Feeding the globe

bonderic

By Lori Weaver
Drought and floods continue to threaten the world's already-dwindling grain supply as soaring commodity prices further jeopardize global food security. Can the feed industry provide solutions?



The unremitting upward spiral of commodity prices is creating tempestuous conditions for the world's livestock industry and consumers, with the world's poor hit the hardest. As commodity prices go, so goes the price of feed and food. Since 2006, prices of food commodities have risen to an all-time high, a full 60 percent above levels of only two years ago.
Those commodities—grains, meats, seafood and vegetable oils—provide the basis for human diets worldwide. Just looking at the grains category, you find that four grains account for a large percentage of the staple foods consumed globally and overall average food commodity prices in most categories track closely to grain prices. Wheat and rice account for the majority of direct human grain consumption. Corn is consumed by both humans and animals. Soybean oil is the primary source of vegetable oil for human consumption and protein for animal feed.
The inflation of grain prices is significant in food inflation from the perspective of both direct food costs to consumers and input cost for the world's livestock producers.
Factors driving food inflation"I think people are underestimating this effect," says Giovanni Gasperoni, executive vice president, sales and marketing, Novus International, Inc., St. Louis, Missouri, USA. "It may bounce back and create a major feed crisis in the world. We're already seeing riots, especially in poor countries where we're seeing food costs or lack of food. We are seeing problems with customers and customer's customers. People stop eating animal protein. It affects the purchasing power of people. I think we are already seeing the effects with half a million people moving from poverty to extreme poverty. We're setting the clock back by seven years in trying to improve the standard of living. That is one consequence of a food crisis."
He sees several factors at play causing the current crisis. One is that the stock level of corn and soya is very low or non-existent. And the expected exceptional harvest for those crops that was anticipated isn't likely to become reality. Analysts had long predicted that the food crisis would not decrease anytime soon without an exceptional U.S. harvest. With recent flooding that has devastated the major corn-producing region of the U.S., that does not appear to be the case, with latest estimates bringing the crop in at well below normal.
But while floodwaters have dampened hopes for a record-setting U.S. harvest, drought has been the big weather story in other parts of the world. Australia is into its third year of a multiple year drought in a century. Other important grain-producing areas in the world, including southern Europe, the Ukraine and Russia, and Northwest Africa have been dealing with drought. "There is very little buffer zone of what the population demands and what we can produce, so whenever we have a hiccup, it's a major problem for humanity today," notes Gasperoni.
Giovanni Gasperoni, executive vice president, sales and marketing, Novus International, Inc.


Policy is another factor. There are problems with government policies which keep prices at certain levels to protect local farmers. Some countries destroy crops to keep prices higher, particularly with perishable foods. "These policies are not so much an issue when the commodity market is in over supply, but today we are in a different situation."
Population growth is another factor, increasing the demand for food. Gasperoni notes that the economy is doing well outside of the United States, with significant upgrades in personal incomes in India and China where more people are moving from vegetable to protein diets and also increasing individual uptake.
Biofuels are also adding to supply and demand pressures. The U.S. and Brazil account for the majority of the world's ethanol production, with the U.S. utilizing corn and Brazil sugarcane. Corn for ethanol production accounts for 24 percent of total corn disappearance. The European Union is the world's largest biodiesel producer and they utilize rapesee oil. "Due to a mandate that 10 percent of all transportation in the EU must be powered by biodiesel, they cannot meet the demand," explains Gasperoni.
The other part of the fuel story is the impact of crude oil prices which directly correlate to rising food commodity prices. "When you chart the prices of grain and oil prices since 1970, you can clearly see that price spikes for both are aligned," he notes.
He says inefficiencies in how animals are fed have also exasperated the situation, with a great deal of waste involved in transport and storage. "Look at how much wastage we have moving product around. When we have excess, it has no big impact, but when the food chain is tight and you have wastage, that impacts the situation more. So what I call the buffer zone is very tight. Almost a third of commodities moved around globally is lost due to wastage. When there is excess, who caresbut when there is no excess, there is a problem," says Gasperoni.
Feeding inefficienciesWhile moving grain around the globe results in astounding losses due to waste, Gasperoni says there are other inefficiencies in the system that should garner the attention of the feed industry. "Unfortunately, in the non-industrialized animal agriculture countries, people look at the cost of feed and the cost of animal protein, and people are choosing cheap feed, which is causing an inefficient conversion of protein to animal protein," he explains.
Flood conditions in the major grain-producing region of the United States this year left farm fields looking like farm ponds while dashing hopes of a record-setting harvest.


"When corn was at US$2.50/bushel and we were in excess, who cared about feed quality? Now we've got sky rocketing prices for energy and for materials in general, so conserving the feed and the energy of feed is very important. We need to move more to enhancing products. With scarcity of raw materials, we are seeing poor quality ingredients put into the channel. We used to have the luxury to select the best, but now we have to feed all we can. We are sending some of the poorest quality raw materials to some of the poorest countries in the world and so people are being fed much worse quality."
Gasperoni says that Novus is changing to address the problem of poorer quality commodities being used to feed animals by broadening the company's scope so that it better fits the whole food chain. Novus has grown from a focus primarily on methionine for poultry to an entire line of products, including those addressing mycotoxins in corn to additives designed to provide greater efficiencies from feed. He says that in addition to addressing the need to make most efficient use of poorer commodities, it's important to help the environment. Both needs have their start in providing a healthy environment for the animal gut so that animals can perform at their greatest potential.
Gasperoni says products like organic acids and probiotics have been developed to help to regulate and moderate a healthy gut environment so animals can express their fullest genetic potential, making best use of available feed ingredients.
Organic minerals are another product that fits the current global situation well. "Organic minerals will not only help to keep the animal healthy, but also the environment. Again, it goes back not only to best dealing with the inputs you have, but also respecting the environment." He says that with any given mineral, the price has moved up five if not 10 fold because of competition for fertilizers, nutrition and other basic utilization for minerals including the computer industry. So moving toward organic trace minerals reduces that demand while being more readily absorbed by the animal and having less impact on the environment.
"Nutritionists are backed into a corner, and what they do at times is they instinctively lower the cost of formulations by using additives that make the ration as cheap as possible, and that has a devastating effect because it costs them more money. Why? Because the animal grows much more inefficiently. So it has exactly the opposite affect," explains Gasperoni.
He says it is up to the feed industry to make sure that message of feed efficiency is underscored with nutritionists, veterinarians, and other industry people.
"Novus as a company can do a lot of good with continuing education programs in all parts of the world," he says. "Times are tough. The message is we need to work together to see what we can do to make the whole food chain more affordable. Today is a gloomy situation. We need to manage what we can."


Updated: Jul 23, 2008 This article appeared in Feed International, July 2008. ©Copyright 2008, All Rights Reserved.