Outside Influences on the Grains & Oilseeds Industry Q2 2021

Stefan Vogel, global strategist for Grains & Oilseeds, takes his quarterly look at what RaboResearch F&A's insights into other sectors mean for the G&O industry.

Insect Protein to Come of Age in the 2020s

Sustainability aspects and functional benefits might support future demand growth and have already resulted in exponential capital investments, while high costs and prices, as well as the current limited production capacity, and legislation are the main factors limiting growth of insect protein.

Impact on G&O: The development of specialized ingredients and products provides great opportunities, likely even beyond feed, pet food and human food ingredients. G&O companies are also investing. ADM, for example, has partnered to build the world’s largest insect protein facility, allowing it to participate on the finished protein side, as well as to supply feedstock, waste heat and steam from its corn processing plant.

African Swine Fever and Feed Prices Challenge Pork

China’s hog herd losses due to new ASF outbreaks, and health challenges, are slowing the recovery. While below earlier expectations, the sow herd is so far flat vs. 2020 and will expand through year-end. Globally, not only ASF is an issue, but higher feed costs and demand uncertainty are also expected to moderate the pace of pork growth.

Impact on G&O: China’s demand is one of the most important price drivers in the current high-price agri commodity markets. Rabobank expects continued strong Chinese import demand in 2022 and also beyond, as we consider the China’s feed grain shortage to be structural. Also, Rabobank’s Poultry Outlook sees for a bumpy road to recovery

US Pork Limbo in 2022, Resulting From California’s Animal Welfare Regulations

Significant US pork supply chain disruption in 2022 is expected as less than 4% of US sow housing is able to meet the new standard. California will see a severe pork deficit while in the rest of the US market, we might see a surplus arise.

Impact on G&O: The USDA estimates US soymeal use for 2021/22 up 1.3% year-on-year, vs 1.0% growth in the current season, and 2.4% on average of the past decade. US corn feeding use is estimated flat vs. -3.3% in this season, and +2.0% on average.

Eco-Score Label Off to a Flying Start

EU discounters and supermarkets already expressed interest in using this environmental guide, a sign that food producers will likely also take Eco-Score more seriously. Eco-Score aims to make it easier for consumers to consider the environmental and ecological impact when purchasing food.

Impact on G&O: The Eco-Score guide will make more transparency regarding sourcing likely for the whole supply chain. EU biofuels already had the requirement to show their sustainability via certification for many years. German, Swedish, Californian and other’s biofuels also show their carbon footprint, often well beyond the default values defined by politicians. Sustainable palm oil has a big uptake, but sustainable soy still has a way to go.

The Future of Alternative Protein in Asia

Rabobank’s podcasts discuss that being closer to origin and managing costs drove Just’s decision for Singapore. Impossible Foods expects innovation throughout Asia to accelerate quickly.

Impact on G&O: Asia’s huge population will also have a material impact on the demand for alternatives, especially as costs decline. Extracting protein in the origins where crops are grown seems to be the strategy for now, while the production of alternative meat products is already occurring in Asia.

Paper Packaging Industry Feels High Corn Prices

The adhesive properties of corn, wheat and tapioca starch help bind linerboard and corrugated medium or enable the conversion of sheets into boxes. Between 1.5% and 5% starch by weight is used for paper packaging, depending on weight, type, processes, and geography.

Impact on G&O: Ecommerce is on the rise and the growth in shipping boxes provides a valuable outlet for starches and benefits the corn wet milling industry, which in times of Covid-related foodservice closures/restrictions faced volume issues.

Detailed Regional Outlooks From Farm to Fork

Australia: While April was much drier, the outlook for June and July calls for good rains and hopes for another good crop harvest.

Brazil’s fertilizer use is forecast to remain strong.

China’s economic recovery might lose steam and soybean crush margins are deteriorating. ASF and falling pork prices induced a slowdown in restocking, while high feed costs pressure poultry.

2021 G&O map released

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