Animal Feed Industry

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Sector Study: Animal Feed Industry

CHAPTER

42Sector Study: Animal FeedIndustry

Introduction:l The human population is growing rapidly and so is their demand for con-

sumption of animal products. The rise in the standards of living has necessi-tated that India expands its market in the areas of animal feed and livestockproduction. The increasing commercialization of livestock production andcompulsions to improve productivity in face of intense competition in theliberalized and globalized economy has resulted in massive increase in de-rived demand of animal feed in the country-side.

l Animal feed industry is broadly classified in two main categories viz.1. Cattle feed industry and2. Poultry feed industry.

While the former has not yet developed to any sizeable extent the latter hasexpanded in an organised fashion. Only some sporadic efforts have been made toundertake cattle feed industry on commercial lines and with limited success.However, there is a growing realisation on the part of all concerned to developthis industry so that composite nutritious feed may be made available at reasonableprices to cattle farmers.

Terminologies used for different types of animal feeds:l Concentrate: High value feed materials generally rich in protein and nutri-

ents.l Roughage: Bulky and low value feed stuffs, low in protein but rich in carbo-

hydrates.l Compound feed (Balanced concentrates): Customised feed formulation con-

taining all the feed ingredients in balanced proportion.l Mash: Type of compound feed available in powder form.l Pellet: Type of animal feed available in small cylindrical bullets.

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The Agribusiness Book : Opportunities, Challenges & Business Strategies

l Starter ration (for broilers): Mash or pellet containing high protein and lowenergy.

l Finisher ration (for broilers): Mash or pellet containing low protein andhigh energy.

l Feed supplements/Additives: Generally added with feed for enriching nu-tritional value and improving storage quality.

Reason for low usage of compound feed:

The share of compound cattle feed manufactured by the industry, in relation tothe overall potential, is low in India for the following reasons:l The cattle population is fragmented and spread over large parts of the coun-

try. Farmers’ low level of education and strong traditional beliefs mean thatthere is generally little awareness of compound cattle feed.

l More than 50 percent of the country’s total milk production comes from avery large number of low-yielding cows and buffaloes. A further 25 percentof milk production comes from buffaloes and only the remaining 25 percentof the total is produced by cross-bred and improved cows.

l Industrially manufactured compound cattle feed has proved its value forcross-bred cows and buffaloes but not for low-yielding cattle because oftheir genetic limitations. Home-mixed feed is very frequently used for buf-faloes and low-yielding cattle.

Livestock industry value chain:

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l The livestock value chain describes the full range of activities which are re-quired to bring the product from conception through the different phases ofproduction. This approach encompasses the whole food chain from primaryproduction to final consumption. Stakeholders include farmers, other sup-pliers, animal feed manufacturers, milk and poultry farmers, dairies, slaugh-terhouse operators, food processors, transport operators, distributors, whole-salers, retailers and consumers, as well as governments.

l Value chain of livestock industry represents the key components contribut-ing towards its performance. Feed industry is the cornerstone of the animalprotein value chain. Studying the trends upstream and downstream of thesector will give the animal feed marketers a better insight of the industry.The downstream component such as volatility of the input supply and inputprices has an impact on the feed industry. Similarly the upstream compo-nents including the practices followed in the farming model, changes in theprocessing sectors and the final demand for the livestock products in theform of meat, milk, eggs, wool etc by consumers also has an impact on thefeed industry.

l The buying and selling of cattle is an important livelihood activity acrossrural India. However, dairy farming for most farmers is not profitable whenone imputes the full economic costs including the cost of labour. Althoughthere are over 70 million dairy farmers in India today, they are often unableto turn dairy farming into a profitable activity due to constraints with re-spect to access to markets and good prices, unavailability of inputs such asartificial insemination, quality feed, lack of knowledge in best practices andof customised cattle finance products.

l The first priority to encourage farmers to invest in dairy farming is to helpthem get a good and secure price for their milk. A farmer who can predicthis/ her cash flows and receives a price that depends upon quality has anincentive to increase involvement in dairy farming and to adopt scientificpractices that will improve the quality and quantity of the milk produced.

l Once a market has been established it can be leveraged to its maximum ben-efit by increasing productivity. The major constraint that farmers face hereis in terms of feeding practices. Though farmers have access to low costfodder this is not necessarily an optimal solution since poor nutrition alsoleads to less than optimal milk yields.

l Farmers also need to purchase inputs including fodder and concentratedcattle feed to supplement the diet. In addition, there are costs linked toartificial insemination to ensure that the animal becomes pregnant and con-tinues to produce milk, as well as the ongoing costs of veterinary healthservices.

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Global scenario:l FAO and other institutions suggest that global meat production and con-

sumption will rise from 233 million tonnes (Year 2000) to 300 million tonnes(Year 2020), and milk from 568 to 700 million tonnes over the same period.Egg production will also increase by 30 percent over the same period. Thesepredictions show a massive increase in animal protein demand, needed tosatisfy the growth in the human population, and the increasing affluence ofthe emerging economies.

l However, much of the growth has been taking place in a relatively smallnumber of countries, including some of the most populous ones e.g. China,Brazil, and India. Including these two countries, the per capita meat con-sumption in the developing countries went up from 11 to 23 kg in the 2decades to the mid-1990s. Excluding these two countries, it went up from 11kg to only 15 kg.

Growth in World animal feed industry:l As reported by FAO (Year 2004) around 1,000 million tonnes of animal feed

is produced globally every year, including 600 million tonnes of compoundfeed (FAO 2004). As of 2004, more than 80 percent of this feed was producedby 3,800 feed mills, and 60 percent of the world total was from 10 countries(FAO 2004).

l Competition from the bio-fuel industries for grain is however likely to im-pact upon the feed sector. The growth in demand for livestock productssuggests that there will be a consequent rise in demand for animal feed notonly of cereals but of other feeds and particularly proteins.

l It is possible to make broad calculations based on assumptions concerningthe use of feed for pigs, poultry, dairy cows and other ruminants. The de-mand for animal feed can then be projected after making following assump-tions:1. Broilers convert at 2:1 and have a 70 percent carcass yield;2. Egg production has a 2:1 food conversion ratio;3. Pigs convert at 3:1 and have a 60 percent carcass yield;4. 3 litres of milk is produced per kilogram of cow feed;

l Obviously, these are very simplified assumptions, given the diversity of pro-duction systems. It is impossible to calculate the feed use of other ruminantsand this is done here simply to account for the known additional feeds thatare used. Such a calculation may be more reasonable at predicting the futuretrends, given that growth will be mainly in intensive systems. However, thelimitations must be noted.

