever (ASF). On ASF, he says, “I think we have entered what, whether we like it or not, is going to be the status quo for quite some time, certainly until we have a vaccine that is effective for use in an 1 Gale, F. (2017, January). China’s Pork Imports Rise Along with Production Costs (LDPM-271-01). Economic Research Service, USDA.

are perpetually higher. “That’s going to be a fundamental challenge for [China’s swine] industry; it has been and will continue to be,” he asserts. “For corn, I think the numbers I saw [in early May] were CNY 2.92 per kg…that’s over US$ 11 per bushel. You know, our producers over here in the US are screaming at US$ 8 a bushel corn, and then China’s dealing with over 11.” Beyond those structurally higher prices, Thurman notes the impact of current events, such as supply chain disruption related to COVID. On the question of the war in Ukraine, he acknowledges that we are likely to see the effects of this on feed prices more in the months to come. “I don’t think we’ve really seen the major impact of that yet. I think that’s still to come. We’re probably looking at the end of 2022, end of 2023 before we really see the impact of a lot of those issues that are going on in Russia and Ukraine. “We’re certainly seeing disruption in small grains markets as a result of the war, and those are trailing into the other big markets. But I think the overall bigger issue is going to be on the fertilizer side, and how that translates into higher production costs for crop producers. And so I don’t think we’ve really seen the full impact of that. I’m not even sure we’ve begun to see the beginning of that impact, which is scary.” However, the input that Thurman sees as most concerning is not tied to current events, but to longer trends. “The one that really stands out to me, that I’m surprised I haven’t heard as much about, is labour costs,” he says. According to him, this is near the top of the list of long-term concerns for any producer in China. “It’s not just cost, but availability,” he observes. “Are we going to be able to find the people to work on these farms, and are we going to be able to afford what we have to pay to get them?” Urbanisation, which has taken literally hundreds of millions of workers out of the Chinese countryside over the last 40 years, is a significant part of this story. “Most people think that trend is going to continue, and that’s a problem for agricultural employers. That pool of potential talent is just getting smaller,” he notes. Another factor is the fact that with rising income levels, the long hours and

Thurman says that adjusting for staffing rates and productivity makes it clear that the Chinese swine market has comparably high labour costs.

10 | SUMMER 2022

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protocols, or the absence of facilities like truck washes. “In China, often you have a shower, but it’s not designed like a shower-in, shower-out should be; it doesn’t step through, you have to walk out on the same ground you walked in on. Well, that’s a shower but it’s not a proper shower for biosecurity purposes.” When it comes to biosecurity problems that fall into that design category, Thurman says he has seen a tremendous amount of improvement, particularly in managing the risks of transmission via people or transportation. “I’m very proud of and very satisfied with the progress that we’ve made on the design side.” On the other hand, he says, when it comes to the compliance category, “we still have a lot of struggles there, and those struggles are harder to deal with in a lot of ways.” Compliance is, of course, an issue in many geographies, because it relies not just on one investment or decision made one time, but on many actors making the right decision every time. Thurman says there is a cultural element complicating the compliance side of things as well. “In Chinese culture, there’s not a lot of black and white. There’s a lot of gray. It’s a very contextualtype culture…. That’s not necessarily good or bad, right? It’s just a difference in the way people view the world, and the approach that they take to managing issues that come up. But it becomes problematic when you have an issue like biosecurity where you cannot have any gray area… you have to do [actions like showering in] 100% of the time.” He concludes: “I just hate to see a producer come in and spend a lot of money investing in processes, procedures, equipment, and facilities, and then to have it thrown away because of poor compliance – it is just extraordinarily frustrating.”

ANTIBIOTICS REDUCTION AND ADDITIVES USE Of course, ASF has not been the only transformative issue in animal health in China over the last decade. In July 2020, a ban on the use of antibiotic growth promoters in feed took effect. According to Thurman, the move was not exactly unprecedented or abrupt; indeed, he says, in the years previously, the government had been “beginning to send a signal that this is something that was on their radar and that they were wanting to work on.” Still, he admits, in markets where this had previously been done, for example in Europe, it was “a slower process, which gave producers a lot more time to adapt…I think a lot of producers

SUMMER 2022 | 13

environment like this, where ASF is endemic…if we don’t have a vaccine, I think we’ve entered this endemic period, and I think the two main drivers for that were the fact that it was just so widespread, and the fact that we’ve shifted to most of the cases being this—and I hesitate to use this term—milder version of the virus.” Indeed, the emergence of a less virulent form of the virus has changed the nature of the threat, but is certainly not a sign that it is fading away. Instead, it comes with different challenges. “This new ASF strain is problematic and causes losses, but it doesn’t cause that obvious mortality [that was a clear indicator of ASF],” he observes. “And in some ways that’s better, obviously, and in some ways it’s worse because it’s really almost impossible to get something like that under control, because it’s hard to identify.” As Thurman recounts, “when we first started seeing this new strain of the [ASF] virus, I’d been getting calls for months from my producers [in China], saying ‘we’re having a really bad PRRS [Porcine Reproductive and Respiratory Syndrome] year’… I think, in reality, they were dealing with ASF.” Moreover, in his words, “the future of ASF, I think, looks a lot like the past of PRRS in China. It’s different: in China, PRRS is an epidemic, chronic, underlying issue; in the US, it’s sort of seasonal to a significant degree, but episodic.” In his experience, those managing large farm systems in the US might expect a certain number of farms to break with PRRS, but “even in bad years, 80% of our farms are going to continue to operate at normal production levels… PRRS is not a day-to-day concern, it’s something that you worry about happening once every few years if you’re a farm manager.” Meanwhile, in China, the threat of PRRS is much more present. “It’s always there, it’s chronic, it’s just an underlying issue that we deal with. Virtually every farm is positive; sure, it ebbs and flows over time… but it’s just kind of there. It’s part of the background, part of raising pigs in China. “That’s pretty much where we’re at now with ASF.” Still, over the last four years that China has been battling ASF, it is not only the virus which has evolved; the swine industry has as well. For Thurman, whose work with Chinese farms includes biosecurity consulting, the country has made much progress on farm biosecurity but there is also room for significant further improvement. For him, biosecurity issues can be separated into two categories: design and compliance. Design problems include things like the insufficiency of

PORK PRODUCTION in China did experience it like it kind of came out of nowhere in 2020. I think it’s because a lot of them didn’t really think it was going to be implemented.” Moreover, he believes the Chinese experience of giving these products up might have been different just because of how extensively they were used. “When I first started going to China, more than a decade ago now, it was not uncommon for those pigs to be born on antibiotics and die on antibiotics, and they were literally on antibiotics their entire lives, through the feed, save maybe a window where they’re given vaccinations or something. That was not uncommon at all. This would become a huge crutch for producers, where they couldn’t imagine how they were going to manage without it… It was a shock to a lot of producers.” In his telling, compliance with the new regime is believed to be an issue raising resentment among different actors. “I know some of the big feed producers that are trying to follow the rules, or that are following the rules, have complained that not all players out there in the market are following the rules like they’re supposed to, whether that’s producers or feed millers.” He understands that the rules, which are mainly targeting the inclusion of antibiotics into the feed, allow for workarounds wherein the farms can administer certain antibiotics directly, disadvantaging those who provide third party feed compared to operations which are fully vertically integrated. “There’s some really interesting issues around compliance there that I’m not sure the industry’s fully wrapped their heads around. Certainly you’ve seen a reduction in the use of the types of antibiotics which are most affected; whether you’ve seen a reduction in antibiotic use overall or not, I

think is very debateable.” In other markets which have aggressively curbed the use of antibiotics in livestock, the transition has had some noticeable effects — increasing mortality, for example, or raising interest in alternative products and practices to protect animal health. When it comes to China’s swine sector, however, any changes in mortality will have been hard to spot, coming as the swine industry was also being transformed by disease pressure. Moreover, adds Thurman, “I really can’t overstate the challenges around record keeping. These systems that are really common in China obscure mortality, especially at the sow farm level, but even at the nursery and finishing level as well, I’m just not sure how much you can trust the numbers.” Notably, he believes, this is not primarily a question of the numbers being massaged upwards for political purposes. “There’s certainly some of that. But I think a bigger reason that those numbers are inaccurate is because of the process that they go through to collect that data is really fundamentally flawed. It’s not just politically driven, it’s just the way that data percolates up from local, regional, provincial governments up to the national government… it’s really a broken system in China.” Meanwhile, has the change in the regulatory environment spurred a rush to feed additives? Thurman claims “there’s certainly tons of interest in additives [but] I think, for the most part, most of my clients have been underwhelmed by the effectiveness of the additives they’ve used.” According to him, this is largely because the response to feed additives is so variable — sometimes they will have a great effect,

“As you increase consolidation, you have less flexibility in supply… you’re going to have higher highs and lower lows.”

TODD THURMAN

14 | SUMMER 2022

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PORK PRODUCTION and sometimes they won’t, and there doesn’t appear to be a great understanding as to why. He cites a conversation with a well-respected Chinese producer who has a PhD and a research background, and is willing to try new things, who told him “my biggest problem [with additives] is that I can’t get a predictable response. With antibiotics, I got an almost 100% predictable response, I knew it was going to work and what the results were going to be… I’d be willing to pay really good money for the response, if the [feed additive supplier] would be willing to take the risk that I’m going to get the response, and then if I don’t get the response, I don’t pay for it.” Short of any suppliers willing to accept such a deal, Thurman says he is intrigued by the opportunities that concepts like gut health promotion can offer, but sees the inability of the feed additives industry to define which pigs will actually benefit from particular additives as being potentially terminal to the entire sector. “That’s the big frustration for producers, and I worry a little bit that they’re going to have enough negative experiences that they’re going to become gun-shy, not wanting to pull the trigger. Once the initial panic over not having [recourse to AGPs] wears off I worry a little bit that it sets back [feed additives adoption]…. I do worry a little bit that these negative experiences are going to be problematic, and it’s going to be hard to get people to dismiss them and be open to trying new things in the future.”

