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Ten year outlook for animal protein business: Rabobank

Feed prices are here to stay, Brazil's corn potential could grow faster, Russia will soon become self-sufficient with regard to pig and poultry production, China will most likely face large grain imports – and by the way, China also suffers from Foot-and-Mouth Disease these days.

In short, these were some of the key elements of the presentation of David C. Nelson, global strategist, Animal Protein, Grains & Oil Seeds. He spoke at the official opening of VIV Asia 2011, held in Bangkok, Thailand, 9-11 March. His topic was ‘Focus 2021’ – an attempt to look ten years into the future for global agriculture in general and Asian agriculture in particular.
Feed prices will remain high, Nelson said, as yield improvements are decelerating and the challenge remains to service growing markets. One of the countries that could well profit from this growth could be Brazil, he said. The country had, however, increased its total surface of planted crops by a mere 1% in 2010-2011. Input costs, fertiliser prices, land prices and an unfavourable currency were named as reasons why the message to grow more crops in Brazil was not yet taken up.
Nelson also compared Brazil’s Mato Grosso province to the Black Sea region in Ukraine/ Russia. Both have high potential, but are relatively landlocked and badly reachable – hence high transport costs need to be added to relatively low costs of cultivation.
Meat integrators
At the moment, JBS, Tyson and Smithfield top the ranks of largest meat producers in the world. These companies will be challenged, Nelson mentioned. The last couple of years already saw the rise of the Brazilian conglomerates, and the size of Russian (e.g. Cherkizovo) and Chinese (e.g. Zhongpin) integrators is growing rapidly.
Russia’s official policy is to become self-sufficient in protein production, i.e. domestic production will meet domestic demand. Nelson expected Russia to be at 85% in 2015 and at 95% in 2020. “What this means? All meat exporting countries have to find new markets!”
The Chinese market, with approximately 50% of all pigs in the world, may face shortage of corn stocks and will need to import shortly. Official figures may draw a somewhat overly optimistic picture, Nelson said: “China’s corn supplies appear to be desperately low.” He expects strong grain imports in the years to come.
Nelson added that China also may experience an outbreak of Foot-and-Mouth Disease (FMD), just like in the neighbouring Koreas at the moment. He had observed indications that it occurred at various locations throughout the country and added that he could see sow liquidations at a level of -3% for this year. Hence he predicted total pork production for this year to be at the level of 2005-2006. Pork imports for 2011 could grow four-fold to 1.1 – 1.4 million metric tonnes with potentially more imports in the years to come.      
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    Ivan Milin

    The production of protein (meat) is an extremely inefficient process. Only 30% of chicken feed, for instance, is metabolized by chickens and the rest (70%) is excreted. Wasting 70% of valuable resources is bad enough in itself, but that's just part of the problem in the protein production industry. Storing and disposing of manure makes the protein production industry one of the biggest polluters of air, water and soil.
    In my opinion, producing more feed crops is not the best way to meet the growing demand for meat. For every ton of feed we produce, 700 kilograms of heavy pollutants are created as well.
    The best way to meet those demands is to recycle the 70% of waste produced, using methods which do not produce pollution, which are economically viable and which create products that can be used in the same industry.
    University of Guelph, Canada, is in the process of industrializing just such a process and the first prototype will be operational within a month or two. Besides being profitable, this process is an environmentalist's dream come true. It takes only 4 days, uses no chemicals, and produces dry, stable, pleasant-smelling and highly potent organic fertilizer. It also produces protein-rich and high-fat natural feed as well as organic fungicide. There are no byproducts to be disposed of and no pollution is created at all.
    This process is called Milinator Technology and it makes the old phrase meaningless: -If it looks too good to be true, it probably is not-.

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