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Source: FAOSTATProjected world growth in demand for animal feed(Based on existing feed conversion ratios and carcass yields)

Source: Feed International January 2006

290

370

440

537

590 597 605

575586 591 597 604 612 614

626

200

300

400

500

600

700

1975 1985 1995 1997 1999 2001 2003 2005

World Compound Feed ProductionMillion Tonnes

World compound feed production

Key drivers of animal feed industry:l India has the largest livestock population in the world. The real challenge is

convert the unorganised traditional raw material feed users to compoundanimal feeds and here lies a tremendous growth potential.

l Given that India is the largest producer of milk globally and also the fifthlargest poultry and shrimp producing nation, the opportunity to grow in theanimal feeds market is huge. The present animal feeds capacity looks punywhen compared with the latent market that exists. The demand for feedadditives is related to animal feed production which in turn is dependent onthe steady demand for milk, meat and poultry, this is a welcome statistics.

l One of the key drivers of feed additives is consumer demand for guaran-teed safe foods. This forces the industry to comply with industry standardsand produce quality foods, since animals reared for their meat require supe-

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rior feed with optimum balance of different nutrients. The increased de-mand for naturally reared meat often results in the expansion of livestockproduction, which would, in turn, increase production of intermediate prod-ucts such as animal feed and feed additives. This requirement for meat islikely to improve sale of feed grains and protein meals.

l Although animal population has increased only marginally, the key driverfor growth is the willingness of owners to spend more on the health of theiranimals and the ability of veterinarians to meet that need. The human-cattlebond has a high economic ceiling and the animal feed industry has recog-nised the potential of this market segment.

l The professionalism of poultry industry, growth of organised dairy produc-tion and changing focus of farmers from treating to preventing diseases areother factors driving growth in the animal feed market.

l Increasing interest of the government in the health conditions of animalsdue to the outbreak of bird flu and foot-and-mouth disease has boosteddemand for high-quality ingredients in animal feed. This demand is drivingthe growth of the animal feed additives industry.

l Legislations such as the ban on antibiotic growth promoters (AGPs) in theEuropean Union compel the industry to discover alternative feed ingredi-ents, especially with pork producers increasingly demanding substitutes forgrowth promoters.

l The world meat economy has been characterized by the rapid growth of thepoultry sector (its share in total meat output went from 13 percent to 28percent in the last three decades) and, in more recent years, the buoyancy ofthe meat trade. The growth drivers behind poultry industry in India aregrowing processed chicken market, rising export opportunities, particularlyin the Middle East, better penetration of real good chicken through increasedbrand building efforts and expansion in value-added products.

Meat production in the World: Present & projected

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Although the United States is by far the biggest exporter of poultry meat, it isessential to note the importance of a number of developing and emergingeconomies in this market, most notably Brazil and Thailand. China’s position issomewhat anomalous, being at the top of both imports and exports, suggestingconsiderable reprocessing of poultry meat in that country.

Chicken meat production in the World: Present & projected

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l Global demand for meat has multiplied in recent years, encouraged by grow-ing affluence and nourished by the proliferation of huge, confined animalfeeding operations.

l The world’s total meat supply was 71 million tons in 1961. In 2007, it wasestimated to be 284 million tons. Per capita consumption has more than dou-bled over that period. In the developing world, it rose twice as fast, dou-bling in the last 20 years.

l The FAO data show that livestock production is growing rapidly, which isinterpreted to be the result of the increasing demand for animal products.Since 1960, global meat production has more than trebled, milk productionhas nearly doubled and egg production has increased by nearly four times.This is attributed partly to the rise in population, as well as to the increase inaffluence in many countries.

l A joint IFPRI/FAO/ILRI study suggested that global production and con-sumption of meat will continue to rise from 233 million metric tons (Mt) inthe year 2000 to 300 million Mt in 2020, as will that of milk, from 568 to 700million Mt over the same period. Egg production will also increase furtherby 30%.

l World meat consumption is expected to double again by 2050 resulting in arelentless growth in livestock production. More meat means a correspond-ing increase in demand for feed, especially corn and soy, which some ex-perts say will contribute to higher prices.

l Americans are downing close to 200 pounds of meat, poultry and fish percapita per year (dairy and eggs are separate and hardly insignificant), anincrease of 50 pounds per person from 50 years ago.

Egg production in the World: Present & projected

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Consumption of milk and dairy products has some way to go before it hits limits.As per various projections, there is higher growth in the world milk and dairysector than in the recent past because of the cessation of declines and some recoveryin the transition economies (FAO, 2000). Excluding the transition economies, worlddemand should continue to grow at 1.6 percent per annum as in the past. Chinahas little influence on the dairy sector because consumption has historically beenvery low. However, there are signs, particularly in the cities, of a change in thisculture and an exponential growth in demand, albeit from a very low base.

Overall, it is quite possible to have an optimistic view of the growth of the livestockindustry and its contribution to better human nutrition. But many developingcountries and whole regions, where the need to increase protein consumption isthe greatest, have not been participating in the buoyancy of the world meat sector.In this category are the regions of sub-Saharan Africa (with very low consumptionper capita reflecting the quasi perennial economic stagnation), the Near East andNorth Africa. Here, the rapid progress of the period to the late 1980s (oil boom)was interrupted and subsequently slightly reversed, due in some respects to thecollapse of consumption in Iraq. Similar considerations apply to the developmentsin the per capita consumption of milk and dairy products.

Milk production in the World: Present & projected

Indian animal feed industry:l In India, the term “compound feed” refers to feed that is nutritionally bal-

anced and has been manufactured using the facilities of an analytical labora-tory and under the supervision of nutritionists. There are also a large numberof small-scale feed mixers who produce feed for local consumption. Suchfeed is termed “self-mixed feed” or “home-mixed feed”.

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l The feed manufacturing on a commercial and scientific basis in India startedaround 1965 with the setting up of medium-sized feed plants in northernand western India. Feed was produced mainly to cater to the needs of dairycattle as the poultry sector was not developed to that extent at that time andit was restricted mainly to backyard production, with the desi (or nativebird) kept mainly for the production of eggs. However, the scenario haschanged altogether now, with the growth of poultry industry as well asprogress made by dairy and meat industry.

l The Indian feed industry was worth approximately Rs 45 billion (US$1 bil-lion) as per data of year 2002. The Indian livestock feed industry is quite old;it is still in a very primitive stage, supplying only about 8.33 percent of cattlefeed and 40 percent of poultry feeds for the country (Year 2005). Accordingto the association, the bulk of that feed is being produced in large part byhome and custom mixers. It sees feeding animals with compound feeds as aroute to improve efficient use of the ingredients available.

Market potential of Indian feed industry:l India has a very large population of livestock both of productive and unpro-

ductive animals. India is bestowed with a huge livestock population com-prised of 222 million cattle, 98 million buffaloes, 124 million goats, 61 millionsheep and 489 million poultry (Livestock census 2003).

l The estimates of Indian Livestock Industry Report 2005 of CLFMA (Com-pound Livestock Feed Manufacturers Association) show that the compoundfeed (balanced concentrate) produced by members of CLFMA and non-mem-bers of CLFMA is about 5 MMT. The total estimated requirement of com-pound feed is about 60 MMT.

l According to a study conducted by NIANP (National Institute of AnimalNutrition and Physiology), the availability potential of concentrates likeoilseed cakes, bran, cereal grains for livestock and by-products of pulses likechunnis is about 35.32 MMT. This report clearly indicates the gap betweenrequirement and availability.

l Dairying in India has emerged as an important sub-sector accounting fornearly two-thirds of the total livestock contribution to GDP with an encour-aging growth rate of almost 8-9 per cent. A very large population of dairyanimals is either grazed or stall-fed on dry roughage of uncertain quality.Availability of sufficient feed resources both in quantitative and qualitativeterms is the key factor for the growth and sustenance of the livestock andpoultry sector in India.

l This dairy sector offers a tremendous opportunuty to feed manufacturersand marketing professionals to popularize the concept of using balancedcompound feed. Based on the number of productive dairy animals and thecurrent milk produced by them, the current estimated compound feed re-

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quirement is 45 MMT considering feeding compound feed at 50% of milkproduction. The current estimated demand for poultry industry is about 15MMT.

