The Protein Era Challenges and opportunities for traditional and novel protein sources

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1 The Protein Era Challenges and opportunities for traditional and novel protein sources Sara Girardello - LMC International Ltd Feed Protein Vision, Amsterdam 6-7 th March LMC International. All rights reserved.

2 About LMC LMC is the leading economic & business consulting company for global agribusiness Commodities Oils Grains Sugar Sweeteners Starch Ethanol Biodiesel Bio-based Chemicals Coffee Cocoa Rubber Tyres Automotive Expertise Feasibility & due diligence Cost benchmarking Market research Policy impact Sustainability Price forecasts Economic modelling Valuations Market opportunities Services Off-the-shelf Reports Customised consulting Independent We do not produce, trade or broker. LMC s analysis and advice is entirely objective. Oxford New York Kuala Lumpur 2017 LMC International. All rights reserved. The sugar and starch markets in the MENA region 2

3 1. Why is the Protein Era emerging? 2. Demand for high-protein feed ingredients is increasing, but there are questions regarding the outlook for supply 3. New opportunities for meeting protein demand

4 Why is the Protein Era emerging?

5 Calorie disappearance per capita follows income growth Calorie disappearance per person (kcal/day/capita) Calorie disappearance and GDP per capita, ,000 3,500 3,000 2,500 2,000 1, ,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Data source: UN FAO. GDP per capita (Real 2000 US$) Individual dots represent one country, for one year: 5

6 As income grows, the make-up of our diet also changes Share of calorie intake Share of total calories from different sources and GDP per capita, % 80% 70% 60% 50% 40% 30% 20% 10% 0% 1,000 10,000 15,000 20,000 25,000 30,000 35,000 GDP per capita (Real 2000 US$) Vegetal products Dairy products Meat 6

7 Meat production is growing faster for certain species Production (millions tonnes) Share of total meat production Production of meat from cattle, pigs, poultry and aquaculture 120 Production of meat from cattle, pigs, poultry and aquaculture as a share of total meat 50% % 40% 80 35% 30% 60 25% 20% 40 15% 10% 20 5% Aquaculture Bovine Meat Pigmeat Poultry Meat 0% Aquaculture Bovine meat Pigmeat Poultry meat 7

8 Protein requirements vary by species Required protein content (%) Protein requirement of different livestock species and the required volume of protein required between 2015 and % 60 50% 40% 30% 20% 10% Protein feed demand (million tonnes) 0% Broilers Fish Pigs Layers Beef cattle Dairy cattle Protein-adjusted feed demand Protein requirement (%) 0 8

9 Only certain sources of protein will meet the requirements Protein content of major meals, concentrates & isolates Whey protein isolate Soy protein isolate Feather meal Potato protein concentrate Pea protein concentrate Vital wheat gluten Whey protein concentrate 80% Fishmeal Corn gluten meal Soy protein concentrate Poultry by-product meal Meat & bone meal Groundnut meal Soybean meal Cottonseed meal Rapeseed meal Wheat DDG Sunflowerseed meal Whey protein concentrate 35% Maize DDG Dry peas Corn gluten feed Palm kernel meal Wheat bran Rice bran Feed wheat Maize 0% 20% 40% 60% 80% 100% Protein content (% DM) Low Medium High 9

10 Supply of high-protein feed ingredients is limited Million tonnes Consumption of the main protein-containing feed ingredients (average ) 20 Maize > 1 billion MT SBM > 220 million MT 10 0 Maize Soybean meal PAPs Fishmeal CGM SPC VWG SPI 10

11 The outlook for high-protein feed

12 Soybean is the most important source of vegetable protein % DM Soybean meal is the protein feed par excellence and the price benchmark for all other protein feed ingredients. Soy protein concentrate (SPC) and isolate are also attractive soy protein products. However, breeding programmes and expansion in new growing areas in the last 20 years appear to have resulted in a decline in protein content. Protein content of soy products Trends in soybean protein content Soy protein isolate 43% Soy protein isolate 42% Fishmeal Soy protein concentrate 41% 40% Soybean meal 39% Maize 38% 0% 20% 40% 60% 80% 100% Protein content (% DM) 37% US soybean Brazil soybean Argentina soybean 12

13 Fishmeal supply constrained by TACs Fishmeal price, US$/tonne Ratio of fishmeal to soybean meal Fishmeal is one of the world s most important feed ingredients due to its nutritional profile. Fishmeal supply is restricted by Total Allowable Catch (TAC) quotas. Supply of fishmeal has been stagnant vs. strong demand growth, leading to a steadily rising price of fishmeal. Global fishmeal output vs. prices Fishmeal vs. soybean meal prices 2, ,600 1, Production, millions of tonnes Fishmeal price Fishmeal production 7x 5x 3.5x 2.5x Fishmeal:SBM ratio 13

14 PAPs are a reasonable substitute for fishmeal Million tonnes Although lower in protein than fishmeal (with the exception of HFM), they are a replacement for it. Aquafeed is the fastest-growing outlet of PAPs. In the EU, legislation and consumers attitudes towards PAPs have resulted in consumption falling. Demand growth in the region ultimately depends on legislative relaxation, Protein content of PAPs PAP demand by region Soy protein isolate Feather meal 12 Fishmeal Poultry by-product meal Meat & bone meal Maize 0% 20% 40% 60% 80% 100% Protein content (% DM) South America North America Western Europe China South East Asia Other 14

15 Other plant proteins can gain from fishmeal supply issues Corn gluten meal (CGM) is a protein-rich co-product of maize wet milling. It is mainly used in the pig, poultry and aquafeed sector. Vital wheat gluten (VWG) is a high-protein co-product of wheat wet milling. It is increasingly being used in combination with legume proteins as a replacement for fishmeal in aquafeed. Protein content of CGM and VWG Soy protein isolate Vital wheat gluten Fishmeal Output of both CGF and VWG is driven by demand for starch and starch derivative products. Increase in CGM and VWG supply is therefore linked to the trends in this sector. Corn gluten meal Maize 0% 20% 40% 60% 80% 100% Protein content (% DM) 15

16 New opportunities for meeting protein demand

17 As the world gets wealthier, people consume more animal protein in the form of meat and fish. This will create more demand for feed protein. Due to cultural preferences and diverging trends in production costs, the type of animal proteins that we will consume in the future is expected to be different from the past. This will benefit poultry and, to a greater extent, aquaculture. These are very efficient at converting feed into animal protein. The catch is they need higher concentrations of protein. There is a range of high-protein feed ingredients available on the market. However, their supply is constrained by different factors. This tension between demand and supply is opening up opportunities for novel protein sources (insect, algae, single cell, etc). 17

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