US animal feed industry shows constant four-year growth

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Publish time: 2nd March, 2012      Source: www.cnchemicals.com
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March 2, 2012

   

   

US animal feed industry shows constant four-year growth

   

   

   

Feed price hikes, rising demand from farm stocks wholesalers and firm growth in pet ownership have enhanced the US animal feed output sector income since 2007 at a yearly rate of 3.8%.

   

   

However, according to IBISWorld industry analyst Josh McBee, "the industry''s future prospects are modest, with slow but sustained growth anticipated through the next five years. Advancements in crop technology and alternative energy sources combined with product innovation are projected to alleviate some of the inherent risks associated with commodity-based goods. Also, a forecast increase in disposable incomes and, subsequently, pet ownership will likely drive demand for pet food, a segment typified by high profit margins and brand-loyal consumers. Export growth is also anticipated during the next five years, as the economic rise of countries in the Asian Pacific and Latin America drive demand for meat and animal feed."

   

   

Feed prices, downstream demand for animal products and commodity movements are the key drivers of the industry''s fortunes. Demand for pet foods augments total sales.

   

   

With regard to commodities, corn''s relationship to oil has seen increasing feedprices, but recent spikes in the crop''s value have been to the detriment of feed producers.

   

   

Meanwhile, growth in global meat consumption and, consequently, herd stocks has sustained modest revenue gains as meat producers demand more livestock feed.

   

   

Also, Americans have stood by their pets during the Great Recession, with canine and feline ownership growing even as personal disposable incomes have fallen.

   

   

According to McBee, "the Animal Food Production industry has a medium level of company concentration, with the industry''s top four players expected to account for about 68% of total market share in 2012. The industry has experienced an increasing level of concentration over the past five years as major companies actively invest in new operations to further strengthen scale economies."

   

   

Further, the rapidly growing and high-margin pet-food segment has encouraged many producers to switch their production lines from livestock feed to these products.

   

   

Industry consolidation is expected to continue in the future through sustained merger and acquisition activity, primarily driven by major players such as Cargill, ADM and Mars.

   

   

Given that economies of scale are imperative to maintaining industry profitability, it is very likely there will be fewer animal food manufacturers servicing wider geographic markets over the next five years.