l Unlike many developed dairying countries where large mechanized farmspredominant, more than 70 million rural families are engaged in milk pro-duction in India. Landless, small and marginal farmers with limited resourcesaccount for 65 percent of the total milk production in the country.

l There has been a large increase in egg production which is expected to con-tinue. Although not an exporter, India, with its very low poultry meat andegg consumption per capita but a population rivalling that of China, canbecome a potential centre of growth for poultry.

l The poultry sector in India is one of the fastest growing sectors in the coun-try. India is the fourth largest producer of eggs and eighth largest producerof broilers in the world. India’s broiler industry is not well organized in theNorth, but in the South, the producers have come together to form inte-grated operations. In the egg production industry, thirty per cent is still inthe hands of small producers. It is suggested that the Indian poultry sectorhas the potential to grow at 20 percent per annum over the next 10 years.

l This confidence arises from the fact that even developing neighbours, suchas Pakistan, China and Thailand have annual per capita poultry consumptionlevels of 2.3, and 9 kg respectively, compared with India at less than 1 kg. Adeveloped country like the United States has an annual consumption of 44kg per head. A similar situation exists for the egg industry. With the adventof fast-food chains and growing dependence on convenience foods, the proc-essed foods sector, and particularly that of poultry, is expected to have agrowth rate in double figures.

Dairy cattle:l Worldwide, India is number one in milk production, producing about 100

million tonnes per annum, and the dairy industry is spread across the wholecountry. India has one of the largest populations of cattle and buffalo in theworld. There are 14 million cross-bred cows, 20 million good milch cows oflocal varieties and 40 million buffaloes of good milch varieties. The remain-der of the cattle population is of a non-descript variety and a sizeable pro-portion consists of bullocks.

l The cross-bred population is either Jersey or Holstein-Friesian, crossed withlocal cows. Cross-breeding was a natural solution to upgrading the milkyield in the absence of high-value imported varieties of pure-bred animals.The buffalo breeds are unique to India and produce milk with a fat contentof 7 to 8 percent.

l Farms are located on the outskirts of cities and within cities. Almost all vil-lages have a number of cattle, but there are only a few organized dairy

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farms. In India, dairy is not so much an industry as a smallholder farmingactivity.

l Growth in the milk sector has occurred mainly through cooperative efforts.Cooperatives started by supplying milk collection centres, where milk wascollected from villagers in quantities as small as 1 litre, and gradually startedto provide other services to farmers, including education, artificial insemi-nation, veterinary health support and feeding. The small farmers becameprosperous, loan facilities were made available through banks, and memberfarmers started to share the profits from cooperatives. Lots of cooperativeshave also set up their own modern computerized feed plants. They havemodern milk processing plants from which they produce and market pas-teurized milk, butter, butter oil, chocolate, ice-cream and milk sweets, whichare very popular with Indian consumers. The feed production from coop-eratives is about 1.5 million tonnes per year (Year 2002).

l The dairy industry in India is expected to grow, but growth will be re-stricted to individual small farmers. It is unlikely that India will see theadvent of large, organized dairy farming in the near future.

Poultry:l India has 150 million layers and 650 million broilers. Annual per capita con-

sumption of eggs is 40, and that of broiler meat is 1 kg (Year 2006). India isthe world’s fifth largest egg producer, with a total production of 40 billioneggs per year. The broiler industry is growing at the rate of 10 percent perannum. Although these figures are low in comparison with those for devel-oped countries, the industry has great potential to expand because 30 per-cent of the country’s population (about 300 million people) are developingeconomically and the demand for poultry products is therefore likely togrow.

l Compared with the rest of the livestock sector, the poultry industry in Indiais more scientific, better organized and continuously progressing towardsmodernization. Breeding and feeding management has improved througheducation, training, competition, expansion and survival instincts.

l In poultry, the States of Karnataka, Kerala, Andhra Pradesh, Tamil Naduand the western region of Maharashtra, account for more than 56 percent oftotal national egg production and similarly 60 percent of the broilers. TamilNadus’ Coimbatore region alone accounted for more than 30 percent of thetotal broiler production in 2000. Poultry farming is hampered in northernregions because of cold conditions during certain periods of the year, al-though Punjab contributes significantly at around 6% of the total egg pro-duction in the country.

l The poultry industry has witnessed several ups and downs in the last 25years as a result of unplanned growth and lack of government regulations.

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Currently, it is growing at the rate of 10 percent in broilers and 6 to 7 per-cent in layers and is going through a phase of integration in broilers which islikely to change the face of the industry.

l Although this integration phenomenon is new, it is expected that there willbe very rapid changes towards integration as more farmers find it increas-ingly difficult to run farms with marginal profits or negative margins. Thepoultry industry is very modern, with pure-line breeding, the latest vaccinesand medicines, environmentally controlled poultry houses, up-to-dateprocessing units, the latest management practices, chicken processing, ex-ports of hatching eggs and excellent feed quality.

l Poultry is traditionally fed on balanced concentrates either mixed on organ-ized farms or manufactured by compound feed millers, except by a smallsection of people who have backyard poultry where the practice of feedingscratch grains or leaving birds to fend for them is usual. With the rapidgrowth of the broiler industry in the last couple of decades, the requirementof feed for commercial broilers has gone up to 5.64 MMT, and that for thebroiler breeders to about 0.65 MMT totalling a broiler feed requirement of6.29 MMT (Year 2004). The feed requirement for the layer population is about7.39 MMT and that for the layer breeders approximately 0.74 MMT, total-ling feed requirements for layer birds of 8.13 MMT (Year 2004). Thus thetotal requirement of feed for poultry sector is estimated to be about 14.34MMT.

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Poultry Feed Usage in MMT (Source: CLFMA)l Export markets are also likely to open up as subsidies on agricultural prod-

ucts are phased out internationally under World Trade Organization (WTO)agreements. By making the quality and cost of eggs and poultry meat com-petitive, the Indian poultry sector is expected to capture a significant shareof the export market currently dominated by the United States, Brazil, Neth-erlands and Thailand. India has already started exporting shell eggs to gulfcountries and egg powder to the European Union (EU) and Japan. India alsoexports large quantities of hatching eggs to Bangladesh, Singapore, Maldives,United Arab Emirates, Saudi Arabia and Oman and specific pathogen freeeggs to the EU for pharmaceutical purposes.

Sheep, goats and camels:l In India, the sheep and goat sector is mostly in the hands of nomadic tribes.

There has been little implementation of scientific husbandry, rearing andmanagement practices. The feed given is very traditional and is mainly lim-ited to grazing in the fields. The market in mutton and chevon is in its nas-cent stage; however, there has been a good demand for wool. Compared toother sectors there is massive need of extension services for technology dis-semination in this area of animal husbandry.

l Most of the country’s camels are located in the desert area of the westernpart of India, in the states of Rajasthan and Gujarat, bordering Pakistan.Camels are reared by individuals who feed them local ingredients. There isa total lack of scientific management practices, genetic studies and scientificfeeding practices in camel rearing and the industry survives mostly on thebasis of local, long-established knowledge of feeding and breeding. Thereis, however, a fairly good disease diagnosis and treatment system, withmodern medicines and vaccines.

Swine:l India is a multilingual, multiracial country whose people hold various reli-

gious beliefs and thus few religions shun pork consumption. Other people

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disapprove of pork consumption, maybe because of the lack of scientificmanagement on swine farms. Swine reared on the streets are very unhy-gienic and buyers are always suspicious about the source of pork, so there isno organized pork industry. Thus the scope of feed industry in terms ofdemand from piggery is not very bright.

