Hamlet Protein CEO, Erik Visser, discusses the 2023 market outlook for the animal nutrition industry
The global leader in specialty ingredients for young animal nutrition expects the volatility in high feed costs to continue, yet sees opportunities for growth in swine and poultry markets.
“As part of an inflationary environment, we expect that increased cost levels of utilities, fertilisers, transport and labor will contribute to continuous high feeding costs.”
With relatively low agri-commodity stocks, the risk of volatility will remain high in 2023. As the cost of nutrition makes up the bulk of production costs, producers will favor solutions that will help drive efficiencies at their farms.
Price levels of Soybean Meal will primarily be driven by weather, demand for renewable energy and consumption levels in China. “Considering current stock levels and weather forecasts, we expect to see a 5% to 10% cost reduction in 2023 versus the 2022 average,” according to Visser.
European producers and households were severely affected by high utilities costs in 2022. As geo-political tensions continue, no significant drop in price levels is expected any time soon and markets will see continued volatility. “Where we expect some price relief in Q2 and Q3, Q4 will be the big question mark as governments will need to rebuild gas stocks without Russian supply.”
With global demand falling, increased capacity and reduced port congestion, spot rates for ocean freight will continue to decline.
“Even though we may see some relief on container freight costs, logistics in the global supply chain in general will continue to suffer disruptions in 2023 impacting reliability and cost levels,” indicated Visser.
These disruptions will be driven by the energy crisis, labor shortages and demand imbalance.
Avian Influenza and African Swine Fever will continue to impact animal numbers across geographies. The occurrence of these disease patters, and the absence of break through treatments like vaccinations, will bring with it a further focus on farm management and bio-security measurements.
“As a consequence we expect that animal protein as a diet source, like blood plasma and fish meal, will come under pressure.”
Sustainability and animal well fare will be on the agenda of consumers as well as governments. Several countries are considering further taxation on CO2 emissions or actively try to reduce animal population through buy outs of farmers.
Even though this will not slow down the global demand for animal protein, it will have an impact on where production will take place.
The trend to reduce medication in feed, and in particular anti-biotics will continue. Europe banned the pharmacological use of Zinc Oxide mid-2022 and we will see farmers fine-tuning their diet composition in 2023.
“These regulatory trends create opportunities for suppliers of natural solutions like Hamlet Protein,” indicated Visser.
Cost of living pressure will have consumers rethink their diets and may impact the type and amount of animal protein they consume. Typically, that will favor poultry and pork consumption over beef.
As inflation has accelerated the cost of alternative protein sources and plant-based meat substitutes, expect the demand for these products to be down in 2023.
Geographies and species outlook
“Animal protein production trends vary across geographies. In general terms we expect a downward trend in Europe and improved market conditions in South East Asia. On a species level we expect growth in poultry and aquaculture, a slight decline in beef and a somewhat stronger decline in pork.”
“The reduction in pork will be mainly driven by Europe where the decline in pig numbers will continue. On the other hand, we expect China pork demand to increase as Covid restrictions will further ease, generating opportunities for exporting countries,” said Erik Visser.