In numbers: EU grains and oilseeds set for stunted future demand

EU demand for the three main end products of grains and oil seeds – animal feed, food and biofuels – have limited long-term growth prospects, forecasts an ING report.

This is due to macro drivers such as a levelling-off of the population, reduced demand for animal food products and biofuels demand pressure from alternative fueled vehicles.

The majority of grain products such as wheat, corn and coarse grains in the EU are used for animal feed. The same is true for the three main oilseed crops of rapeseed, sunflower and soybeans.

The Agricultural Outlook data predicts feed demand in the bloc will decline by 0.5 percent per annum by 2030. Within this overall decline, corn is expected to be less severely impacted than wheat, coarse grains and soybeans, which will experience “a more marked decline” in demand, said the Dutch bank’s commodities analysis.

For non-EU feed producers that supply the bloc, a growing need to supply detailed environmental footprint and geolocation data will create a capex need to build out data systems and product tracing capabilities. This could create a “green premium” for locally produced feed as their products are considered more sustainable.

Food will experience a demand shift instead of a demand growth, as the EU is expected to reach peak population in the second half of this decade.

Consumer demand for fresh and more nutritious foods should support areas such as bakery products, organic and gluten-free alternatives of staples such as pasta are expected to continue growing, while use of oilseeds in healthier and more sustainable products represents another demand shift.

ING singles out plant-based foods as a “stand out pocket of growth”, as meat alternatives frequently rely on soy, wheat, and pea protein.

“As a result of the plant-based trend, grain and oilseed companies like ADM, Avril, Cargill, Kerry, Lantmännen and Roquette have all been adding plant-based protein processing capacity and products to their portfolio,” the report says.

“In some cases, the trend has enabled them to upgrade lower value feed applications to higher value products for food use. Besides an increase in the use of major plant-based proteins sources like soy, wheat and yellow pea, we would also expect more research and development into specialized protein sources like sunflower, rapeseed and corn.”

EU alternative fuel passenger cars made up 5.9 percent of total registrations in 2017 and in 2020, that number rose to 24.5 percent. Biodiesel is expected to suffer the most, due to government clean air policies penalizing and declining diesel vehicle sales relative to petrol sales since the 2015 Volkswagen emissions scandal.

Ethanol demand will be better supported, given that petrol vehicle sales are holding up relatively better, along with growth in demand from other end users. This includes industrial use, as well as food and beverages.

Meanwhile, EU regulations are expected to push biofuel producers towards more advanced biofuels, given the concerns over using food crops for energy. The EU wants the biofuel industry to use feedstock which has a low indirect land-use change. This will reduce a key market for several grain and oilseed crops.

“For example, the EU plans to phase out the use of imported palm oil as a feedstock, with it no longer being classed as a green fuel from 2030,” according to ING commodities analysis.

“The focus to increase the share of alternative biofuels means stronger demand for waste products such as used cooking oil, waste food and a few other more sustainable feedstocks. For now, though, the supply of these feedstocks is rather limited.”