Business environment:

The business environment of Indian feed industry is influenced by governmentpolicies and regulations as well as the association called CLFMA (CompoundLivestock Feed Manufacturers Association).

Government:

Both Central and State Governments influences the business in India. There aremany regulations, acts and policies which directly or indirectly influence the feedindustry. In addition there are certain international laws and policies whichinfluence as India has become a member of World Trade Organisation (WTO).Essential Commodities Act and Harmonized System of Nomenclature (HSN) whichdeal with the ingredients of animal feed industry, local sales tax, countervailingduties, export and import related duties directly influence the cost of productionof the industry. Some of the Government interventions have been shown in thefollowing table.

Government interventions in feed and feed ingredient marketing

Regulation Government Level ExamplesCoarse cerealsTrade Licensing Central and state Food Grains Licensing and

Procurement Order, Uttar Pradesh food grains and other Essential Articles, Haryana Food Articles Licensing and Price Control, Punjab Trade Articles

Price control Central and state Support price, Uttar Pradesh Food Grains Act

Transport Central Motor Vehicles Act (Maximum Weight=16.2 t)

Inter-state Trade State Punjab Maize Movement OrderDealer Trade State Punjab Trade Articles (Dealer

trade not to exceed 2.5 t)Storage quantity Central and State Licensing Order, Punjab Trade

Articles (Maximum quantity set by different orders) (Maximum quantity=2.5 t)

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Source: The World Bank Document on the Indian livestock sector review

Compound Livestock Feed Manufacturers Association (CLFMA)

CLFMA was formed in June 1967 as an association of feed manufacturers andassociated industries such as ingredient suppliers, importers, feed additivemanufacturers, consultants, hatcheries and milk cooperatives and feed machinerymanufacturers.

The objectives of CLFMA are:l To promote the concept of nutritionally balanced compound feed;l To promote, assist, organize and coordinate scientific research in the field of

animal nutrition;l To conduct, assign, sponsor or co-sponsor surveys and studies;l To collect, classify and circulate information related to animal feed to its

members and government;l To offer suggestions to government in formulating policies; andl To impart training to livestock farmers, feed mill personnel, veterinarians,

students and others.

CLFMA is gradually becoming a representative of the entire livestock industryand has thus become the main influencer for feed industry.

The Product-Feedstuffs and ingredients used in animal feeds:

Livestock in India is fed with various types of food grains, oil cakes, by-productsand feed supplements and additives. The major ingredients of animal feed are:

Storage licensing State Uttar Pradesh Scheduled Commodities Dealers’ Licensing Order, Punjab Trade Articles

Oil seedsTrade licensing Central/State Essential Commodities Act,

Punjab Trade Articles (if quantity >2.5 t)

Transport State Essential Commodities Act Punjab Trade Articles Haryana Food Articles

Storage quantity Central/State (Class A; City Wholesalers 150 t, retailer 10 t; Class B; City Wholesalers 50 t, retailer 5 t) (Maximum quantity 2.5 t)

Marketing Central/State Agricultural Produce Marketing Act (oilseed manufacturing is restricted to small-scale enterprises)

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l Cereals and grains: Maize, sorghum and bajra (a type of millet) are com-monly used in animal feeds. Wheat and rice are mainly retained for humanconsumption.

l Cakes and meals: Commonly used commodities of this kind are soybean,groundnut, rapeseed, sesame and sunflower meals in poultry feed.

l Others: In cattle feed, in addition to these meals, others such as cottonseedand copra are used as premium ingredients.

By-products as animal feed ingredients: Some by-products are very nutritiousand palatable to cattle, and these products forms the bulk of cattle feed. Theyinclude:l Wheat bran, rice bran and oil-extracted rice bran, tapioca, guar meal, saf-

flower meal, maize gluten and molasses.l A special mention should be made of Indian cattle feed’s unique use of hulls

or shells, popularly known as chunnis in the local language. These shellscome from pulses: horse gram, black gram, mung bean and pigeon pea.

The following by-products are also added to animal feed:l Forest produce babul seed, dhaincha seed, puwad seed, patwa seed, sagaon

seed, san seed, tulsi seed, tamarind seed, babul falli, mesta seed etc.l Food industry Biscuit waste, cocoa-shell powder, cocoa beans, maize dust,

macaroni waste, issapgul chhala etc.l Gum and starch industry guar seeds, guar kurma and chunni, dhaincha kurma,

tapioca milk powder, tapioca spent pulp, maize gluten, maize cake etc.l Fruit and vegetable processing orange peel, spent lemon, orange waste, jamun

seed, potato waste, tomato waste, mango kernel, pineapple waste, mangoseed extraction, coffee waste, extracted tea leaves etc.

l Alcohol industry Barley waste, yeast sludge, grape extractions, penicillinresidue etc.

l Essential oil industry spent residue of pepper, cardamom and ginger, spentajwan seed, spent anthia seed cake etc.

Minerals and vitamins: Cattle feed is necessarily enriched with vitamins A andD3, and trace minerals such as iron, zinc, manganese, copper, cobalt and iodine.Calcium and phosphorus are also included. Poultry feed is enriched with all ofthese and all of the B complex vitamins.

Feed additives and supplements: Feed additives and supplements have played avery important role in enhancing the performance of dairy animals and, evenmore so, poultry. Today they are necessary in any feed formulation and essentialfor the formulation of a balanced diet. The additives and supplements used areantibiotic growth promoters (their usage is not banned in India), prebiotics,probiotics, enzymes, mould inhibitors, toxin binders, anti-coccidial supplements,

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acidifiers, amino acids, by-pass fat, by-pass protein, non-antibiotic growthpromoters, milk boosters, antioxidants, feed flavours and herbal preparations ofIndian origin. A number of these products are imported from developed countries.Feeds of animal origin: Meat-meal, fishmeal, bone-meal and dicalcium phosphateof bone origin are the common raw materials available for animal feeding. It isinteresting to note that, with the exception of some bone-based dicalciumphosphate, the Indian feed industry does not use materials of animal origin indairy cattle feed. This was not out of fear of any zoonotic problems but the resultof deep-rooted beliefs that the cow is sacred and must therefore be vegetarian.Now even the use of bone-based dicalcium phosphate has been banned andmineral-based dicalcium phosphate is used instead. Fishmeal and meat-meal werepopularly used in poultry feed, but the increased production, improved availabilityand better awareness of soybean meal has led to its replacing fishmeal and meat-meal in most poultry rations. It should be mentioned that farmers have facedproduction problems owing to the bacterial contamination of fishmeal and meat-meal. The quality of fishmeal is also very poor.

Animal feed commodity production:

The commercially important feed ingredients used in compound feed are maizeand sorghum in cereals, rice bran and solvent extracted rice bran in by-productsand oilseed meals. The description related to these ingredients is as follows:

Maize and Sorghum:l Maize is one of the most important cereals used in animal feed. The annual

production of maize is about 10.5 million tonnes; about 4 million tonnes ofwhich are used in the starch industry, 4.5 million tonnes in animal feeds and2.5 million tonnes in human consumption and seed production (Year 2001).

l The major crop cultivation is during the Kharif season (June to October),which accounts for 90 percent of the total. The remaining 10 percent is har-vested in the Rabi season (November to February).

l The import of maize used to be restricted. However, since April 2000, im-ports have been approved under open general licence (OGL). There are,however, 15 percent duty and a grain inspection fee to be paid, so there is noprice parity between imported and domestically produced maize.

l Sorghum and bajra are very sturdy varieties of millet that can grow underlimited rainfall conditions and are popularly used in animal feeds. Produc-tion of sorghum has remained static. There is no export of sorghum andbajra (millet).