CONSOLIDATION ASF, a crackdown on pollution, and other factors contributed to one final dramatic transformation for the Chinese swine industry: rapid consolidation. According to Thurman, this is noteworthy not because of the degree — after all, the overall market remains much less concentrated than that of the US, for example; the top 10 Chinese companies accounting for between 14 and 20% of the pig market,

while in the US, the top four pork companies slaughtered over 60% of hogs, and 63% are raised under contract with processors. However, the speed of concentration in China has been breathtaking. “It is really remarkable how quickly that industry is consolidating. What happened over the course of 30-40 years in the US is happening in just a matter of months, honestly. If you take the top 10 producers, you go back to right before ASF, [their market share] was 5%. So you’re talking about a tripling of market share, in just a few years.” This has, of course, largely happened as the country restocked after the devastation of ASF. “That shift has been primarily at the expense of backyard production, non-commercial production and small commercial producers,” asserts Thurman. “The mediumsized operations have actually grown fairly aggressively, although not at the same pace as the big producers.” For Thurman, while the increase in the professionalisation of the Chinese swine industry is certainly a good thing in terms of animal health and the ability to maintain sanitary standards, continuing to consolidate at this rate will have “major implications.” “As you increase consolidation, you have less flexibility in supply. So this elasticity in supply goes away and what results there is more volatility in pricing. You’re going to have higher highs and lower lows. We’re starting to see that now. What we’ve seen in terms of pricing in China is unprecedented.” Taking a step back, he says, “if we go 30 years in the future and look back on this time period, that may be the most consequential legacy of this whole process, a rapid consolidation of the industry in China and the political and economic and practical changes that’s going to instigate in the industry. And what that means exactly, I’m not sure, but I know that it’s going to mean massive changes. If this continues, and then in a few years the top 10 producers control 30% of the pork production in China… that’s 15% of the pork production in the world controlled by 10 companies. That’s a huge story.” By Shannon Behary, senior editor

Thurman believes the consolidation of the Chinese swine industry may be the most consequential legacy of this period of rapid change.

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INDUSTRY PERSPECTIVES | Sponsored

AB Agri leadership talk recent restructure to support company in “growth mode” With the appointment of long-serving executive Simon Heath as its new Chief Commercial Officer in January this year, AB Agri has further solidified plans to grow the company’s operational footprint, tasking him with overseeing its expansion in Southeast Asia, Central and Eastern Europe, and the Americas. “With his skills and experience from within our business, Simon is in a unique position to drive our commercial strategy and support me with our mergers and acquisition activities”, said AB Agri CEO, José Nobre at the time. “He will help to ensure we have an aligned, commercial, responsible and sustainable approach to the animal nutrition industry across continents.” To further support this ambitious growth strategy, the compound feed maker has recently undertaken an internal restructuring that it believes will allow the company to meet its expansion goals more effectively. Feedinfo recently sat down with both Mr. Nobre and Mr. Heath to find out exactly what the business’s restructure entails, why the company is betting on dairy, in particular, to support this expansion, and why its home base, the UK, remains a key geography for the company even as it looks to grow abroad. [Feedinfo] Mr. Nobre, what can you tell us about your plans for AB Agri over the coming five years? [José Nobre] We are in growth mode and our agenda is based on enabling a more responsible industry, capable of providing the world with affordable, high quality and responsible food. That’s the legacy we want to create. We want to transform AB Agri into a global driving force and that ambition is reliant upon our ability to provide customers with high value technology applications and delivering these solutions with flexibility in key agricultural markets. We have implemented a new structure in

18 | SUMMER 2022

our business to provide the framework and focus to deliver our strategic goals of growing internationally and driving innovation. We will continue to invest in our ‘pipeline of innovation’ and we’re aligning new solutions and existing products with key customers’ needs and prioritising how customers prefer to engage with us. [Feedinfo] How does restructuring the business support this move? [José Nobre] To effectively serve our customers, we need to ensure we’re using our extensive industry experience and expertise in the most appropriate ways. We see three main opportunities to grow our business, and through our restructure we are now in the best position to realise them. Firstly, expanding our UK-based regional model into other key geographies. Our experience in this area allows us to identify and focus clearly on packaging solutions – for example products, customised support or tailored services – to the specific demand of the regional market we are targeting. Secondly, we want to expand the value and width of our technology portfolio. Our global technologies business units pursue category excellence and a world-class understanding of how each category can distinctively provide a solution to key customer needs. AB Agri has several established and new businesses within this group that are already investing in new technologies, and this will continue. Finally, to focus on specific species to provide a distinct technology platform that we believe is critical to provide affordable, high quality and responsible food. With this aspiration in mind, we are starting with a focus on dairy. We are enabling this growth by acquiring routes to market through investments, new portfolio categories and innovative technologies. We have also developed an ‘Innovation Lab’ which is focused on enabling new technology platforms with the ability to partner with external bodies and realise our vision of enabling more open innovation partnerships. [Feedinfo] Why the particular focus on dairy? How does this support your growth strategy and what role will your new head of Dairy Innovation, Dr. Michael de Veth, play in driving this?

www.feedinfo.com José Nobre

Photo courtesy of AB Agri

Sponsored | INDUSTRY PERSPECTIVES

[Feedinfo] Mr. Heath, when you took on the CCO role earlier this year, it was announced that you would oversee plans to expand AB Agri’s geographical footprint with a key focus on Southeast Asia, Central and Eastern Europe and the Americas. Why specifically these regions? [Simon Heath] Outside of the UK, we see significant growth potential for these markets and for AB Agri. For instance, parts of Southeast Asia have been hit significantly by animal diseases over the past few years, but they are now recovering at pace. We feel that the new emerging industries will be much more focused on animal performance, sustainability, biosecurity and animal welfare. We have a vast amount of experience and an array of product offerings within our group to meet these changing needs in the different regions and my role involves making sure we are aligned across our business units to support these emerging market growth opportunities.

[Feedinfo] How does this renewed growth strategy affect your operations in China?

Matthew Power Photography

[José Nobre] We want to create a Simon Heath legacy and we want to do this by pioneering responsible ways to build a more sustainable food chain. Dairy is a very affordable and efficient source of protein, which offers enormous flexibility in different food categories. It is therefore a growing market, with evolving science and technology. That creates multiple opportunities to optimise diet performance and feed ingredients use. Through technology we can provide farmers with increasingly accurate and timely evidence to allow them to make critical decisions and, consequently, achieve an even more productive and sustainable dairy farming system. We have the people, tools, innovative solutions, and expertise to create a platform that will truly add value in this market. Michael will be at the forefront of delivering this vision, engaging with our scientists, partners, commercial teams and customers.

[Simon Heath] We have been in China since 1995 and it is a core part of the AB Agri portfolio. We have learned a lot during our time there and now have an established, credible and recognised business that we will continue to invest in. This is evidenced by our recent commissioning of our latest compound feed mill in Tongchuan. We will also continue to invest in our premix capabilities as well as our distribution networks. China is a global agricultural powerhouse, and we intend to be a crucial part of that.

[Feedinfo] Meanwhile you’ve continued growing your presence at home in the UK with last year’s announcement that you will be constructing the country’s biggest feed mill in the east of England. Considering you were already the largest feed compounder in the country before this decision, why was it so important to also continue growing in the UK and not just outside the country? [Simon Heath] The UK regional business is also core and we are committed to continuing to invest in this important part of the business. The new ‘super mill’ will be the UK’s biggest, state-ofthe-art, animal feed mill, capable of producing one million tonnes of pig and poultry feed per annum. Pig and poultry feed manufacturing in the UK is reaching capacity and the industry is struggling to keep pace with the growing demands . With the benefit of latest advancements in technology and design, we will be able to optimise the efficiency of compound feed production and distribution in line with our vision to produce affordable, high quality and responsible food. Published in association with AB Agri

[Feedinfo] So, what have you put in place so far to pursue expansions in these regions? [Simon Heath] We are actively looking for opportunities to grow in these regions but don’t believe a ‘one size fits all’ approach is appropriate. Having the best people is key to any business and our recent appointment of Graham Wong in Southeast Asia is an example of our intention to develop our talent pool. Creating effective and scalable distribution networks is also key to success and we are searching for merger and acquisition opportunities in these regions to enable this, as well as growing our current routes to market through investment in infrastructure and new product offerings.

