A looming aquafeed crisis?

Zuridah Merican

A quick review of the aquaculture feed industry shows the key drivers in 2019 were farm to fork traceability, non-GMO ingredients and antibiotic free feeds. While 2020 was a bad year due to supply chain disruptions, low prices for aquaculture products and food security, 2021 is looking like a painful year for aquafeed producers. The industry has seen a sharp increase in plant protein meals compounded by high freight costs. With this impending commodities super cycle, how will this affect the feed segment and the industry in general?

At the start of the Asian shrimp feed industry in the early 1980s, fish meal was a major ingredient included at 35% in shrimp feeds. Due to increasing fish meal prices combined with efforts from the American Soybean Association (today USSEC), high protein soybean meal and corn gluten meal managed to partially substitute fish meal while keeping the price of shrimp feeds at an average of USD1.00/kg over the past 40 years. However, soybean meal prices have increased over 50% and corn over 130% since September 2020 knocking over the price stability of all feeds, including those for aquaculture. Taking an example, if an Indonesian shrimp feed formulation done in Aug 2020 is unchanged, the cost of the same formula would have increased by 16% in April 2021.

Should the feed industry revert to fish meal? Peru, a major fish meal producer has announced that the quota for the next fishing season will be maintained and hence fish meal prices is forecasted to remain at USD1,500/tonne in the short term and this price differential makes fish meal attractive for least cost formulation programmes. There is always the question of a “rising tide will lift all boats” so will rising protein meal prices move fish meal in the same direction? Sustainability has become another push for fish meal reduction in feeds driven by the debate that wild fish should be directed for human consumption instead of feeding fish with fish. Fish in-Fish out (FIFO) ratio is the sustainability measure for wild fish used in aquafeeds. FIFO ratios for crustacean feed have been reduced from 0.93 in 2000 to 0.46 in 2015 and ratios for tilapia, from 0.23 in 2000 to 0.15 in 2015 (iffo.com). Therefore, although fish meal utilisation may be driven by attractive prices, it will be challenged by FIFO and sustainability issues.

This situation has opened up opportunities for novel protein ingredients. The examples below are just a flavour of what is available. Single cell proteins produced with methanotroph bacteria may contain 72% crude protein (CP) and offers itself as a credible alternative as a specialty protein component. It can also be manufactured at a large economy of scale using a very small footprint. Black soldier fly larvae meal containing 50% CP using industrial food waste promoting the circular economy can also be produced at scale. Many companies have grown from startups to hundred-million USD investments in just a period of 3 years. With new manufacturing technology, dried distiller's grains (DDG) can now offer up to 50% CP carving out a distinct segment for itself while developing a credible coproduct of the ethanol industry.

Marine fish feeds in Asia have a CP level of 42% and with a price around USD1.20/kg will face similar opportunities and threats as the 35% CP shrimp feed. Here, as marine fish feeds are still in the development stage, it is unlikely to be under similar pressure of conforming with FIFO ratio requirements in the short term compared to shrimp feeds. Our first step is to replace trash fish with compound feeds.

The greatest pressure of the increasing cost of protein meals will be seen in freshwater fish feeds. Pangasius feeds have around 26% CP. Feed costs an average USD450/ tonne; in Vietnam pangasius feeds comprise four major feed ingredients: cassava meal, rice bran, wheat bran and soybean meal. With no alternatives and margins turning negative, it only leaves the option for a price increase but pangasius exfarm prices are at an all-time low in Vietnam. Pangasius exports to China have been curtailed in 2020, leading to higher supply and the poor prices will not allow for any increase in feed prices. Farmers are likely to skip cycles in order not to lose money.

There is no doubt that the outlook is challenging but with this change comes opportunity. The COVID-19 pandemic has taught us to think global but act local. This has put not only food security but feed security at the forefront for every nation.

If you have any comments, please email: zuridah@aquaasiapac.com