Rice bran and solvent-extracted rice bran:

Rice bran and solvent-extracted rice bran are by-products. India is one of theworld’s largest producers of rice, producing approximately 100 million tonnes.India also produces approximately 2.95 million tonnes of solvent-extracted ricebran, which is regularly exported (Year 2001).

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Oilseed meals:l India produces soybean, groundnut, rapeseed, sunflower, sesame and cot-

ton meals and these are used as major ingredients in animal feeds. For ani-mal feeds, soybean is the most frequently used oilseed meal and has com-pletely replaced fishmeal in poultry feeds.

l Cottonseed cake and meal are often used in cattle feed throughout the coun-try. Groundnut meal is less popular because of the aflatoxin problem.Rapeseed meal is second to soybean meal in production and second tocottonseed cake and meal for cattle feed. Sunflower meal is commonly usedin both cattle and poultry feed.

l India regularly imports edible oil and they have created problems for thecountry’s crushers. Although India has about 600 solvent extraction units,they run at only 50 percent of their capacity. India’s economy is agro-basedbut the yield per hectare is a cause of major concern to the country’s farmersand agriculture. The government recognizes this and there are subsidies onfertilizers and power tariffs. The government also assures base prices formany agro-based commodities.

Formulations of Animal feed:l Compound feed manufacturers produce both finished compound feeds (suit-

able for consumption by an animal without further processing) and proteinconcentrates, which are mixed and diluted with cereals on the farm beforethey are eaten by animals.

l Manufacturers produce compound feeds to meet specific nutritional require-ments. On the basis of energy, protein, fibre, vitamins requirements of dif-ferent animals, the compound feed manufacturers mix different ingredientsavailable to fulfil the requisite make-up of balanced feed. This is done withhelp of linear programming to optimise cost, whilst ensuring that the speci-fications of the diet are in accordance with specific requirement.

Cereals/Substitutes, 40%

Cereal By-products, 35%

Oilseed Meals, 10%

Meat-bone Meal/Fish Meal, 5%

Oil/Fat, 4%Molasses, 4% Minerals &

Vitamins, 2%

Typical compound ration for cattle

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Corn, 65%

Soyabean Meal, 25%

Micro-nutrients, 3%

Animal By-products, 5%

Feed Phosphates, 2

%

Typical compound ration for poultry

Feed standards and specifications:

For cattle and poultry, nutritional standards have been prepared with respect tothe genotype, environment, and quality of available raw materials, maintenancemethods, production and reproduction requirements, production capacity andphase of production. The Bureau of Indian Standards (BIS) is a central governmentorganization that facilitates discussion between scientists and industry andprepares guidelines and specifications.

BIS standards: Dairy feed requirements

BIS standards Poultry feed requirements BIS standardsMoisture (maximum %) 11 11Crude protein (maximum %) 22 20Crude fat (minimum %) 3 2.5Crude fibre (maximum %) 7 12Acid-insoluble ash (maximum %) 3 4

Source: BIS. Dairy feeds - specifications, fourth revision.

BIS standards: Poultry feed requirements

Characteristic Broiler starter feed

Broiler finisher

feed

Chick feed

Growing chicken

feed

Laying chicken

feed

Breeder layer feed

Moisture (maximum %) 11 11 11 11 11 11Crude protein (N x 6.25) (maximum %)

23 20 20 16 18 18

Crude fibre (maximum %) 6 6 7 8 8 8Acid-insoluble ash (maximum %)

3.0 3.0 4.0 4.0 4.0 4.0

Salt (as NaCl) (maximum %) 0.6 0.6 0.6 0.6 0.6 0.6Source: BIS. Poultry feeds - specifications, fourth revision.

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CLFMA specifications for compound feeds: Dairy cattle and buffaloes

Characteristic Dairy special feed

Type I feed

Type II feed

Type III feed

Moisture (maximum %) 12.0 12.0 12.0 12.0Crude protein (on dm basis) (minimum %)

22.0 20.0 18.0 16.0

Un-degraded protein (minimum %) 8.0 -- -- --Crude fat (minimum %) 3.0 2.5 2.5 2.0Crude fibre (maximum %) 7.0 7.0 12.0 14.0Acid-insoluble ash (maximum %) 3.5 4.0 4.5 5.0

Source: CLFMA Standards for Compound Animal Feeds.

CLFMA specifications for compound feeds: Poultry

Characteristic Chick feed

Grower feed

Layer feed,

I

Layer feed

II

Broiler starter feed

Broiler finisher

feed

Breeder chick

feed

Breeder grower

feed

Broiler breeder feed

Layer breeder feed

Broiler male

breeder feed

Moisture (maximum %)

12 12 12 12 12 12 12 12 12 12 12

Crude protein (minimum %)

18 14 16 14 20 18 18 14 16 16 14

Fat (maximum %)

2 2 2 2 3 3 3 3 3 3 3

Crude fibre (maximum %)

7 8 8 10 6 5 5 7 7 7 7

Acid-insoluble ash (maximum %)

4 4 4 4 4 4 4 4 4 4 4

Metabolizable energy(minimum cal/kg)

2 600 2 300 2 500 2 300 2 600 2 700 2 600 2 400 2 500 2 500 2 400

Source: CLFMA Standards for Compound Animal Feeds.

The Compound Livestock Feed Manufacturers’ Association (CLFMA) has alsoprepared its own specifications which are as follows:

The specifications of both BIS and CLFMA are only guidelines and their use asstandards is not compulsory. The animal feed business is competitive and feedmanufacturers therefore endeavour to produce feed of the highest possible quality.

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Feeding practices and the use of compound feed:

Cattle feeding practices in India are very traditional. Farmers choose their owningredients and prepare their own formulations, believing that by these meansthey are able to pay more individual attention to their cattle. The productivity ofthe cattle is limited because of their poor genetic make-up, so high-qualitycompound feed (industry feed) may not necessarily generate a significantimprovement in productivity and this has hampered growth of the cattle feedindustry.

Most farmers are reluctant to use compound feed fully, instead they compromiseby using such feed in proportions of 5 to 60 percent, making up the balance withtheir own formulations. It is only in the case of highly productive animals thatcompound feed has been able to show its real potential and the importance oftechnology has been demonstrated.

Poultry feed:l Poultry feed is divided into layer and broiler feed. In the case of layer feed,

cost is the main constraint in using compound feed. An innovative, high-value compound feed can result in increased numbers of eggs, but the risksare too high because of the birds’ long life cycle.

l Compound feed has, however, made a major contribution to broiler feed-ing. This is an example of excellent coordination among instrument technol-ogy, formulations and use of feed additives and supplements. Cost is a lessimportant factor because the performance improvements are greater thanthe cost increases and the birds’ life cycle is short.

l Two types of poultry feed are prepared. The first one is ready-made and isin the form of mash or pellets. The second is in concentrated form for mixingwith an energy source. Concentrates are protein sources, balanced in aminoacids and containing vitamins, minerals and feed additives. They are mixedwith energy sources such as maize, sorghum or bajra to prepare poultryrations.

