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Published July 01, 2015, 08:17 AM

Livestock feed to overtake biofuel in grain demand growth

PARIS - Livestock feed will surpass biofuels as the main source of growth in global grain consumption in the next 10 years as emerging countries consume more animal protein while lower oil prices and policy changes end a decade of high demand for crop-based biofuel, the FAO and OECD said on Wednesday.

By: Staff Report, Reuters

PARIS - Livestock feed will surpass biofuels as the main source of growth in global grain consumption in the next 10 years as emerging countries consume more animal protein while lower oil prices and policy changes end a decade of high demand for crop-based biofuel, the FAO and OECD said on Wednesday.

In their annual Agricultural Outlook report, the United Nations Food and Agriculture Organization and the Organization for Economic Cooperation and Development confirmed a broad trend already projected last year of more moderate food commodity prices due to production gains and less vigorous demand.

Prices of all major agricultural products are set to decrease in real terms over 2015-2024, although they will remain above levels seen before a surge in 2007-2008 that heralded a period of high volatility, the report said.

Within the overall picture of more restrained markets, partly due to tepid economic growth, a dietary shift towards animal protein in emerging countries will help meat and dairy prices outperform crop prices and make livestock feed the main impetus for extra demand in cereals and oilseeds.

"The major changes in demand are in developing countries," the report said. "Rising incomes prompt consumers to diversify their diets by increasing their consumption of animal protein relative to starches."

Animal feed demand would account for 70 percent of growth in world consumption of coarse grains - mainly corn (maize) - in the next 10 years, double its share in the previous decade when it lagged the near 40 percent contribution of biofuels.

Coarse grains would in turn represent more than half of an expected rise of 390 million tonnes to 2.8 billion tonnes in global use of cereals, which are the most consumed category of agricultural product, the report said.

The need for more livestock feed would also spur extra demand for oilseeds, led by soybeans, that yield relatively high-protein meal. This could benefit Brazil in particular, which has land resources to expand its soy production.

Brazil was also tipped to see significant growth in biofuel use, as the government encouraged further ethanol blending, in contrast to a slowing trend in the United States and Europe.

In trade terms, exports would remain dominated by a small group of countries, with South American producers notably expected to help meet protein demand in Asia.

Russia's embargo on food products from Western Europe and North America, imposed last August, had not significantly altered the global outlook, although it had changed some trade flows by generating more South American exports to Russia and shifting some EU and U.S. exports towards Asia, the report said.

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