Author Archives: David McKee

Zambia’s push for more protein

Investments in meat and animal feed production reflect changing diet in this African country.

With the exception of a few conflict-torn pockets, since the turn of the century sub-Saharan Africa has achieved much greater availability of carbohydrates despite the world's highest rates of population growth. Gains in production of cereals, mainly corn, and root crops, principally cassava, are a big part of the positive caloric equation. Another is importation of low-cost rice and wheat to feed burgeoning urban areas. Under-nutrition rates above 30% in many countries across the vast region, per FAO data, are still high but have been coming down.

The next stage, greater intake of protein foods, particularly animal-sourced ones, is well underway in many countries due to investments in feed milling, oil-seed crushing, layer and broiler farms, aquaculture, improved dairy and beef cattle herds, pasteurization plants, feedlots and slaughterhouses.

Aller Aqua's fish feed plant in Siavonga, Zambia. Photo courtesy of Famsun Group.

A recently published report uses Zambia as a case study of the pan-African trend toward greater availability of commercially produced, affordable, protein-rich foods. U.K.'s CDC Group, an international development bank, commissioned SAIPAR, a Zambian research institute, to carry out a comprehensive analysis of key value chains.

One major conclusion is that though Zambians overall have benefited from greater food production, as evidenced by reduced rates of childhood stunting that is partly due to insufficient dietary protein, much could still be done to make commercially-produced, animal-sourced foods (ASF) more accessible to the rural poor who still make up over half the country's population of 16 million.

"Low income consumers spend less per household, but still account for a large proportion (43%) of the overall market," the study said.

Total spending on food by these households, mainly composed of smallholder farmers in villages, amounts to around $500 million per year, according to data from Zambia's 2015 Living Cost Monitoring Survey. Since the majority of these households grow their own corn and cassava, most of their spending is on animal proteins like dried fish, live chickens and milk from village cows.

FEED INPUTS

Zambia's relatively modern agriculture and food sectors are well-positioned to respond to demand for more accessible and affordable ASFs. Self-sufficiency in both soybeans and corn underlies a thriving feed milling industry. The USDA estimates that 600,000 tonnes, over one quarter of total corn production, now goes to domestic feed consumption. Commercial producers of compound feed still take less than half, with most non-food corn used by the thousands of small and medium broiler farming enterprises.

Government purchase, transport and storage of smallholder corn and allocations to industrial roller mills amounts to an indirect subsidy for those companies that produce feed as well.

Soybean production peaked at 351,000 tonnes in 2017 and dropped to 321,000 tonnes in 2018, per the USDA. Its growth directly parallels the rise in demand for compound feed for the commercial production of protein foods. In 2002, soybean production was only 2,000 tonnes.

Large commercial farmers with pivot irrigation accounted for the initial surge in soybeans, often cutting back on wheat acreage. But when prices soared, many smallholders also began planting soybeans in place of corn.

Soybean farmers face major challenges. One is severe price volatility. From 2017 to 2018, farmgate soybean prices fell from over $400 per tonne to less than $150 per tonne but have partially recovered. The glut in soybeans resulted in part because Zambia as a landlocked country has no easy export markets. Plantings were reduced following the bumper harvest and price collapse.

Strict non-GMO laws also mean lower soybean as well as corn yields, resulting in higher overall feed costs in comparison to South Africa, which has no such restrictions and where soybean production has doubled. The GMO restrictions also mean that soybeans or soybean meal cannot be imported from South Africa when prices spike. Only India is an alternative source of non-GMO corn.

SOYBEAN CRUSHING

The presence of several soybean crushing companies is a competitive advantage for feed production. After South Africa, where soybean production has taken off, Zambia has the most soybean crushing capacity of any country in sub-Saharan Africa.