Quality management in compound feed:l The Indian feed industry employs the services of qualified nutritionists who

are knowledgeable about the nutrition requirements of cattle, buffaloes, layersand broilers. Members of the industry have their own analytical laborato-ries and either have their own research and development facilities or haveaccess to the research laboratories of agricultural universities or govern-ment institutions.

l Various analyses are regularly carried out, such as tests for amino acids,aflatoxin, ochratoxin, castor, tannins and urease activity. There is a high de-gree of awareness of feed microbiology among the millers of feed. Feed rawmaterials and finished products are subjected to microbial counts, Salmonella

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and Escherichia coli testing and mould count, and contaminated materials arerejected and sometimes destroyed.

l The feed millers have acquired the latest technologies and modern equip-ment such as high-pressure liquid chromatography (HPLC) and near-infra-red (NIR) analysers. All vitamins, minerals and other feed additives areregularly analysed using modern analytical techniques.

l The quality of Indian feed in organised industry can be compared with thatof any Western feed. Today it is common to achieve a chicken house averageof 310 eggs in 52 weeks, in layers, and body weights of 2.0 kg in less than sixweeks, with a feed conversion ratio of between 1.5 and 1.6, in broilers. Dairyfeed can use the genetic potential of Indian cattle at its maximum. The qual-ity of Indian feed is satisfactory and innovation will continue.

R & D :

Research and development in animal feed is of paramount importance to innovateand meet the emerging demand and satisfaction levels of the customers (farmers).Given the importance of feed ingredients, Indian scientists have worked on variousaspects of research and development in the field of animal feeds and feeding.l In the 1960s, all Indian raw materials were analysed for their proximate

composition, metabolizable energy values and deleterious factors.l During the 1970s, the government sanctioned special projects to study the

use of by-products in animal feeds. Various by-products were consideredand their nutritional parameters were studied. Indian scientists analysedingredients for their chemical values and studied their biological values, andthis information was useful to the industry in the initial stages of growth.

l In the 1980s subsequent research was conducted on the energy-protein andenergy-amino acid ratios and the vitamin and mineral requirements of ani-mals.

l During the next phase of research, the main focus was on bypass fat andbypass protein utilization in ruminants, and on the role of various feed addi-tives in enhancing milk, egg and broiler meat production.

l Research and development work has been conducted on least-cost formula-tions and usage of synthetic amino acids.

Major organised players in animal feed industry:

Godrej Agrovet:l Godrej Agrovet Limited is a Rs. 1250 crores (US$ 297 million as per 2008

data) company. The activities of the company are in areas of CompoundAnimal feeds, Agricultural Inputs, Integrated Poultry Business, Oil Palm Plan-tations, Plant Biotech, Retailing of Fresh Farm Produce in urban areas, andrural retailing of a wide range of products including agricultural inputs.

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l Godrej Agrovet is among one of the largest producers of commercial animalfeed in India as it has a rich experience of over 3 decades in the business ofanimal feeds. It has a strong presence in dairy feed; aqua feed and poultryfeed sectors. Its production facilities are spread over 40 locations across thecountry. It has a network of over 10,000 distributors, dealers and C&F agents.

l Godrej Agrovet acquired Goldmohur Foods and Feeds Limited fromHindustan Lever, a Unilever subsidiary in India, in 2001.

l Godrej Agrovet has gone global and has started international operationstoo. It has signed a joint venture with ACI Group of Bangladesh for poultryand feed operations in Bangladesh, and acquired controlling stake in Al-Rahaba, which runs broiler farms in UAE.

Cargill:l Cargill is an international producer and marketer of food, agricultural, fi-

nancial and industrial products and services. Founded in 1865, it is a pri-vately held company employing 160,000 people in 67 countries and had aturnover of $120 billion in 2008.

l Cargill started its operation in India as a joint venture in 1987. Cargill has anumber of businesses in India, with operations including the handling andprocessing of a wide range of products, such as refined oils, grain andoilseeds, sugar, cotton and animal feed. In addition, Cargill develops fla-vour systems and operates a value investing business.

l Cargill Animal Nutrition, a subsidiary in animal feed develops and marketsa broad range of animal feeds and customized animal productivity solutionsto commercial producers in 28 countries across North and South America,Europe and Asia. There are 180 plants worldwide which support the busi-ness unit.

l Animal Nutrition in India serves feed products in these categories: dairy,beef, swine, poultry and aquaculture. Cargill Animal Nutrition started inIndia through a joint venture with a local shrimp feed company located inRajahmundry, Andhra Pradesh in February 2006. This was followed by theopening of a dairy feed business in Rajpura, Punjab in October of the sameyear. By March 2007, the Rajahmundry business became a wholly ownedsubsidiary of Cargill India. Then they launched Purina® line of poultry feeds,which was followed by quick acceptance by broiler farmers in Haryana andPunjab.

Vetcare:l Tetragon Chemie Pvt. Limited is popularly known as Vetcare. It is a 25 year

old company and had a turnover of Rs. 2080 million (42.91 million USD) inthe year 2008. It mainly has presence in the veterinary pharmaceutical indus-try. Vetcare has a wide range of therapeutic and nutritional products forpoultry, large and small animals, aquaculture catering domestic and over-

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seas market. It operates under four main divisions to meet the diverse needsof the veterinary and animal farming community they are Vetcare, Petcare,Aquacare, and Equicare.

l Vetcare employs nearly 450 employees and has 5 plant locations, a ResearchFarm and Kennel. It exports to over 20 countries. Post joining hands withProvimi, one of the giants in Animal Health and Nutrition, Vetcare intro-duced many products in Premix and Dairy specialties. The Provimi Group isactive worldwide in all types of Animal Nutrition and is a leader in all mar-kets where it is present. The Group is actively seeking acquisition opportu-nities to continue its growth in key markets including North America, LatinAmerica, Eastern Europe and Asia. It employs about 8,000 people and hasannual sales of EUR 2.2 billion. Provimi has 87 production centres in some 30countries and exports to over 100 countries. Provimi manufactures productsand supplies technical support for all species, including ruminants, poultry,swine and pets.

Anmol Feeds:l Anmol group of companies is a leading poultry feed manufacturer of India.

It has a turnover of 35 million US dollar in year 2006. The first poultry feedmanufacturing unit was established in the year 1999 at Muzaffarpur, Bihar,with the capacity of 50 MT per day catering the market of Eastern and NorthEastern part of India.

l The company now has 5 plants located in various parts of the country withthe total production of 500MT per day of poultry feed. In the year 2006,Anmol entered the cattle feed segment with brand name of ‘Anmol Super’.

Challenges:

The growth in animal feed industry faces numerous challenges since it is not awell developed and modernized industry except poultry. The biggest challengewhich the industry faces is marketing and supply chain related issues. There areproblems of low awareness among the livestock farmers regarding the importanceof animal feed, supply side related issues such as the shortfall of stock of rawmaterials due to irregular supply of feedstuffs and its ingredients, rising inflation,lack of standardization, regulation of quality and unhealthy competition.

Marketing challenges:1. Small livestock farmers: Smallholder livestock production supports the live-

lihoods of majority of the poor livestock keepers in mixed livestock-cropsystem. Thus majority of farmers have 1-2 cows or buffaloes for dairy farm-ing and very few birds in poultry farming, this results in inability of farmerto follow scientific feeding practices for their animals.

2. Poor management of animals: Livestock are managed unscientifically in-cluding improper nutrition and health care, which results in nullification of

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any quality of compound feed given to them. Since nutrition can only beeffective when all other aspects related to livestock production and manage-ment are taken care well.

