For the tenth year in a row, the European Union (EU) has recorded an increase in the consumption of animal feed. The term animal feed hereinafter refers to compound feed, premixes etc., and feed for farm animals, excluding feed for dogs and cats.

Animal feed increased by 1,5% in 2019 and amounted to 154 million tons. Consumption grew at an average annual rate of 1,6% from 2007 to 2019. In addition, growth dynamics remained broadly stable with minor fluctuations over the period under review.

IndexBox has just published a new report titled EU – Animal and pet feed – market analysis, forecast, size, trends and insights. Here is a summary of the report’s key findings.

Animal feed market overview

In 2019, the EU animal feed market increased by 0,5% to US$50,2 billion (IndexBox estimates), rising for the third year in a row after three years of decline. This figure reflects the total revenues of manufacturers and importers (excluding logistics costs, retail marketing costs and retailers’ margins, which will be included in the final consumer price).

The level of consumption peaked at US$59,6 billion in 2013. However, from 2014 to 2019, consumption failed to regain momentum. In 2015, the market value decreased significantly due to a drop in raw materials and energy costs against the background of falling world oil prices. Over the past three years, the market value has been growing only slightly despite more pronounced physical growth.

Impact of COVID-19 pandemic

The COVID-19 pandemic has a powerful impact on many markets and the economy. The EU is no exception. Against the background of the introduction of quarantine restrictions, production in entire sectors of the economy has decreased. Furthermore, international transport activity has practically stopped as a result. Consequently, consumer incomes have sharply decreased and consumer behaviour patterns have changed.

However, the livestock sector is less affected by these short-term shocks, as quarantine measures have not led to a sharp reduction in the number of farm animals. Thus, from March to July 2020 the EU saw no sharp drop in the production of animal feed compared to last year.

No pronounced growth has been observed either. Frankly, it was not expected due to the rather stable performance of the livestock sector. Absent prerequisites for a sharp increase in demand for livestock products, whether an increase in the population or their income, also affected growth.

Household consumption patterns

Even though the decline in household income should hamper the growth of demand for meat and dairy products, these products remain a staple in the diet of Europeans. An increase in home consumption can partially offset the decline in demand from the hotel, restaurant and café (HoReCa) sector.

As people began to eat and cook mainly at home during the pandemic, the demand for long-storage products and ready-to-eat meat and dairy products increased. Accordingly, some of the livestock products that were previously supplied to restaurants and cafés could be sent for processing, which supported agricultural producers.

Animal feed market movement amid the pandemic

Since the market for animal feed is predominantly a business-to-business market, no dramatic changes in sales channels are expected against the backdrop of the pandemic. However, with the use of distance communication and electronic document management, online communication is becoming more and more important even in the business-to-business sector.

On the other hand, market growth is hindered by a decline in capital investment amid a downturn in the economy and financial uncertainty. This may delay plans to expand and re-equip livestock farms. Consequently, it may also curb the growth in demand for animal feed. At the same time, government support measures should mitigate these negative effects both for the economy and the agricultural sector.

The main risk to the supply chain is the possible disruption of established international supply chains, including suppliers of ingredients and packaging materials, as well as the distribution chain. Supply chains can be disrupted by asynchronous quarantine measures in different countries, as well as restrictions on international transport. However, the possible influence of these factors is now mitigated by the gradual opening of the economy in Europe. The reopening of the economy should support both market supply and demand.

Amid the pandemic, the market is likely to face pressure on prices as the sharp drop in oil prices will reduce the cost of raw materials and supplies. Moreover, a temporary increase in unemployment in light of the closure of entire economic sectors will entail a decrease in the cost of labour, which will also reduce the cost of production. On the demand side, lower consumer budgets are likely to force producers to curb price increases.

Given the abovementioned assumptions, the EU farm animal feed market is expected to remain roughly at the level of the previous year in 2020. In the medium term, as the economy recovers from the effects of the pandemic, the market is expected to grow gradually at approximately 1% per annum between 2019 and 2030. This will lead to an increase in market size to 173 million tons by the end of 2030.

Spain, Germany and France constitute the largest markets

The countries with the highest volumes of animal feed consumption in 2019 were Spain (25 million tons), Germany (23 million tons) and France (19 million tons) with a combined 44% share of total consumption. These countries were followed by Italy, the United Kingdom (UK), the Netherlands, Poland and Belgium, together accounting for a further 40%.

From 2007 to 2019, the highest average annual growth rates of animal feed consumption among the leading consumer countries were achieved in Poland and Italy (4,5% and 3,5%, respectively). In contrast the consumption in the other countries grew at a more modest pace.

In value terms, the largest animal feed markets in the EU were Germany (US$7,1 billion), Spain (US$7,1 billion) and France (US$6,4 billion), together accounting for 41% of the entire market. The Netherlands, the UK, Italy, Poland and Belgium lagged somewhat behind, together comprising a further 40%.

The countries with the highest levels of animal feed per capita consumption in 2019 were the Netherlands (751kg/person), Belgium (631kg/person) and Spain (539kg/person). –IndexBox AI Platform