Newcomer Global Industries Limited is now the country's largest oilseed crusher with a 1,000-tonne per-day capacity plant in Ndola in the Copperbelt. It started up only in 2017 with investment from India, but, according to industry informants, has won a large share of the market for the high-protein soybean meal demanded by expanding aquafeed production.

Illegal imports of cheap palm oil from southeast Asia in addition to competition for the smaller 2018 crop have squeezed soybean crushers' profitability. In late 2018, Cargill shuttered and began mothballing its 500-tonne-per-day capacity crushing and vegetable oil refining plant in Lusaka, which it had acquired in 2015 from Zambeef and upgraded.

FEED MILLING

Both large and small animal protein producers benefit from a sophisticated feed milling sector that consisted of eight companies whose output of a range of compound feed products reached 300,000 tonnes in 2017, according to Alltech's 2018 global feed survey.

About 45% of feed production is for poultry, which includes 90% for broilers. Large layer farm operators mostly mix loose feed themselves, grinding corn in hammer mills on site and buying soybean meal and vitamin and mineral premixes.

The two new dedicated aquafeed producers that started up in late 2017 will increase national compound feed output by at least one-third within a year or two and greatly enlarge the aqua feed share, as farmed fish production continues its double-digit growth. Danish multinational Aller Aqua partnered with local company Yalelo to build a fish feed plant, commissioned in 2017, with capacity of 50,000 tonnes per year in Siavonga on the shore of Lake Kariba. It is now undergoing an expansion to add a second 14-tonne-per-hour line supplied by Famsum Group.

Norway-based Skretting, a subsidiary of Nutreco of the Netherlands and the top global fish feed producer, has partnered with Lake Harvest, a subsidiary of African Century Foods, to build a smaller, competing aqua feed plant in Siavonga, also made by Famsum.

As in the rising aquaculture sector, some of the poultry feed millers are parts of fully integrated operations that include day-old chicks, broiler farms and slaughtering lines. These include Ross Breeders and Nutrifeed, which are subsidiaries of Country Bird Holdings Ltd. of South Africa and Zambeef, Zambia's largest agribusiness company, which produces Novatek brand feed.

FISH, POULTRY AND BEEF

The SAIPAR study reveals that consumption of farmed fish, predominantly tilapia, increased rapidly in the last decade to surpass poultry as the most important ASF in Zambia. This development reflects the efficiency of global aquaculture value chains with their improving aquafeed conversion rations. The initial surge in consumption resulted from the increase of frozen fish imports from 8,000 tonnes in 2011 to 127,000 tonnes in 2016.

The second stage was the rapid expansion of large-scale, caged fish farming in Zambia, concentrated in Lake Kariba, the world's largest reservoir by volume, separating Zambia and
Zimbabwe. Domestically farmed fish volumes are likely to triple from 31,000 tonnes in 2016 to 100,000 tonnes in the coming year or two. Production in 2011 was 9,000 tonnes.

The poultry sector is highly developed but still in need of expansion in order to reach more under-served consumers in rural areas, according to SAIPAR.

Commercial egg production is an earlier Zambian success story with competition and investment lowering production costs and market prices, enabling a rapid increase in consumption. A handful of both locally and internationally invested layer farm companies, mostly in Copperbelt province, account for over two-thirds of egg production. The largest of these, Golden Lay, has over a half-million hens in lay.

Zambia now has annual output exceeding 1 billion eggs with at least 10% exported via informal cross-border trade to neighboring Katanga province of the DRC. Zambians consume over 60 eggs per capita per year, much higher than the average for sub-Saharan Africa, but still well below many developing countries elsewhere.

Efficient distribution by layer farms and traders directly to township markets means that retail egg prices hover around 10' per piece, which is low by international standards.

Abundant soybean meal, corn and bran help keep layer feed prices in check. Globally feed is usually twothirds of both broiler meat and egg production costs. Raw material prices can be volatile due to currency devaluations and production swings.

