The rapid transformation of the animal feed ingredients sector : a case study of the South African beef sector

Abstract

Food systems are transforming globally, from the upstream through the midstream to the downstream components. Despite the transformations throughout the food systems, research has focused more on the upstream (farm gate) transformations and paid less attention to the midstream and downstream (off-farm) transformations. These transformations have led to the increased demand for different agricultural commodities, including animal feed. Globally, the demand for animal feed is rising and is expected to keep rising. This is because the appetite for value-added food, including all forms of meat, is growing among the middle-income class population in developing countries. The growing middle-class income households are transitioning from starchy diets to beef and poultry diets, processed foods, vegetables and fruits. Worldwide dietary consumption patterns are changing due to population growth, socio-economic factors, rapid urbanisation, increased disposable income among households, and better food distribution. The change in consumption patterns is also evident in southern Africa, particularly in South Africa, where meat is concerned. Between 2010 and 2017, the per capita consumption of beef in South Africa increased from 17.8 kgs to 21.3 kgs. The increased demand for beef has led to the rise in demand for animal feed in South Africa. Researchers have assessed the evolution of the southern African animal feed industry and trade, but have paid less attention to the transformations occurring along the value chain for the animal feed ingredients trade. Also, research has paid little attention to the transformations occurring within the South African animal feed industry. The transformations along the animal feed ingredient value chain are important for analysis. This is because the transformations along the value chain have motivated on-farm growth through commercialisation and technology change. In this regard, this study analysed the changes that have occurred over the two decades along the southern African animal feed ingredient value chain, with a specific focus on the South African feed sector. The purpose of the study was to quantify the transformations that have occurred along the southern African feed ingredients value chain, and those occurring within the South African animal feed industry. Furthermore, the study aimed to identify the drivers of the flow of feed ingredients towards the South African feed manufacturing sector. The study employed a functional analysis method and Porter’s diamond framework model to achieve this. Quantitative and qualitative data analysis methods were used to analyse the data collected from the firms involved in the industry. The study surveyed 53 firms in the total population of about 100 firms involved in the animal feed industry in South Africa. Of the 53 firms surveyed, 47 firms completed the survey online, and six firms were interviewed via phone call to help map the chain of feed ingredients. Furthermore, 16 firms involved in the supply of feed ingredients in Zambia were surveyed online. Zambia was identified from the literature as the main exporter of feed ingredients in southern Africa. A total of 10 firms in Zambia completed the online survey, and six were interviewed via phone to help map the feed ingredients chain. Zambia has less than 25 firms involved in the animal feed trade on a large scale. The study analysed the trade of five main feed ingredients imported by South Africa. These are maize grain, whole soybean, maize bran, soybean oilcake and sugarcane molasses. Imports of these products by South Africa from other southern African countries between 2010 and 2019 increased by 211%, 302%, 179%, 564% and 7%, respectively. The study also finds that the South African animal feed industry has experienced rapid transformation along the value chain. The number of feed manufacturers has increased by 6%, suppliers of animal feed ingredients increased by 73%, suppliers of feed premixes and feed additives increased by 89%, and the firms offering laboratory services increased by 400%, although their total number is still below ten. Through analysis of the transformations in the animal feed industry, the study has contributed to the value chain management knowledge base on the literature on the southern African animal feed industry by providing a detailed analysis of the South African animal feed industry. With these transformations occurring along the chain, the dissertation concludes by making recommendations to ensure the sustainability of the animal feed value chain. There is a need for the government to increase its support to the industry to boost its competitiveness, both locally and internationally, by facilitating trade policies between nations that promote increased international trade. Since South Africa is driving investments in the region, there is a need for the South African animal feed industry firms to increase their investments in other southern African countries into grain crop market development and contract farming. These investments will directly benefit the local farmers in those countries through increased access to markets. This, in turn, will increase grain crop production, leading to increased availability of animal feed ingredients. The increase in grain crop availability will help to cushion the deficit of feed ingredients in South Africa through the increased movement of feed ingredients to the South African feed manufacturing sector.

Keywords: Animal feed ingredients, international trade, beef, value chain, transformations.