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AB Agri, Peterborough, UK

SUMMER 2022 | 19

ANALYST’S CORNER Weak consumer demand, expensive feed, and other challenges holding back growth in animal production

2022 feed additive demand forecasts cut on lower pork and poultry expectations

lobal consumption growth forecasts for several leading feed additives have been drastically reduced in response to a weaker outlook in key pork-producing regions and significantly lower expectations for poultry output, according to the latest update of Feedinfo’s Supply & Demand Pro Database, released in May. Feedinfo projects global lysine HCl consumption growth in 2022 at 1.3%. The dramatic downgrade from the previous forecast of 5.2% is based on the rising cost of raw materials and its likely impact Sam on consumer demand for animal protein Weatherlake products. There has been a global shift in recent years towards substituting lysine sulphate for lysine HCl, following large-scale capacity growth in China, and the forecast assumes that lysine sulphate will continue to increase its share of the market. Global methionine consumption growth is forecast at 2.3% for 2022 — representing a substantial downgrade from the previous forecast of 5.3% — based on higher raw material costs and a significantly weaker outlook for China. Capacity in the country increased sharply in 2021 and this was seen in higher exports for both DL-methionine (DLM) and liquid DL-methionine hydroxy analogue-free acid (MHA-FA), in spite of the supply chain crisis that prevailed throughout the year. Feedinfo projects global threonine consumption growth in 2022 at a modest 1% following two years of very strong increases. This change is based in part on a weak outlook in key pork-producing regions such as the US. China continues to have ample spare capacity, with operating rates expected to be comparatively low throughout the forecast period. A strong growth trend of around 7% is forecast for global vitamin A consumption in 2022 as major producer BASF gradually returns to the market following the resolution of technical problems with its vitamin A production at Ludwigshafen in Germany. In October 2021, BASF said it planned to start offering vitamin A 1000 in a “stepwise approach” by early Q1 2022 following the resolution of product quality issues. In January, it was reported that the producer had started to offer commercial-grade material to its

20 | SUMMER 2022

customers, but it would only be able to offer 25% of normal volumes for several months. Chinese exports of most grades of vitamin A increased dramatically in 2021 as producers continued utilising their surplus capacity to compensate for the lost production in Europe. The forecast assumes that vitamin A 1000 inclusion rates will begin to rise towards historical levels as global availability improves. The market dynamics for vitamin A have diverged from other products in recent years owing to a series of incidents that have reduced output from BASF’s facility at Ludwigshafen. These began in October 2017, when a fire at the site prompted a declaration of force majeure on citral, a key intermediate for vitamins A and E. This led to dramatic price increases for both products, vitamin A in particular. This was followed by technical issues at the vitamin A unit from mid-2019, which further lowered operating rates. The producer then informed its customers in mid2020 that it was experiencing product quality problems. In 2021, a series of supply interruptions occurred at the Ludwigshafen alcoholates unit, which manufactures intermediates used in vitamin A. The cumulative effect of these developments is that consumers have not returned to the inclusion rates that were standard before the price spike of 2017-18. Feedinfo projects global vitamin B2 80% consumption growth in 2022 at a modest 1.1% following a very substantial increase in 2021, estimated at around 12%. Vitamin E 50% consumption growth for 2022 is forecast at 1%.

MODERATE GROWTH FORECAST FOR CHINESE SWINE IN 2022 AS ASF IMPACT DIMINISHES China is the world’s leading producer of pork and chicken, and therefore plays a critical role in global amino acid and vitamin consumption trends. Lysine and threonine are predominantly used in pig production, while methionine is a key additive for chickens. In its China Livestock and Products Semi-Annual report, published in March, the USDA forecast a 2% increase in Chinese hog production for 2022 compared to 2021. The drive to rebuild China’s swine herd following losses of up to 50% during the worst of the ASF epidemic has not been matched

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ANALYST’S CORNER and Poultry World Markets and Trade the USDA took a less optimistic view: “Global production is forecast virtually unchanged in 2022”, it said, “as gains by major producers generally offset declines in Ukraine and China.” Rabobank also acknowledged a less favourable commercial environment, saying in its Q2 2022 Poultry Quarterly report that “the outlook for the poultry industry has become more challenging, largely due to the significant by a recovery in demand. This is partly due to the impact of COVID- operational challenges with ongoing Covid-19 uncertainty, the spreading of AI [Avian Influenza], the ongoing impact of ASF 19 restrictions over the past two years, but changes in consumer [African Swine Fever] on pork supply, and the sudden increases in habits towards consuming alternative protein sources (such as operating costs, especially feed, energy and transport.” chicken) for health reasons are also evident. This trend has also China plays a key role in the USDA’s outlook, with its chicken been observed by Rabobank, which previously suggested that output “forecast lower as pork production continues to rebound China’s pig herd may never return to its pre-ASF size. and yellow feather broiler production declines due to consumers While the Chinese pork industry grapples with long-term shifting to online and modern retail channels.” The report constraints on both supply and demand, it is also having to predicted weaker manage substantial domestic consumption, increases in East Asia Vitamin A - Supply & Demand partly due to China’s capacity as a result 12000 90 zero-tolerance approach of expansions 80 to COVID-19 infections, undertaken in 10000 70 which has continued to recent years. As 8000 60 guide government policy the USDA reports, in recent months. There “In 2021, multiple 50 6000 were also indications investments in large40 that “poultry farms scale production and 4000 30 have been operating at slaughter facilities 20 a loss since late 2021 came online across 2000 10 due to overproduction, China … investments 0 0 high input costs, low made at the start 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 pork prices, and weak and throughout the consumer demand.” ASF pandemic are Capacity Produc�on Consump�on Opera�ng Rate It is worth noting in reaching completion Source: Feedinfo’s Supply and Demand Pro service this context that the now … Industry USDA estimated in mid-2021 that vertically integrated facilities sources highlight that while production capacity has increased scheduled to come online in 2022 would raise chicken production with new facilities being completed, producers are unlikely to capacity by 20%. utilize the full capacity of these facilities so long as hog and A more optimistic picture is emerging in Brazil, with the USDA pork prices remain low.” These developments are part of a wider projecting in its Brazil Poultry and Products Semi-Annual report, process of industry consolidation and modernisation, which has published in May, that chicken production will increase by 2% seen larger farms with stronger biosecurity and more sustainable this year, with lower domestic consumption offset by a sizeable environmental practices increase their share of the market and increase in export volumes. vertically integrate their operations, resulting in greater demand By Sam Weatherlake, Principal Analyst for high-quality compound feed. Differing trends are emerging in the Americas, with weakness in the US expected to be offset by solid growth elsewhere. Rabobank has lowered its US hog production forecast for 2022 to minus If you need supply and demand data, 2.8% amid rising feed, energy and labour costs. In its Brazil Feedinfo’s Supply & Demand Pro is a comprehensive view Livestock and Products Semi-Annual report, released in March, of six major feed additives, tracking capacity, production, the USDA forecast that swine production would increase by 1.8% trade and consumption at a country level, annually from in 2022 on strong export and domestic demand, following a 2.3% 2004. Based on our own expert analysis of Feedinfo’s rise in 2021. proprietary data plus highly regarded partner sources, we also provide a rolling five-year forecast. For convenience, POULTRY PRODUCTION OUTLOOK WEAKENS ON data is provided in Excel to allow you to easily analyse and RISING COSTS AND FALTERING DEMAND model it. In addition, we provide a full list of Plants and Earlier expectations of increased global chicken production Projects, delivered as an interactive world map. in 2022 have largely evaporated as rising feed costs strain margins at a time of weakening consumer demand. The USDA and Rabobank had previously forecast that global poultry demand would increase by 2% in 2022, but in its April edition of Livestock Opera�ng Rate (%)

Tonnes

“Feedinfo has significantly downgraded projections for consumption growth in lysine HCl and methionine.” SAM WEATHERLAKE

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SUMMER 2022 | 21

INDUSTRY PERSPECTIVES | Sponsored

Importance of gut health in reducing antibiotic use still underestimated by poultry producers

Ron Eskens Soowpictures

“While antibiotic use in poultry has already been reduced significantly in several markets, a lot of countries are still using them irresponsibly. Much more can and should be done to reduce the need for these therapies and to safeguard their use for protecting animal welfare.” This is what Barbara Brutsaert, Antibiotic Reduction Programme Lead at Trouw Nutrition, shared with Feedinfo during a recent catch up to discuss, amongst other things, the importance of the poultry industry continuing its efforts to further reduce the therapeutic use of antibiotics in production. Of equal importance, according to her, is increasing the industry’s awareness of just how critical bird gut integrity can be. “While the industry understands its importance, its role in antibiotic reduction is probably still underestimated”. So, in this Industry Perspectives, Feedinfo sits down with both Ms. Brutsaert and Yvonne van der Horst, Global Product Manager for Gut Health at Trouw Nutrition’s feed additive Barbara brand Selko®, to find out Brutsaert how the feed additive solutions provider is helping the industry improve its approach to bird gut health as a means of addressing the antibiotics gap. We also find out how its popular Selko Presan®-FY product, a blend of a phenolic compound, slow release C12, target release butyrates, mediumchain fatty acids (MCFA) and organic acids, remains a valuable tool in supporting gut integrity in poultry 10 years after its market release, contributing to antibiotic reduction strategies. [Feedinfo] What should farmers be considering when developing an effective antibiotics reduction strategy?

