Rabobank: protein bottleneck to tighten

Increasing demand for meat and protein for animal feed is putting pressure on animal feed supply, according to Rabobank.

Animal feed prices will experience periodic bouts of price volatility for the coming decade, impacting the animal meat market against a backdrop of increasing demand for protein for animal and human food, argues Rabobank analyst Clara Van Elst in a recent report.

The changing share of protein in feed, combined with increasing meat consumption and population growth triggers questions about how the supply of vegetable protein meal for animals can keep up with the rising demand for animal feed.

The strong growth in protein demand over the last decade was reflected in the average price for soybeans, the single largest source of protein, the report says, which more than doubled between 2005 and 2014, at a time where corn and wheat prices increased at a much lower pace, as poor soybean harvests affected supply growth.

“Price rises for other protein meals have also outpaced grains over the past decade, and it appears demand for the meal or protein component has been the main driver,” the report noted.

The report highlights two specific factors that will challenge the ability of animal meal supply: a declining demand outlook for biofuels and the reliance on yield expansion to lift soy production, as forecast by the US Department of Agriculiutre.

Biofuel demand for oil from oilseeds will slow down compared with the previous decade, meaning soymeal supply and prices will have to grow faster than they have in the past in order to compensate, according to Rabobank.

Rabobank predicts that the current trends suggest the vegetable protein meal supply and demand balance will further tighten over the coming decade, “leading to upward pressure on prices, which in turn will trigger a range of responses along the meant production supply chain.”

Global vegetable meal consumption will rise by 90 million tonnes, or 37 percent, between 2013 and 2013 and energy crop consumption will rise by 225 million tonnes, or 27 percent, which is less than the 47 percent demand increase seen for protein meals in the past decade. “But given the increased absolute volumes, it still represents a significant addition,” the report says.

The report concludes that the structural growth trend in vegetable protein demand will continue in the next decade. “Food and agribusiness companies that understand the range of possible outcomes and appropriate strategies are going to be better placed for the coming decades.”