CONCLUSION

In sub-Saharan Africa, production and consumption of animal source foods like eggs, chicken, fish, beef and milk has been on the rise as a result of the strong economic growth of the last decade and greater disposable income.

Across the continent, investment in protein food production has surged to meet demand, mostly coming from the relatively well-off and burgeoning urban population. In Zambia, the commercial production and supply of ASFs is largely limited to a corridor from Lusaka in the center northward to the Copperbelt province bordering DRC where the urban population is concentrated and percentage of population below the poverty line is much less.

By focusing on easier to reach city dwellers, are commercial processors missing an opportunity to profitably meet the protein needs of smallholder farm households that are typically under-served by the food industry?

Zambia, which as a lower middle-income country is a step higher up the development ladder than most other sub-Saharan countries, would seem to show that there is much room for corporate players to extend their marketing and distribution strategies to encompass more of the rural poor.

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WUDELI makes good on promise

Chinese company has doubled milling capacity since 2012, with plans for similar growth in the coming years.

How did a small family-owned enterprise in an out-of-the-way place in rural China become in less than 30 years the world's largest wheat miller? World Grain recently visited the headquarters of Wudeli Flour Group to seek the answer.

When our magazine last profiled the company in late 2012 it was already China's No.1 flour producer with 20,000 tonnes of daily wheat grinding capacity and a 7% domestic market share. Mill expansions and new facilities under construction at that time targeted a 100% increase in output.

Wudeli's earliest 200-tonne-per-day mill symbolizes the humble beginnings of the company in Daming in the 1990s. Photos by David McKee.

Six years later, chairman Dan Zhimin said his company is now nearly fully utilizing 42,000 tonnes of daily capacity at 14 locations in six provinces of northern China. Wudeli Group's national market share has reached 15%, he said. Furthermore, the company is building five new greenfield plants and expanding six existing locations to double daily capacity yet again to over 80,000 tonnes.

Growth of such magnitude by a single company is, of course, unprecedented in the annals of milling history, just as the scale and rapidity of China's economic transformation has surpassed anything that came before.

Remarkably, Wudeli's expansion has been entirely organic - without the acquisition of existing mills or milling companies - in line with a single-minded strategy to locate ever larger and more efficient plants in key wheat production zones.

The five new locations make up half of the current expansion program. They consist of one factory of 5,500 tonnes per day; three of 4,000 tonnes; and one of 3,000 tonnes in Handan, a large city and regional administrative center for Daming, which is one hour by road to the southeast.

Qingdao is the site of Wudeli's third milling complex in Shandong province, and the first factory to be located in a port city and outside the main wheat production zone. It will make use of imported wheat for much of its output.

Another 24,000 tonnes of new capacity is planned at existing locations, though the project sizes are subject to change. In Dongming, Shangdong Province, the company will add two matching 4,000-tonne mills at a new site near its existing mill to create its largest single location. An 1,800-tonne mill nearing completion in Daming will bring total daily capacity to 7,000 tonnes at the seven plants scattered mostly around the southeast quandrant of the town. In Jiangsu and another location in Shandong province, two mills will undergo 4,000-tonne expansions, and in Henan and Hebei provinces, another two locations will add milling lines of 3,000 tonnes each.

When the current phase of growth is completed, Wudeli Group will have 19 locations in the same six provinces as before.

In 1988, the company started with a 15-tonne short mill similar to thousands of others that were launched by local entrepreneurs at the time. It was not until 1996 that the company could build its first 200-tonneper-day plant. Two more of that size were built before the company scaled up again. The 200-tonne-per-day mill still operates profitably in Daming.

Dan pointed to a simple, time-worn formula underlying his company's success: high quality flour produced at the lowest possible cost. The economies of scale already achieved have driven down unit operating costs, allowing Wudeli to profitably underprice its competition and generate cash to fuel expansion. Wudeli mills operate at about 90% capacity utilization, including maintenance, according to the chairman, while the average rate for all mills in China is just 40%.