3. Traditional feeding practices: Cattle feeding practices are very traditional.Generally farmers prepare their own formulations at home and home-mixedfeed is very frequently used for buffaloes and low-yielding cattle. They be-lieve that by these means they are able to pay more individual attention totheir cattle as well as it is cost-effective. The challenge before the animalfeed marketer is to remove this misconception in the farmer’s mind andeducate him about the advantages of providing compound feed to the live-stock. They must understand how it ensures proper and complete supply ofall the required nutrients in right proportions.

4. Lack of farmer awareness: Farmers’ low level of education coupled withstrong traditional beliefs means that there is generally little awareness ofcompound cattle feed. The lack of awareness is crippling the feed industrysince it poses a great challenge to the industry. Companies are forced tospend disproportionate time, energy and money in concept selling to ensurethat the farmer appreciates the importance of compound feed.

5. Low production potential of livestock: More than 50 percent of the coun-try’s total milk production comes from a very large number of low-yieldingcows and buffaloes. A further 25 percent of milk production comes frombuffaloes and only the remaining 25 percent of the total is produced by cross-bred and improved cows. The productivity of the cattle is limited because oftheir poor genetic make-up, so high-quality compound feed (industry feed)may not necessarily generate a significant improvement in productivity. Thishas hampered growth of the cattle feed industry because most farmers arereluctant to use compound feed fully. Instead they compromise by usingsuch feed in proportions of 5 to 60 percent, making up the balance with theirown formulations. It is only in the case of highly productive animals thatcompound feed has been able to show its real potential and the importanceof technology has been demonstrated.

6. Fragmented livestock population: The cattle population is fragmented andspread over large parts of the country. Since India has a huge geographicexpanse, the relative density of livestock is quite thin. As such, heavy cost isincurred on distribution and logistics. Underdeveloped drivers of feed in-dustry: Majority of Indian population is facing the problems related to pov-erty which results in non-affordability of the livestock products such as dairyproducts and meat. The demand for the livestock products directly impactsthe feed industry.

7. Untapped export potential: India has a lot of opportunities to export com-mercial animal feed because of the strategic location and availability of hu-man resources. Issues related to quality and safety as well as a presence of

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very few private players, the export potential remains untapped in animalfeed industry.

8. Product Innovation: Due to presence of very few big players there has beena lack of research and resultant poor innovation in commercial feed. Gov-ernment though has research centres such as NIANP etc. There is still a lotof gap to be covered in the areas of animal nutrition.

Supply chain challenges:

Supply-chain management has become more important as consumers demandproduct quality and integrity. Hence there needs to be integrated managementfrom farm to retail-shelf and this may have profound implications especially onsmallholder producers. The five things which may affect the supply chain includefood safety, quality, production circumstances, cost price and information.

Supply chain is of paramount importance in feed industry since it captures variousparameters ensuing in availability of the product to the target customers. Itaddresses various problems such as the bulkiness of product and subsequenthigh logistics and warehousing costs thus exploiting the various distribution modesand channels. Some of the key issues are:l Availability of animal feed: Making the feed available to farmers living in

small villages is dependent upon many factors such as proper roads andtransportation available to reach the rural areas, the elements of distributionsystem such as distributors, wholesalers and retailers, the channel supportand accurate forecasting of the demand. Indian villages still face the prob-lem of infrastructural bottlenecks and improper rural connectivity. This prob-lem is further aggravated by smallholder livestock farmers as well as poorquality livestock holding by the farmers.

l Location of the manufacturing plant: The inputs for feed manufacturingplant are not available at one place. Inputs need to be procured from a numberof places both from national as well as international locations. The consump-tion/demand of feed may not support such costs.

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l Bulkiness: Generally lot of backtracking takes place from the inflow of rawmaterial stage to the outflow of the finished goods. Freight costs form any-thing between 15 to 30 per cent of total cost. Compound animal feed is bulkierand this also results in higher transportation costs if the distance betweenthe feed manufacturing plant and the target customer increases. Moreover,unit transportation cost increases if small orders are received from differentlocations due to lack of economies of scale. The feed industry is highly pricesensitive and operates on wafer- thin margins which results in erosion ofprofits.

l Quality and warehousing problem: Animal feed consist considerably highprotein which may result in lower keeping quality or else if the feed is pro-vided to livestock it may result in various diseases and subsequent loss ofconfidence of farmer in company’s product. Thus proper storing of feed isnecessary to prolong the keeping quality of feed.

l Unhealthy competition within industry: Since the feed sector in India hasnumerous small and regional players, there exists a high competition andsubsequent price wars. The firms supplying a high quality compound feedhas to compete with other smaller players producing not so good qualityanimal feed and compromise on the prices. This results in non-attractivenessof the industry for high quality compound feed manufacturers.

l Problems related with classifications of animal feed supplements / addi-tives for import: The classification of feed additives is a major hindrance tothe Indian feed industry. Worldwide, animal feed supplements and addi-tives are covered under chapter 23.09 of the Harmonized System of Nomen-clature (HSN), to which India is a signatory. In the HSN, all feed ingredientsare listed under the “free” category for import, but the Indian Governmentput them into the “restricted” category in October 1995. Since then, therehave been continuous discussions among the drug control authorities, theDirector-General of Foreign Trade and the Central Excise Department, all ofwhich want to bring feed additives under their administration so as to in-crease their own revenues. The industry, represented by CLFMA, has madeseveral representations to the government, but these have been round vari-ous government departments, appellate tribunals, the High Court and theSupreme Court without providing any useful results for the industry.

l Lack of standardization and regulation: Though BIS has produced guide-line feed standards and the feed industry also has its own guidelines, cur-rently there is no compulsion to use BIS standards, but the central govern-ment has been advising states to introduce their own regulatory standards.The industry, however, is resisting this move. Another feed standards issuethat worries both the government and industry is that any changes to exist-ing standards will be slow and difficult to arrive at because of participativeconflicts and various lobbying groups. However, the industry’s principal

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concern about compulsory standards is that they will disturb efforts to inno-vate and upgrade feed production in order to improve the productivity ofthe animals. This is because all innovations would have to be passed by BISand such a process is likely to take several years to complete.

l Problems with the Essential Commodities Act: One of the major reasonsfor opposition from the private players regarding the standardization is thatthe government wants to legislate regulation under the Essential Commodi-ties Act 1955 which is considered draconian and totally inappropriate in thiscontext. There is no shortage of compound animal feeds anywhere in thecountry. In fact, the organized sector of the compound feed industry is fac-ing serious problems resulting from a huge idle capacity, to the extent of 50percent or more. New capacities are being added by global players in thefeed business and by national as well as multinational integrators. The na-ture of animal feeds and the animal feed industry has completely changed.