22 | SUMMER 2022

[Barbara Brutsaert] First, a good antibiotic use analysis is needed, focusing on what certain antibiotics are used for and what the producer wants to achieve with their use. Second, an assessment of the feed, farm, and health status of the full production chain needs to be done to fully understand the current situation, including understanding the real triggers for antibiotic use, and also the opportunities and challenges. Based on these assessments a customised value-added programme should be designed, which includes nutrition, farm management and health management solutions. It should also consider economics and animal welfare, to increase the chance of long-term success. [Feedinfo] And when it comes to supporting gut integrity in birds under this strategy, what should be kept in mind? [Barbara Brutsaert] When people think of antibiotics the first aspect that comes to mind is the microbiota itself. However, several antibiotics also have anti-inflammatory properties. Beyond that, it is important to fully understand the primary triggers (eg. immune suppression by viral infection or mycotoxins) which lead to the health challenges for which antibiotics are used. Because most of a bird’s immune cells reside in the gut, maintaining a healthy intestinal environment is critical to supporting its health in general, even under challenges that originate outside the gut (e.g., locomotory, respiratory, etc.). By improving gut integrity, you not only improve the absorption of nutrients necessary to fight diseases, but also the immune system and resilience of the animal. A healthy gut barrier also enables good digestion of feed and, for example, avoids the oversupply of fermentable protein in the hindgut, which can cause harmful microbial overgrowth. This is often a trigger for antibiotic use, making both microbiota management and gut integrity key aspects in the effective reduction of the use of antibiotics. [Feedinfo] To help producers improve the gut health of their flocks, you are proposing Presan-FY, a product which was launched 10 years ago. Considering how rapidly the landscape surrounding antibiotic reduction in poultry production has changed during this time, how effective a tool can it still be here? [Yvonne van der Horst] As mentioned before, it’s important to create a holistic programme based on a producers’ individual situation through an assessment of the full value chain. Presan-FY has a broad-spectrum effect; it both balances the microbiota and directly impacts the gut integrity, both of which are crucial to keep a bird’s gut healthy. It does this through its blend of phenolic compound, slow

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Sponsored | INDUSTRY PERSPECTIVES release C12, target release butyrates, medium-chain fatty acids and organic acids with high pKa-value. The importance of this synergy between different classes of feed additives is often underestimated. It has been shown that a broad range of factors, such as morphological changes of the intestines, immunomodulatory effects and altered gut barrier function, can impact animal performance (Granstad 2021). Choosing a broadspectrum and preferably synergistic blend of feed additives with multiple modes of action is most likely to provide the best benefits needed during challenging times in the animal production process. Presan-FY’s impact on poultry gut health and digestion can also help avoid fermentable protein ending up in the hindgut, which, as mentioned earlier, can contribute to harmful microbial overgrowth. Continuous R&D and validation work at universities and in the field has proven that the various individual components of PresanFY and the solution as a whole remain among the most effective in improving animal performance and reducing the need for antibiotics. [Feedinfo] You recently conducted a trial that found Presan-FY can “significantly improve zootechnical performance” in broilers. Can you please take us through how you were able to prove this?

enabled by the easier, Yvonne van der Horst more precise monitoring of gut health, allowing us to optimise product recommendations. Also, we can optimise or extend product applications in specific production phases to further integrate the holistic approach in the production chain. The application of PresanFY in other species is also showing promising Photos courtesy of Trouw Nutrition results, providing interesting new possibilities. And we will continue to consider and test new ingredients and technologies to improve the current mode of action pillars of the product or extend to new pillars. [Feedinfo] Finally, do you think consumers are being adequately informed of the significant progress made by the poultry industry in the matter of antibiotics reduction?

Body weight gain, g

[Yvonne van der Horst] An extensive scientific study was executed [Barbara Brutsaert] Unfortunately, the communication to in Norway in which a list of commercially available feed additive consumers often does not contain the complete picture. blends was compared under uniform testing conditions. Birds For example, what were challenged 2,000 b does ‘antibiotic free’ a a to simulate a a a a a 1,800 mean? In some field conditions 1,600 regions it means and effects on b a b a respecting the legal performance 1,400 a a a a withdrawal time of parameters were Control 1,200 antibiotics, so there examined. Presan-FY Presan-FY 1,000 are no antibiotic significantly improved Com petitor #1 800 residues in the meat body weight gain of Com petitor # 2 b 600 a b a a a a a (meaning below broilers compared Com petitor # 3 Maximum Residue to the negative 400 Com petitor #4 Levels). In other control group, and 200 Com petitor # 5 regions it means that outperformed all Com petitor # 6 0 no antibiotics were competitors tested Phase 1, d 0-14 Phase 2, d 15-28 Overall , d 0-28 used on the broiler with regards to body Figure 1: Body weight gain of broilers fed mixed feed additive solutions in each phase. farm, or in the full weight gain (see Bars with different superscripts within phases differ (p<0.05). value chain, which is figure 1). already a big difference. The cost of inclusion of a feed additive often strongly influences Also, while in the US ‘NAE’ (no antibiotics ever) means produced the choice of the solution. For this reason, the zootechnical without antibiotics and ionophores, in Western Europe retailers results of the study were also analysed from a financial point of don’t usually communicate this as consumers could assume that view. Based on this study, only two out of the seven feed additive other meat contains antibiotic residues (which is not the case as solutions showed a positive added value per broiler, including the withdrawal times are well respected). Presan-FY. For the rest of the treatments the added value was Many consumers still believe that broilers in particular are full of negative, indicating that the improvement in performance did not antibiotics, without realising what has been achieved in the last 20 compensate for the cost of inclusion of the feed additive solution. years. Moreover, the idea that antibiotic use in animal production [Feedinfo] So, what lies ahead for Presan-FY and Trouw Nutrition? contributes more to antibiotic resistance in humans than human Are you exploring new applications/advancements/developments use is a continuing myth. Obviously, it is difficult for the consumer to navigate all of for the product? What can you share with us? this, so it is really up to us in the industry to communicate more proactively and effectively. [Yvonne van der Horst] We are continuously exploring new advancements for our portfolio. One promising new area will be Published in association with Selko Feed Additives

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SUMMER 2022 | 23

VITAMIN PRODUCTION

Anhui Redpont charts a course as a standalone nicotinamide producer

ver the last six years, those following the Chinese vitamins scene have seen a new name emerge: Anhui Redpont Bio. Mere months ago, Redpont split from its parent company to become an independent operation in the vitamin B3 space. However, a closer look at the history of the company reveals that it is not a newcomer to the space, but instead has deep roots in the production chain of nicotinamide (one of the two forms of vitamin B3, along with niacin or nicotinic acid). In this Feedinfo Review exclusive, Feedinfo goes directly to the source and hears from the company’s chairman Hao Zhou to understand where Redpont comes from and where the market can expect it to go next.

INVOLVEMENT IN NICOTINAMIDE PRODUCTION Anhui Redpont Bio was established in 2016, as part of Nanjing Red Sun. Located in Maanshan City, Anhui Province, the company’s footprint covers an area of more than 600 mu (about 40 hectares) in Dangtu County. Zhou claims the company’s entire vitamin B3 production capacity amounts to 20,000 tonnes. “We are ranked second in vitamin B3 capacity globally while Lonza is ranked first. Lonza may have 10,000 tonnes/year in Nansha, 18,000 tonnes/ year in Switzerland, and thus 28,000 tonnes overall. But if we look at a single production line, we believe ours to be the largest nicotinamide production line in the world,” he says. Today, the company’s portfolio includes two products which it makes itself: cyanopyridine made from 3-methylpyridine, and nicotinamide made from 3-cyanopyridine. Beyond that, the

company has a ten-year exclusive distributorship for Nanjing Red Sun’s 3-methylpyridine. To understand how the company ended up in the nicotinamide production chain in the first place requires some understanding of the production process. Nanjing Red Sun, Redpont’s old parent company, is a manufacturer of pesticides, products whose production requires a chemical known as pyridine. Pyridine production has a byproduct, known as 3-methylpyridine. The output ratio between the two is 2:1; that is, for each unit of pyridine produced, one unit of 3-methylpyridine will also be created. This meant that, in the process of making pyridine for its pesticide production, Red Sun was left with large quantities of 3-methylpyridine. The initial solution was to sell it to others — namely Lonza, whose Nansha facility used it to make nicotinamide. However, Red Sun eventually decided to bring that transformation step in-house: “Our R&D team invested a lot of manpower and resources in developing a production process from 3-methylpyridine to 3-cyanopyridine to nicotinamide, and in 2016 we built a production line of 10,000 tonnes of 3-cyanopyridine and 10,000 tonnes of nicotinamide, and in 2018 we built an expanded production line to 20,000 tonnes each.” Still, Zhou stresses that the company is not simply one more undifferentiated nicotinamide producer; instead, it has developed the biotechnical know-how to qualify it as one of the pioneers in this space. “We developed nitrile hydratase Continued on page 26

Anhui Redpont’s 40 hectare site produces around 20,000 tons of vitamin B3 annually.

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independently,” he asserts. “[We go] from 3-methylpyridine to 3-cyanopyridine by chemical method, and then from 3-cyanopyridine to nicotinamide by biological method, using biological enzyme catalysis, and then protease catalysis after gene editing of engineering bacteria, and [finally] get nicotinamide. We can say that we have opened up a low-cost, high-efficiency and low-pollution production line in the field of nicotinamide.” In his words, at least one other mainstream manufacturer of nicotinamide in China continues to rely on fully chemical production, but this is a process which is being “slowly eliminated.” “The biological method is lower cost, less polluting, safer, and higher quality than the chemical method,” he asserts. “In terms of quality, Redpont is the only company that can reach 99.5% content.” Moreover, the emphasis placed on research continues. “We have set up four laboratories in the research institute: the first is focused on molecular biology, the second on fermentation control, the third on biocatalysis, and the fourth on separation and purification, which basically involves the core technology of the whole process of biotechnology.”

