Most talk in the feed industry is usually on the reliable and settled European markets, the dynamic expansion and possibilities of Asian trades, or of the massive livestock and poultry farms of North America, Russia, and Australia. Hence there is little consideration (and relatively little known) about less dynamic feed markets, such as the Middle East.
Until now…
Because Kaleem Iqbal Quazi, a consultant at Gulf Feed Formulators and Project Managers, and a former CEO of Feeds at IFFCO (an integrated multi food company with a presence in Agribusiness, Oils & Fats, Packaging, Chemicals, Sales and Distribution) is now speaking out. Ahead of his key note speech at the Feed Additives 2018 conference in Amsterdam on Sept 26th to 28th 2018, he gave an interview presenting his insights on the current Middle East feed market trends and his thoughts on the future of feed markets in the Middle East.
In doing so, he exposed the truth, the lies, and the chances available for feed manufacturers, feed traders, and feed additive suppliers to expand in the Middle East.
Middle East Feed: The Lies
Feed producers and suppliersassume that the feed industry in the Middle East operates much like that in Europe, the Far East, or the Americas, but in many ways, they would be wrong.
For beside a challenging climate and a very different culture, the Middle East feed market is made up of a small number of very large producers, and then a great number of much, much smaller independent feed mills and mixers.
As this table of data from WattAgNet shows:
The presence of so many larger players in the sector means that dealers and distributors have a smaller role to play.
As Quazi notes, feed producers and suppliers considering entering the Middle East feed market, “… will most of the time be dealing directly with individual customers as against through your dealer or distributors in other markets. In fact, some of the customers are so big and their requirement so high that it makes sense in dealing directly with them.”
Quazi is also quick to highlight the biggest misconception that feed producers attempting to break into the region have; that feed purchasers in the Middle East are not quality and cost conscious. In fact, he states that, “This is not true anymore. They are both quality and cost conscious and expect a high degree of service. All commitments regarding quality and supply need to be kept. Uninterrupted supplies are of paramount importance in the Middle East because they do not have many alternative sources like in Europe.” Adding that, “Feed buyers from the Middle East appreciate openness and transparent dealings.”
Middle East Feed: The Truth
The fact is, that there are numerous opportunities for the smart feed producer to get a foothold and expand in the Middle East: This is partly due to the climate, which creates problems of freshness, and partly because the region is such a long way from most major animal feed raw material producers. This creates the challenge of storage and long lead times.
Quazi described a common situation experienced by Middle East feed consumers, when he observed how, “Currently a customer has to order, say, at least a container load of material even if his monthly requirement is much lower, as part containers take longer to sail. In order to maintain minimum safety stock level, he has to order at least three months in advance, to cover order confirmation and voyage time from European markets. It means he will always be using 2-3 months older stock and he has to block his capital for this period. Moreover, he will have to store this stuff in an air-conditioned warehouse (because of very high ambient temperature during most of the year) which increases his storage costs.”
These long lead times create other challenges, such as acquiring replacements when deliveries arrive that are found to be sub-standard. It also prevents livestock and poultry farmers from changing formulations quickly, or from mixing in alternative feed additives when a flock or herd is suffering from health issues or adverse weather.
As a result, Quazi is keen to stress that a successful entrant to the Middle East feed market needs to be able, “Reduce delivery time, ensure fresh quality, and supply smaller lots at shorter intervals.”
Middle East Feed: The Chances
But while opportunities can be found, it is important to acknowledge that the Middle East is a very big place, and not all countries offer the same chances for success.
One of the best opportunities, according to Quazi, lies in Saudi Arabia. During his interview with the conference organisers at Feed Additives 2018, he outlined his reasons, stating that the kingdom currently produces only 42% of its chicken meat needs, importing the rest as frozen meat. However, demand for fresh poultry is growing, leading to an annual increase in bird head counts of 5% per year. With a population of over 650 million broilers, there are plenty of opportunities for feed producers to expand.
One of the reasons that Saudi Arabia is a net importer of chicken meat is because mostfeed raw materials and feed ingredientsare imported, making for high production costs. Many farmers are therefore looking for higher quality feed, feed additives, and specialised feed formulations, hoping to improve feed efficiency and make cost savings through more effective production.
Furthermore, since the use of antibiotics as growth promoters is banned, other new non-antibiotic growth promoters (like enzymes, acidifiers, vitamins etc.) are experiencing increased demand. The average growth rate of the market for these feed additives is 4% CAGR.
This situation has led to a great opportunity for feed producers to gain a foothold in the Middle East market, by applying improved feed quality, reliability of supply, and the latest feed additive nutrition.
As a recent report by industry consultants Mordor Intelligence notes, “The [Middle East feed additive] market is a lucrative market and has witnessed a boom in consumption in the recent past. The expansion of the dairy and poultry industry is also a major promoter for the feed additives market. Leading companies are looking at cutting edge technologies with efficient water management systems and innovative feed solutions.”
The final word is left to Quazi, who states that, “[The market] has the best chance for innovation and growth because there is great pressure on local producers to reduce cost of production and increase growth rates. This offers a great opportunity for new innovative growth promoters in broiler chickens.”
AG CHEMI GROUP has been supplying animal feed additives since 1994. It is also a global supplier of industrial quantities of monocalcium phosphate and zinc oxide.
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