Increasingly, products, including new products, are being excluded from thepurview of the Essential Commodities Act 1955. Major raw materials for compoundanimal feeds, such as groundnut, soybean, rapeseed and sunflower meals andcottonseed and rice bran extract, which are exported, are not covered by the Act.There is therefore no reason for it to cover the animal feed manufactured withthese raw materials. Furthermore, the industry has several reservations aboutimplementing BIS standards. There is a lack of flexibility in these standards andthey lag far behind the industry’s products. For cattle, they have not been revisedfor 30 years, while the BIS standards for poultry are obsolete.l Improper supply of animal feed ingredients: Expenditure on raw material

comprises of about 80 to 90% of the total cost of production, hence the in-dustry is highly susceptible to movement in prices of raw materials. Avail-ability of sufficient feed resources both in quantitative and qualitative termsis the key factor for the growth and sustenance of the feed industry in thecountry. However, due to various climatic and other factors every yearthere is an erratic supply of the feed ingredients as well as there is very highfluctuation in their prices. Apart from this some feed ingredients such asfeed additives and supplements have to be imported.

l Local Sales Tax: Another threat to the industry is posed by local sales taxes.It must be noted that the feed industry is mainly commodity-oriented and,although it is value-added, it cannot support the burden of any kind of taxa-tion. The industry has made several representations to the government andsome state governments have accepted its point of view and refrained fromlevying any tax on animal feeds.

l Countervailing duty on amino-acids: The essential amino acids, such asDL-methionine, L-lysine and L-threonine, are not manufactured in India.These products are vital ingredients of compound animal feed for improv-ing the quality of the final feed and making it conversion-efficient. With a

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view to bringing about the rapid development of animal husbandry in India,the government reduced the import duty on essential amino acids, so thatthe feed price to livestock farmers would be economic. However, with theimposition of countervailing duty (CVD) and other duties, the objective ofhelping to promote animal husbandry has been defeated.

l Public health & safety: In recent years, livestock output has grown steadilyand at the same time, there has been a major increase in production andtrade of feeding stuffs. It is suggested that much of the increase in livestockproduction in developing countries such as India has been based on importedfeeds. The intensification of livestock production and the increasing trade inraw materials for the feed industry, as well as livestock products, demandsgreater attention to risk management by all countries. Public concern aboutthe safety of foods of animal origin has recently heightened due to problemsthat have arisen with bovine spongiform encephalopathy (BSE), dioxin con-tamination, outbreaks of food borne bacterial infections, as well as growingconcern about veterinary drug residues and microbial resistance to antibiot-ics. These problems have drawn attention to feeding practices within thelivestock industry and have prompted health professionals and the feed in-dustry to closely scrutinise food quality and safety problems that can arisein foods of animal origin as a result of animal feeding systems.

Recommendations for growth of animal feed industry:

Animal feed industry requires a holistic integration of all the factors so as toemerge as one of the most profitable industries in animal husbandry. Since animalproduction involves a number of factors including environment, quality,sustainability, production, productivity and animal welfare thus a renewed visionis required to revitalize the animal feed industry.

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A number of trends may be discerned in the livestock and feed industries. Thereis a continuing rise in the demand for animal products and particularly thosefrom poultry and pigs. There is a concomitant rise in the need for animal feedsand particularly oil cakes and meals. At the same time, there is increased publicconcern about contaminants and health, and demand for safety, regulation andtraceability.The development of government infrastructure and human resources for themanagement of livestock production as well as the improvement in the efficiencyof utilisation of feed resources for livestock production has to be ensured throughproper organisation. There should also be an assurance of the quality and safetyof materials entering the human food chain through livestock feeds. Theworldwide Code of Practice for the production of proteins for the feed industryshould be implemented.Many governments want to upgrade their legislation and its implementation andput in place a system of feed management which will ensure the safety of rawmaterials and compound feeds entering the food chain through animal production.The system could provide feeding standards for livestock and implement thesethrough information and training.The need to apply standards is both in terms of feed safety and feed quality.Improved feeding standards, feed quality and feed information will increaseconfidence in the manufacturing, product quality, marketing and utilisation ofcommercial animal feeds, and will be the basis of a sustainable development forthe livestock sector. This will best be achieved by the adoption and implementationof international standards for testing and manufacture such as those provided bythe Hazard Analysis Critical Control Point (HACCP) System and the InternationalStandards Organization (ISO).The collection of good quality data relating to world and Indian market forcesand the availability of proteins for the feed industry should be addressed.Innovative developments in the feed industry should be sought with a view toproviding alternative sources of proteins and new amino acid technologies.

When the livestock industry is viewed holistically, the issues related to therestructuring of value chain have to be seriously acknowledged. There is tendencyin the industry towards modernisation and more scientific orientation.l The emerging challenges are needed to be given due recognition especially

in input supply sector. There is severe competition within and outside theindustry, rising costs and emergence of various new by-products.

l Feed industry requires niche players and resource optimisation is the needof the hour to overcome competition and have negotiating power to securesupplies from vendors. Feed safety needs to be ensured.

l Modern livestock farms have to scale up and be managed more profession-ally. There should be consolidation in the new farming model concept.

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l Processing industry has to be highly oriented towards public health safety.The value added livestock products are gaining increased importance to con-sumers.

l Sophisticated technologies equipped with modern ICT (Information & Com-munication Technology) need to be adopted in the livestock industry. Inte-gration, both in forward and backward direction is required.

l With “Retail boom” organised retailing in food sector is emerging as a lucra-tive business. There is orientation in consumers towards health conscious-ness and organic meat/egg consumption.

l Traceability in livestock products can be an important issue in internationalmarkets for Indian players.

The future of the Indian feed industry - Winds of change:

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India’s economy is on the fulcrum of an ever-increasing growth curve. With positiveindicators, such as stable 8 to 9 percent annual growth, rising foreign exchangereserves, a booming capital market and rapidly expanding FDI inflows, India hasemerged as the second fastest growing major economy in the world. The domesticIndian and international markets are fast-expanding with a lot of untappedpotential in the areas of animal husbandry sector with multitude of opportunities.

The livestock industry in India is the second largest contributor to gross domesticproduct (GDP), after agriculture, and accounts for 9 percent of the total.Consumption is projected to increase as: per capita milk from 240 to 450 g per year;per capita eggs from 40 to 100 per year; and per capita broiler meat from 1000 to2000 g per year. These will act as the drivers for the dependent animal feedindustry.The dairy industry, which is cooperative-based, is growing with the increasedcapacities of milk processing units. The population of cross-bred cattle and buffaloesis also growing. Milk is very popular in India. The poultry industry is developingtowards vertical integration and a few multinational companies have alreadyentered the Indian poultry business. Although the live bird market currentlyaccounts for about 90 percent of the total market, it is expected that theconsumption of dressed chicken will grow in the next five years, from the existing10 percent to 25 percent or more. This would mean establishing very hygienicand scientific processing units. Cold chains, branded chicken, chicken cuts, etc.will be introduced and, depending on the success and consistent quality, consumerpreference for dressed meat will grow.India has entered into an agreement with its trade partners under the WorldTrade Organization (WTO). The changes brought about by the liberalizationprocess will be slow but certain. Thus India will become a stakeholder and anyglobal factors causing a change in the livestock industry will affect the feed industryas well. The time has come for investment, expansion, growth, and diversification. TheIndian entrepreneur also has its sights fixed on project exports. Intense competitionis the keyword of the present day business environment. Therefore, one needsprofessional expertise to have a cutting edge over competitors. The next decadewill see significant changes in restructuring, mergers, acquisitions, amalgamations,joint ventures, diversification, integration and efficient service chains, e-commerceand use of the latest information technology in global tenders, trading, export/import and other commercial activities. At the root of all these developments willbe the scientific development of feed manufacturing technology.

The Indian feed industry will increasingly use biotechnology, more scientificformulations, new molecules and natural and herbal products to improve animalproductivity. Indian agriculture will also use biotechnology and geneticallymodified organisms (GMOs) to support the feed industry, which is entering avery exciting phase of growth for the next decade.

Animal Feed Industry

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