“Our independence from Red Sun will allow them to focus more on their main business of pesticide products, and also helps them solve part of their debt and replenish working capital. It is also good for Redpont, because after SASAC (State-owned Assets Supervision and Administration Commission) joined, we have had sufficient funds to fulfil our plans for scientific research.”

REDPONT TODAY AND IN THE FUTURE

“In terms of quality, Redpont is the only company that can reach 99.5% content.”

According to Zhou, Redpont’s Q1 operating income was up 20% year on year, its output value increased by 30% y-oy, and nicotinamide sales volume in the first four months, amounting to more than 2,000 tonnes, is already equivalent to what the company sold in the entire year in 2020. “My goal this year is probably to sell 8,000 tonnes, and next year our goal may be to sell more than 10,000 tonnes, to operate at our full capacity,” he shares. “Now we are still in the process of taking back the market.” While sales last year were largely in the domestic market, he says the company has now strengthened its foreign sales team, and is working more closely with large multinational animal nutrition groups. “They all signed orders with us in Q2, and we are now talking about the usage in the third quarter. I think the quality of our products, technology, industry chain and supply ability have been recognized by them,” he observes. Of course, Redpont’s products are used in applications beyond just animal nutrition. As Zhou tells it, “We intend to fully expand our pharmaceutical, food, and cosmetic products next year. The year after next, we will start to improve the animal nutrition segment.” While nicotinamide will remain the company’s flagship product, he hints that the company may look to enter adjacent products like vitamin A or D-calpan, products with similar production processes to what Redpont already has in place. Meanwhile, he believes that Chinese producers are well-placed to profit from the depreciation of the Chinese yuan’s exchange rate value, which will benefit Chinese exporters. “According to our inquiries, [Chinese enterprises] are still optimistic about vitamin B3, and they are optimistic about the price and [volumes] of meat.” Interview by Lydia Ma, analyst Editing by Shannon Behary, senior editor

HAO ZHOU

INDEPENDENCE FROM RED SUN After a few years, though, the decision was taken to separate Anhui Redpont into an entity independent from Red Sun. It is understood that this was partially in order to present an image of a company fully focused on the nicotinamide market. “Since Nanjing Red Sun is mainly engaged in the pesticides market, having Redpont (an animal nutrition/biological company) under it seems like a poor fit. This led to Redpont losing lots of ground in the animal nutrition market,” Zhou asserts. Another consideration was that the parent company was encountering what is known in Chinese as a “capital chain crisis,” a sort of working capital crunch. “Under such circumstances the share of our company’s nicotinamide in the market shrank bit by bit from 2019-2021, which resulted in many customers thinking that Redpont had exited from the vitamin B3 business,” he recalls. Therefore, in July 2021, he was appointed as the chairman of Redpont Bio to lead the company into the next stage of its development, as an independent operation. Currently, Redpont is 77% owned by the State-owned Assets Supervision and Administration Commission of Ganzhou City, Jiangxi Province, while he personally holds 23% of the shares.

26 | SUMMER 2022

Photos courtesy Anhui Redpont

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DEMAND INSIGHTS African Swine Fever, COVID-19, and other influences on a market of 1.4 billion consumers

Evolutions underway in Chinese meat consumption

hina’s economy continues to evolve from an export and investment-driven model to a domestic consumption-driven growth model, which is seen to be a more sustainable path for China going forward as the country is increasingly urbanising and consumer buying power increases. Shifts in where and how people live will likely prompt further dietary change among Chinese consumers. Rising living standards and availability of a wider variety of foods from supermarkets, restaurants, and cafeterias for an urbanised Chinese meat consumption patterns are shifting. population will drive this change. Furthermore, under the © YPPicturesPro / Shutterstock.com consumption-driven growth model, March dropped 16% year-on-year (y-o-y) to its lowest level since the transition from traditional “backyard” farming to larger-scale, capital-intensive modes of farming will be increasingly encouraged. May 2020. In Friedrichs’s opinion, throughout 2020 and 2021, the This has been the case in recent years with the Chinese swine consumer sector did relatively well as China’s zero-covid policy herd recovering from the African Swine Fever (ASF) crisis which was successful at containing outbreaks of COVID with minimal wiped out nearly half of the country’s pigs, and the resulting disruptions to daily life within the country. But that has changed mass investments in the modernisation and upgrade of pig in 2022 as officials struggle to contain the much more infectious production facilities. Omicron variant. It is expected that Chinese meat consumption will keep rising in “Lengthy lockdowns and frequent mass testing have taken a toll the coming years. Moreover, since meat consumption per capita on consumer confidence as many have chosen to avoid crowded is still lower than in other economic powerhouses such as Europe places such as shopping malls or restaurants, with some analysts and the US, there is even more room for growth. estimating foot traffic to malls down over 20% y-o-y in March. This With this trajectory in mind, we recently spoke with Darin reduction in demand has also weighed on pork demand which was Friedrichs, the co-founder and market research director at Sitonia already suffering from oversupply,” he said. Consulting, an independent Shanghai-based information service “Changing demographics and consumer preferences are positive company that provides reporting and price assessments for for the long-term growth of meat imports but in the short-term China’s agriculture market, to discuss the impacts of recent major China faces serious headwinds which will weigh on the consumer events such as ASF, the COVID-19 pandemic which still continues sector and negatively affect meat demand,” Friedrichs added. to cripple some parts of China, and the drivers of Chinese meat However, one of the consequences of the shift in the Chinese consumption more generally. Friedrichs is an American national economic growth model is that many domestic suppliers of meat and has been based in China for over five years. are now looking to expand downstream into more specialised pork Reflecting first on the shift in China’s domestic meat products or pre-made meals. consumption, Friedrichs warned of a slowdown caused by the “Many consumers, tired from working long hours in the office, recent spread of the Omicron COVID-19 variant in China in 2022, are now increasing buying pre-made dishes. Often dubbed ‘lazy combined with the country’s zero-covid policy. Both factors economy’ meals, these product offerings have seen a surge in have weighed on domestic growth and consumer spending. As an example, he said that retail spending at restaurants in Continued on page 30

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DEMAND INSIGHTS Continued from page 28

popularity among urban consumers,” Friedrichs commented. “Spending on pre-made meal offerings during the Chinese New Year holiday was up 46% y-o-y and market research firms expect the sector to grow at a rate of 20% per year as consumers continue to pay a premium for convenience and time-savings.” The shift in the Chinese economic growth model has also changed the market environment for international meat and livestock companies who have a presence in China as their roles have altered dramatically in the past two years as the domestic pig herd has recovered from ASF. “During ASF, China simply needed to import meat, and this included relatively unprocessed hogs to supplement the domestic market,” Friedrichs said. “Now, the domestic hog market is oversupplied and tariffs on imported pork have increased. It will be difficult for companies selling undifferentiated products into the Chinese market, but there is a growing opportunity for specialty or premium meats.” “Middle- and upper-income consumers having spending power and will continue to pay premiums for imported products, such as American beef, Spanish hams, or New Zealand lamb, to name a few,” he added. Amid this bearish consumer environment, Friedrichs pointed out that pig farms have continued to suffer from over-capacity that has been difficult to shed. In his view, record prices led many firms to enter the pig industry or aggressively expand production. Operators have also become more skilled at biosecurity and culling practices which have limited the disease’s impact on herds. “China has a long history of boom-and-bust cycles in its hog sector, but the changing nature of industry will make it harder to clear this over-capacity. Large firms have taken an increasing amount of market share while small and medium-sized firms have left the industry in greater numbers. The large firms continue to compete for market share and have access to more capital which allows them to continue to invest during the downcycle of the market. This ability to stay afloat during times of heavy losses could extend the market cycle and keep prices depressed for long,” he said. “The deeply negative margins for hog production have already triggered government warnings with state stockpilers buying up supplies to support the market. These reserves purchases did little to support the market, and ultimately the financial situation of hog breeders will only improve as capacity is cut,” he added. “China’s sow herd is starting to shrink which will help improve the situation,

but firms will continue to face losses in the near term.” In the long run, however, China still has a political desire to remain largely self-sufficient in food production, including pork. The consultant referred to the most recent goals from the Ministry of Agriculture which said that by 2025 China should aim for selfsufficiency rates of 95% in pork, 85% in beef and mutton, 70% in milk, and 100% in poultry and eggs. It is also interesting to note that during the height of ASF in China, many consumers switched from pork to alternative proteins. Some consumption went to cheaper products such as eggs or poultry, while others moved to more expensive beef. The pork price has also come down to pre-ASF levels as pig farms rapidly expanded product, but pork consumption has not fully returned. “This raises the possibility that China reached peak pork consumption and demand won’t surpass its pre-ASF level. Reasons for this include changes in consumption habits which happened while pork prices remained very high for years and changing tastes as demographics shift,” Friedrichs said. Moreover, additional urbanisation can increase pork consumption to some extent but seems more likely to diversify the protein mix. In urban areas, consumers have access to a wider variety of options, including more imported options, which leads to more diverse eating habits. It is also important to remember that the cold chain in many rural areas is still under-developed, which limits the variety and availability of different meats and seafoods. Asked which types of meat will benefit most from the economic reform in China, Friedrich argues that beef is showing promise. “China saw a sharp rise in beef imports, including from South America, as the country worked to supplement its supply of meat as the domestic hog herd was devasted by ASF. This helped create inroads for more imported beef into the Chinese market,” he explained. “During the peak of ASF, the cost premium of beef relative to pork also fell, making beef a more attractive option and increasing beef consumption among consumers. Younger consumers now have more diverse tastes and have shifted away from pork-centric dishes into a wider array of diverse and international options.” Friedrichs added: “Beef demand in China has been growing in recent years, and growth in consumption has outpaced the growth in demand. This continues to bode well for China’s long-term growth in beef imports. However, in the short-term, beef could face challenges if China continues to pursue its zero-COVID policy amid the rise in Omicron cases within the country.” By Simon Duke, editor-in-chief

“This raises the possibility that China reached peak pork consumption and

demand won’t surpass its pre-ASF level.”

DARIN FRIEDRICHS

30 | SUMMER 2022

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FEED RAW MATERIALS

China’s evolving stance on GM crops

DOMESTIC HESITATION “Though China was the first country to grow GM crops commercially, starting with virus-resistant tobacco plants in 1988,

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China could plant up to 33 million hectares with GM corn. HUA’AN SECURITIES VIA REUTERS

n recent months, China has been moving to clarify and adjust rules regarding genetically modified (GM) crops, particularly regarding the growth of such crops domestically. April 2022 saw the country’s Ministry of Agriculture and Rural Affairs announce plans to approve two GM corn varieties, following on from three which received a similar green light late last year. All five of these varieties were developed by Chinese businesses or institutions. The Chinese government also said in 2021 that it wants to support biotech to boost food security while also preventing infringement of intellectual property. It aims to bolster the country’s innovation capacity in agricultural science and technology and help minimise the country’s dependence on major agricultural exporters — particularly the US. All this is part of a planned regulatory overhaul for the Chinese seed industry, details of which were published in November 2021 by the Ministry of Agriculture and Rural Affairs in a draft document. The move is in line with a fiveyear development guideline of the Chinese Academy of Agricultural Sciences (CAAS). “It’s a big step,” Liu Shi, Vice President of Beijing Dabeinong Technology Group Co Ltd, told Reuters in November 2021. According to Reuters, Dabeinong has several GM traits approved as safe and is expected to be one of the first firms to commercialise GM corn in China. Insight in January from Gro Intelligence, an agricultural data platform, said that as a result of this changing regulatory environment, GM corn could be planted in China “as early as 2023”.

it has lagged behind other nations in adopting new crops,” claims the Alliance for Science, an independent non-profit research institute affiliated with Cornell University. “GM corn and rice varieties were granted biosafety certificates over a decade ago, but never achieved commercialization, partly due to consumer opposition. Cotton is the only GM crop that is widely grown.” The country does allow GM crops to be imported for use in animal feed. Moreover, it has also been alleged that GM crops are indeed being grown in China in secret; the Alliance for Science said in 2017 that it was an “open secret that huge areas” within China were being cultivated with rice and corn which had been modified for insect resistance, and a recent Nikkei Asia article referenced “foreign nongovernmental organisations and media outlets” which had made similar claims. It is understood there is strong resistance from consumers against GM products, in part due to lack of knowledge

and understanding of GM technologies and to anti-GMO campaigns seeking to influence public sentiment, often propagated through social media. Beyond the historically less-thansupportive regulatory environment and the consumer resistance, there may be yet another obstacle to widespread commercialisation; Nikkei Asia also mentions the decline of the profit margin seen in China’s seed industry for the past few years. Contributing to this trend are small and mid-sized players which slightly modify existing seed varieties and sell them as their own.

IMPACTS OF THE CHANGE China could plant up to 33 million hectares with GM corn, estimates securities brokerage consulting firm Hua’an Securities in a November 2021 note cited by Reuters. The new GM regulations are anticipated to be approved in time for domestic seed companies to ramp up their breeding and seed production activities in

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FEED RAW MATERIALS time for the 2023 growing season. Hua’an Securities estimates this could generate up to 5 billion yuan in income, while also creating strong market leaders and driving rapid consolidation in the industry. The emergence of companies like Dabeinong Technology or others like Shandong Denghai Seed and ChemChina’s Syngenta business, one of the world’s biggest seed companies, come to mind. China is, of course, the world’s largest importer of feed ingredients such as soybeans. The overhaul of GM regulations is part of a push to help increase domestic production and move in the direction of greater food security; a plan late last year by the Ministry of Agriculture and Rural Affairs (MARA), which the South China Morning Post characterised as “ambitious”, calls for soybean production to reach 23 million tonnes by 2025, an increase of 6.6 million tonnes compared to domestic production in 2021. However, this amounts to a mere fraction of the more than 100 million tonnes of soybeans the country imports annually. Still, even if the impacts on global trade

flows are not dramatic, these steps offer the potential for incremental progress, particularly in terms of the environmental impact of crop production. Again in the words of the Alliance for Science, “[China’s] expanded adoption of GM crops is… likely to significantly slash the global use of pesticides.” Moreover, GM herbicidetolerant traits are also seen to contribute to lowering greenhouse gas emissions (GHGs) due to reduced fuel use and tillage and increased soil carbon sequestration.

GENE-EDITED VERSUS GM It is also worth noting the impact that the recent regulatory changes have had on gene-edited crops. As opposed to genetically modified organisms, which have had “entire genes or DNA sequences from other plant or animal species” inserted into their genomes, gene-edited crops have merely undergone “small tweaks” using technologies such as CRISPR-Cas9, explains an article in Nature. For example, the new rules have loosened the requirements for field trials for gene-edited crops. According to

agribusiness research and analysis by IHS Markit, this means that for gene-edited crops, “a production certificate could be applied after the pilot trials, which will reduce the approval timeline from 5-6 years to 1-2 years.” Still, in this category at least, the rule changes are not all pushing in the direction of a more permissive regime. IHS Markit characterises as “unexpected” the Chinese government’s decision to put gene-edited products as a subcategory of GM products, something it says “shows the Chinese government’s intentions to keep a check on the trade/import of such products through the added requirement for biosafety certificate.” Nevertheless, Nature claims that “China’s new rules are more conservative than those in the United States — which does not regulate gene-edited crops that incorporate small changes similar to those that could occur naturally — but are more lenient than the tough European Union stance of treating all gene-edited crops as genetically modified (GM) organisms.” By Simon Duke, editor-in-chief

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SUMMER 2022 | 33

VIEW FROM EUROPE

Dutch animal feed sector experiences consolidation as prices soar and volumes contract

n recent months the Dutch animal feed sector has witnessed deals including ABZ De Samenwerking’s purchase of Bosgoed Diervoeders, De Heus’ acquisition of Feijen Diervoeders, and Fransen Gerrits’ investment in Theeuwes Mengvoeders, among others. The pace of these announcements suggests that compound feed companies in the Netherlands are continuing to seek tie-ups in order to increase their resiliency in a market constrained by high raw material prices and other challenges. At VIV Europe in Utrecht from May 31-June 2, Feedinfo was able to discuss the trend in more detail with Dutch feed compounders and Netherlands-based animal nutrition firms. All were in agreement that despite the Dutch feed sector being already highly consolidated, there is still scope for the trend to continue. Additionally, what may look like a Dutch trend today will likely repeat itself in neighbouring north-western European countries. Firstly, it is understood that the decline seen in Dutch livestock numbers and in the number of farms will continue. As a result, demand for compound feed is declining too. “The margins are thin, and we see that reflected in the financial statements of the compound feed producers,” said Richard Maatman, Managing Director Europe, Central-Asia & Middle East for Trouw Nutrition. “Our industry isn’t unlike any others; when there is overcapacity, there is a need for consolidation.”

Bert van Bremen, the owner of Culemborg-based feed ingredient supplier EFS-Holland, added: “There are significantly less Dutch feed players than when EFS-Holland started operating nearly 30 years ago … Our customers [feed mills] are losing volumes due to the decrease in animal numbers. We estimate that approximately 14 million tonnes of feed were produced in the Netherlands in 2020. This year, it could be more like 11 million tonnes.” “The number of farmers will drop. As a company, you have to get bigger in a context of market consolidation. We want to be bigger to be more relevant for our customers. We want to be part of the party in the years to come. We want to be part of the overall discussions with the large slaughterhouses and dairy companies. You also need to be a certain size in order to truly innovate in data and logistics,” said Huub Fransen, owner of Fransen Gerrits who completed the acquisition of Theeuwes Mengvoeders, a feed producer based in Ulicoten, North Brabant. After acquiring Theeuwes Mengvoeders, the company now has a footprint of five factories (four in south Netherlands, one in Belgium). Pieter Wolleswinkel, COO and Head of ForFarmers Netherlands, pointed out that, historically-speaking, consolidation often takes place in periods of crisis. “More recently, the drop in livestock numbers and in broiler prices have been conducive to consolidation in the Dutch feed sector,” he said. “We still see room for consolidation in the Netherlands in the coming 3-5 years.” “In times of stress, the only thing to do is enter partnerships and acquisitions. In cases where the small feed companies in the Netherlands aren’t necessarily cooperating, the big feed powerhouses like De Heus come in. We also see private equity coming in too, investing in feed additive companies and feed compounders,” also said Tim Lemeer, Vice President of Animal Nutrition at Barentz.

Photo: AgriBriefing

OPERATIONAL FLEXIBILITY

34 | SUMMER 2022

In periods of stress, it is also critical to be as flexible as possible with operational footprint. “It will be important for feed compounders to intensify their collaborations to optimise costs,” said Wolleswinkel. “At ForFarmers, we aim to have the right footprint, be at the

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VIEW FROM EUROPE best cost position and have operational flexibility if the markets go NOT JUST THE NETHERLANDS down. Our decision to close our feed mill in Ingelmunster, Belgium Botter and the other Dutch company executives think the and transfer volumes to a refurbished feed mill in Izegem at the consolidation trend not only applies to the Netherlands, but to the end of 2022 are in line with our operational efficiency plans and whole of Europe, north-western European countries especially. 2025 strategy. This decision was also based on the expectation Fransen said: “We see fewer and bigger farmers especially that pig numbers in Belgium in the Netherlands, but other are dropping.” countries like Belgium and “For Trouw Nutrition, at Germany will follow.” “The feed market will become smaller in European level, we have the His comments were echoed right capacity right now with by Maatman: “Consolidation the Netherlands in the coming years, and 13 production sites, and we may be more noticeable in the everybody is preparing for the future...” can add extra capacity at these Netherlands right now, but you same plants if need be. There can expect a similar trend in HENK BOTTER, DENKAVIT may also be a market shift Germany, France, the UK and in demand from western to other countries.” eastern Europe, but we will use Wolleswinkel added: “We our current facilities for that shift if it happens,” added Maatman. foresee that the consolidation drive will continue in all north“The feed market will become smaller in the Netherlands in western European countries in which we are present.” the coming years, and everybody is preparing for the future,” Lemeer went on to explain: “People are looking for opportunities also highlighted Henk Botter, Commercial Director at Denkavit, mostly in reliable markets like animal nutrition. This is also true whose company recently integrated Nutrifeed, an animal nutrition in markets such as Germany, the UK, even Spain, which may be business acquired from FrieslandCampina last summer. According a bit behind the Netherlands in this regard. These are resilient to Botter, the integration itself went “very well”. countries and where the big feed markets are located as well.” “Denkavit is benefitting from the fact that it now has access to the raw materials coming out of the FrieslandCampina factories, By Simon Duke, editor-in-chief especially in the times when raw material supply is tight,” he commented.

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FEED PHOSPHATES MARKET

War exposes importance of Russian feed phosphates exports

In that time, Russia has become an essential player on the supply side of the international feed phosphates market. It came to dominate a business that was previously in the hands of Western suppliers such as Tessenderlo in Europe or Mosaic in the US. Russian producers emerged on the international scene, with EuroChem on the one hand and PhosAgro on the other hand. Both companies experienced tremendous growth in production and sales. The numbers speak for themselves: the graph on the right shows the growth in exports of monocalcium phosphate (MCP) and defluorinated phosphate (DFP) from EuroChem Lifosa (MCP), PhosAgro Balakovo (MCP), and EuroChem Phosphorit (DFP). The trade statistics do not distinguish MCP from DFP. Volumes have increased by a factor of four over the last 20 years, from 150,000 tonnes/year to 600,000 tonnes/year. Both companies consolidated their assets from Former Soviet Union (FSU) state-owned companies and made significant investments to increase production capacities. If we take a closer look at the trade patterns, we can see that a large share of the volumes was exported through Estonia and Finland. Neither of these countries can consume such large volumes given their population size and feed industry. Both companies first developed sales to the FSU and northwest Europe before expanding sales to North America and Latin America. Germany was, until recently, the primary destination for Russian producers.

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600 k

1,2 k

$1 017 500 k

$828 400 k

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$635 $577

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$497

$588

$606

$631

$573

$473

$596

600

Price $/t

THE RISE OF EUROCHEM AND PHOSAGRO

Exports of MCP & DFP 2002 to 2021 : Russian producers

Volume in tonnes

eed phosphate supply was already tight globally at the beginning of the year, and the Russia-Ukraine war has further complicated the situation. To understand the consequences of the war for Russian phosphate producers, we must first look back over the last 20 years.

$461 $414

$374

200 k

$297

100 k

$188

2002

$216

400

$300

$218 200

2003

Price $/t

2004

2005

2006

2007

2008

2009

2010

2011

Volume in tonnes

2012

2013

2014

2015

2016

2017

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2019

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2021

Note: The above numbers are Praxed calculations based on interviews, EuroStat and ITC data

EuroChem and PhosAgro sales developed at the expense of western producers who once dominated the market, namely Aliphos and Yara. Gradually, buyers switched to MCP from Russia and Lithuania thanks to an aggressive pricing strategy. The main destinations are in Europe, from Ukraine to Spain. Both producers have gained a significant share of the European MCP market, of up to 60%.

IS IT STILL POSSIBLE TO GET RUSSIAN-ORIGIN MATERIAL? MCP has thus far been exempted from sanctions in the EU. In most cases, sanctions are on individuals rather than businesses. Therefore, shareholders and top management have resigned to avoid compromising their businesses. Another consequence of the degraded relationship between Russia and Europe is that Borealis declined EuroChem’s offer to acquire its nitrogen business in Europe. This deal would have significantly strengthened EuroChem’s presence in western Europe, including its fertilizer production operation in Antwerp. Borealis

operates three world-scale fertilizer production units in France and Austria. Russian producers will be constrained in their activities in western Europe and North America. However, the finalisation of EuroChem’s takeover of a significant fertilizer distributor in Brazil (Herringer) last April shows that Russian producers will keep developing their business outside of these areas in direct competition with the likes of Mosaic and Yara. As of late May, ships are still sailing from and to Russian ports, according to maritime traffic reports. However, several shipping companies, including MSC, Maersk, and CMA, announced they would halt cargo booking with Russia. This has mainly impacted container shipping, with oil tankers still finding their way to Russian ports in the Black Sea and Baltic Sea. It is therefore quite a challenge — if not impossible — to obtain product, as ports used for transshipments in Ukraine (Yuzhny) and the Baltic Sea are now unreachable. As trade statistics show, Russian Continued on page 38

SUMMER 2022 | 37

FEED PHOSPHATES MARKET Exports of MCP & DFP from Russian producers in 2021: main destinations (above 1000 t)

Raccourcis clavier

Volume in tonnes

1 045

102 612,5

Continued from page 37

producers previously transshipped large volumes of MCP and DFP through Estonia (Tallinn), Finland (Kotka), Latvia (Riga), and Lithuania (Klaipeda). These countries have suspended all rail freight to and from Russia. In addition, large volumes of MCP were also delivered by train to Poland and Hungary through Ukraine and Belarus. Without access to rail freight, EuroChem is unable to supply critical raw materials such as phosphate rock, ammonia, and sulphur to its Lifosa plant in Lithuania. Without access to major Baltic ports, Russian suppliers have lost more than 12 million tonnes of loading capacity. Though EuroChem has announced a significant investment to develop the Ust Luga port (6 million tonnes) on the Baltic, it cannot compensate for these losses and will not be operational before 2024. While it is still possible for Russian producers to send Panamax vessels to Brazil or India, finding Handysize vessels (3,000-8,000 tonnes of capacity) for bulk or breakbulk cargo is not an easy task. Most shipowners operating in the Baltic have ceased trading with Russia.

WHO CAN REPLACE RUSSIAN SUPPLIERS? Today, only China has the spare production capacity to substitute for Russia, at least on paper. As a result, state-owned Chinese producers like Sinochem have expanded sales outside Asian markets. But Europe is a long way away, and logistic costs and lead times have limited their capacity to deliver to Europe regularly. Closer alternatives from North Africa are also becoming popular, as long as customers can use DCP or MDCP (monodicalcium

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Conditions d'utilisation

phosphate) rather than MCP. European customers also have to compete with markets such as Brazil or the Middle East. Current market conditions could incentivise a restart of production in Europe. However, this seems unlikely, given developmens such as the recent bankruptcy of Ecophos Group and failure to bring proof of concept for promising technologies that would solve the phosphate industry’s main challenges in terms of environmental impact and sustainability. Many have opted to stop operating phosphoric acid plants in Europe, but a few still do it. The cost of managing waste and by-products from phosphate production was one of the main reasons for Tessenderlo’s decision to halt its DCP production in 2014. Once phosphorus is extracted from the rock, the remaining phosphorus gypsum must be disposed of or recycled. Importing phosphoric acid to produce feed phosphate could be a solution, although no-one took the opportunity to acquire the Aliphos Rotterdam plant two years ago. The most likely reason is that there is little added value in producing phosphates from hardto-source and expensive feed-grade phosphoric acid. Projects to recycle phosphates from waste (fly ash) are emerging but are still in their infancy. Recently, EasyMining has promoted its Ash2Phos process and produced precipitated calcium phosphates from sewage sludge fly ash, with two plants under construction in Sweden and Germany. While this sounds promising, the regulatory framework still needs to evolve to allow such products to enter the market. Today, the best solution might be to review formulation standards on phosphorus and make the best use of existing solutions such as phytase. Agriculture is by nature a conservative industry, but the current crisis may be an accelerator for innovation. By Guillaume Milochau for Feedinfo

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RECRUITMENT UPDATES

INDUSTRY MOVES Jason Klootwyk became the new Chief Executive Officer of South Dakota-based AGTEGRA COOPERATIVE, a farmerowned grain and agronomy cooperative. Bjørn Wallentin will join AKER BIOMARINE as Senior Vice President QRILL Aqua Sales. Meanwhile, Aker BioMarine’s current Director of Sustainability, Ragnhild Dragøy, will take on the newly-created role of Vice President Product Management. Andreas Oebbeke has taken over as head of the Animal Nutrition division at ALZCHEM GROUP. Dr. Mark Connors is taking over as BEC FEED SOLUTIONS General Manager of Premix and Feed Additives for Australia and New Zealand from July 1st, following the retirement of Mark Fitzgerald from the post.

Recent senior job moves within the global animal nutrition industry

Dr. Theresia Lavergne has joined the team of NATURAL BIOLOGICS, A FEED ADDITIVES COMPANY, to serve as technical service lead, identifying product applications at the farm level. FEED ADDITIVES COMPANY NUPROXA announced the arrival of Felipe De Conti Horta as General Manager Europe. Global chemical manufacturer OQ CHEMICALS (formerly Oxea) has appointed Dr. Albrecht Schwerin as the new Chief Operating Officer (COO). SYMBROSIA, a Hawai’i-based startup that uses seaweed to tackle livestock methane emissions, announced the appointment of Avery Kramer as Chief Operating Officer. TECHMIX EUROPE announced the addition of Nikolaus (Niko) Brunner, DVM, to the international team in the role of ruminant health business manager.

Meat company DANISH CROWN A/S has announced that Tim Ørting Jørgensen will take over as new Group Executive Vice President and member of the Executive Board of from August 1st.

Thai Union Group PCL announced it has appointed Bryan Rosenberg to the role of PRESIDENT AND CEO OF THAI UNION NORTH AMERICA, responsible for its two key North America operating companies, Chicken of the Sea International (COSI) and Chicken of the Sea Frozen Foods (COSFF).

Dr. Reinhard Grandke is stepping down as CEO of the DLG (German Agriculture Society) in September. The President and Chair will be proposing that Dr. Lothar Hövelmann and Freya von Czettritz take on new dual management roles after his departure. FORFARMERS has appointed Chris Deen as CEO. He replaces Yoram Knoop who is stepping down. HENDRIX GENETICS announced the appointment of Antoon van den Berg as Chief Executive Officer. He will succeed Jolanda van Haarlem who is leaving the company. ANIMAL NUTRITION FIRM HERBONIS has appointed Laurent Peron as Regional Commercial Lead Europe. Michael Sigsfors, has assumed his new position as CFO of LANTMÄNNEN, succeeding Christian Johansson, who is leaving the company. MARS, INCORPORATED appointed Ikdeep Singh as the new Global President for its Pet Nutrition business. Meanwhile, Mars Petcare President Poul Weihrauch is set to become the company’s CEO in September, while Loic Moutault will succeed him as Mars Global Petcare President.

TROUW NUTRITION Asia Pacific announced the appointment of Adam Banaszak to the new role of General Manager, reporting to the Managing Director of Business Unit Asia. Cidinei Miotto has joined the commercial team of Brazilian animal health company VACCINAR in the role of National Business Director for the Additives Line and Poultry Line Algae oil joint venture VERAMARIS will be receiving a new management team in the second half of the year, including Gertjan de Koning as CEO, Holger Kinzel as CFO/COO, Florian Butzmann as new Head of Supply Chain Management and Marion Hax leading Business Performance Management. European meat firm VION announced that Leon Cuypers will become COO Business Unit Pork as of September 1st, succeeding John de Jonge, who is leaving the industry.

ANNOUNCEMENTS AND SERVICES As part of our industry recruitment service, Feedinfo covers recent senior job moves within the animal nutrition world, helping readers keep up to date with new roles, board appointments and business changes. Please send any announcements to recruitment@feedinfo.com

40 | SUMMER 2022

In addition, organisations seeking to recruit technical or senior staff can take advantage of Feedinfo’s recruitment service, which reaches an audience of engaged and highly qualified animal nutrition specialists, managers and executives. For more details, contact our recruitment specialist, Richard O’Donoghue at richard.odonoghue@agribriefing.com

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FEEDINFO SUMMIT

Feedinfo Summit to unpack industry’s most pressing concerns

This year’s Summit will discuss important questions around inflation, supply chain challenges, sustainability, and other high-level concerns.

42 | SUMMER 2022

“By attending the event, you will benefit from the opportunity to discuss with your peers, hear from independent experts on stage, and inform your strategic decision-making over the coming years.”

INFLATION, LOGISTICS, AND OTHER PRESSING CONCERNS Unsurprisingly, inflation is top-of-mind, and as companies across the value chain are searching for ways to cope with it, the Feedinfo Summit seeks to foster dialogue between actors at various levels. “We have a session which is specifically focused on bringing together representatives from integrated farms to talk about the challenges that livestock farming is facing, and we also have a representative there from the European Pig Producers (EPP) to represent smaller farms,” Theocharous observes. “There are a lot of really important questions we need to be talking about here. Are consumers ready for increases in the price of meat and dairy products? What are the consequences of rising costs on farmers, and on the shape of the farming industry going forward? How can we ease pressure on farmers? How do we maintain the progress that has been made on issues like animal welfare and climate-friendly production in such an environment?” Meanwhile, supply chain challenges are expected to be another hot topic at the Summit. “From the increase in prices of transporting goods, higher fuel and energy prices, and even the availability of feed raw materials, there are a lot of logistics challenges at the moment. These are things we are discussing at the Feedinfo Summit, by having independent experts from those sectors come in to actually explain why things are so challenging and what impact we can expect on our sector over the coming months and even years.” Of course, leaders must not only have their eyes on navigating today’s challenges, but also on heading off Photo courtesy of AgriBriefing

pain is among the top three EU producers of pork, poultry meat, and veal. Its 782 feed factories make over 26 million tonnes of feed per year, the most of any European country. Its importance in the continent’s animal nutrition sector makes it a logical spot to host the next global Feedinfo Summit. In late September, senior leaders from companies across the animal nutrition value chain, from feed additives manufacturers and premix producers to compound feed manufacturers and integrated farmers, will gather in a seaside hotel in Barcelona for two days of discussion and analysis of the most critical issues facing the animal nutrition industry. In the words of Olympia Theocharous, Head of Content for Communications and Events at Feedinfo’s parent company Agribriefing, the Feedinfo Summit has been designed from its inception to inform those in managerial and C-suite positions. “We are discussing the issues that leaders want to know about. We didn’t just pluck these ideas from anywhere; we developed the content of this agenda in collaboration with the Feedinfo Leaders Network, a panel of CEOs from a range of companies from across the world, asking them ‘what is keeping you up at night?’

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FEEDINFO SUMMIT

Photo courtesy Hilton Hotels

tomorrow’s. “We’ve got a series of roundtables that are going to be assessing different environmental challenges, followed by a summary panel where all of the roundtable hosts will jump on stage and tell us a little bit about what was discussed and what we, as an industry, must do to address this issue,” Theocharous explains. Moreover, there remains a lively interest in actively cultivating a positive image for the animal protein sector as consumers increasingly have other options. “By bringing WHAT THE INDUSTRY IS SAYING in some independent voices and industry experts to sit “The organization was excellent, the audience from the appropriate field on a panel on this subject, and the talks and presentations were educational and informative. This I think we’re going to get some is what makes the Feedinfo Summit such an excellent event.” interesting ideas.” Finally, because bringing in “With its diverse program, top speakers and great networking an infusion of new and different opportunities, Eastman is very pleased to sponsor the Feedinfo Summit We look forward to meeting new faces and sharing industry insights!” perspectives can often serve as a catalyst for innovative “The Feedinfo Summit is an excellent platform for suppliers and the thinking, the Summit has made feed industry to meet, exchange ideas and discuss new developments. it a priority to incorporate We can pick up on market trends and learn about other perspectives. speakers from outside the For BASF Animal Nutrition, this is an opportunity to position ourselves industry. “We have the former in the market, expressing our approach and benefits: The science of marketing director of EasyJet to sustainable feed that succeeds.” talk to us about how the airline industry has overcome issues like the disruption from COVID, environmental challenges, and PR challenges,” she explains. “So Finally, she says, the team is looking at redesigning the as we face parallel issues in the future, we can learn from his structured networking session, because of the value attendees experience and ensure that we are dealing with these effectively.” place on being able to meet and exchange with potential partners in other parts of the industry. “We know deals are done at our event. We know relationships are formed at our events. We want DIVERSE PROFILES AND MORE INTERACTION you to be able to meet others at the Feedinfo Summit.” Five years on from Feedinfo’s first event for the animal nutrition By Shannon Behary, senior editor industry, Theocharous is able to draw on first-hand experience in designing a successful conference. For example, feedback from last year’s Summit inspired her to add in a second roundtable session, because the format was The Feedinfo Summit will take place at the Hilton such a hit. Diagonal Mar, Barcelona on 26th & 27th September 2022. Also popular were the sessions which had new faces and Featuring high profile speakers such as Adriano Marcon, outside perspectives, something which this year’s event lineup has President of Cargill Animal Nutrition; Fulco van Lede, CEO taken into account. “Our sustainability roundtables are going to of Nutreco; Vignesh Soundararajan, Managing Director of be chaired by academics, representatives from consultancies or Suguna Foods; Soon Bin Neoh, Managing Director of Soon NGOs. That means we can get independent input from someone Soon Group; Martin Kropp, President Animal Nutrition who’s not necessarily working directly with our value chains.” EMEAI of ADM and Jaume Coma, Director of Nutrition of Global representation is also important, she says; while the Vall Companys Group, the agenda contains a series of uncertainty of COVID continued to weigh on long-distance travel C-level interviews and discussions and independent market last year, this year appears more promising. “We’ve got speakers intelligence from our analysts. already coming from India as well as Southeast Asia, and we’ve View the full agenda and register to attend the Feedinfo got attendees coming from South America and Africa. It’s a much Summit here. more global event than in 2021.”

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SUMMER 2022 | 43

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