Total employment is around 5,000, equivalent to 8 tonnes of wheat milled per worker per day. That will increase as much greater output is spread over a slightly larger administrative staff. Thanks to this high productivity, Wudeli is able to pay above average wages for the industry. And its inland location enables it to avoid some of the compensation for workers of China's booming coastal region. About 20% of employees are women, working mainly in finance and laboratories, including a large central one.

Wudeli uses a state-of-the-art plant control system inside the company’s mill in Daming, China.

Dan noted that early in its history the company made a strategic decision to invest in the most advanced milling machinery and embrace automation wherever possible. Since 1995 the company has relied on Buhler Group as the principal technology partner for all of its mills.

WHEAT SUPPLY

Wheat supply is a key competitive advantage. Wudeli is based in Daming County in the southeastern corner of Hebei Province in the heart of the north China Plain, the world's greatest wheat production zone. Less than 30 kilometers to the south is Henan Province with annual output of 37 million tonnes, and an equally short distance eastwards, Shandong province ranks No. 2 with 25 million tonnes. Home province Hebei, and Anhui and Jiangsu provinces occupying the southern and easternmost parts of the Middle Kingdom's wheat belt combine for another 43 million tonnes to round out China's top five wheat producing provinces.

The multi-province region is now crisscrossed by a modern network of divided motorways that mostly did not exist 10 to 20 years ago. Traders can quickly deliver wheat to mills in bulk trucks of 34 tonnes net. The company still accepts direct delivery from farmers as well, even when transported in bags, which has become rare.

Dan said almost all wheat farmers, however small, sell all of their production at harvest and buy flour for household consumption year-round. The north China plain is densely populated and staple foods like buns and noodles are wheat-based. Thus, the wheat zone is a major market for Wudeli's flour. Raw material and finished product transport costs are low over such short distances on good roads, keeping costs and prices down.

Stable wheat prices resulting from predictable government purchases make business planning easier. China's state grain agency, Sinograin, buys a large part of the harvest at a minimum support price in order to guarantee farmer incomes. The 2019 price is 2,240 RMB (U.S.$336).

The government's large wheat reserves are rotated via regular auctions with an average price of 2,500 RMB that both depends on and influences the overall domestic market price.

Wudeli sends staff to take samples from the local storages owned or leased by the government grain organizations. Bids are placed online. Payment is immediate. At times the government wheat may be three years old, but Wudeli's technicians can manage it.

By buying and storing wheat and selling mostly on a steady as-needed basis, the government significantly lowers the financing and working capital requirements of the private milling sector. Wudeli's 3,000-tonneper-day mill in Daming, for example, has storage for 90,000 tonnes, just one month of inventory.

SALES AND MARKETING

Until recently, all production was sold under the Wudeli brand, which has become a household name in many parts of China. The brand encompasses the 20 to 30 types of flour on offer. These differ mainly in protein levels, ash content and functionality to meet the varying requirements of traditional noodle and steamed bun makers as well as western-style bakeries and households.

Wudeli Group consists of subsidiary companies by location. A sales center at group headquarters processes all orders from the 2,000 wholesale distributors that account for 80% of turnover. Some customers send their own trucks to the mill gate, but independent trucking companies are outsourced to deliver 34-tonne loads to distributor warehouses. Thus, the lack of need for a truck fleet either for wheat supply or flour shipments further simplifies Wudeli's business model.

Rail is used to move flour to more distant destinations such as Shenyang, the largest city in the northeast. Dan estimated a 50% market share for Wudeli brand in Beijing, and 25% share in Shanghai, China's two largest cities.

MANAGEMENT UPGRADES

Dan said the ambitious implementation of SAP enterprise resource planning software in July 2017 has heightened management capability for sales as well as inventory and processing operations.

Dan Zhimin, chairman of Wudeli, has helped guide the company to unprecedented expansion over the last decade.

Wudeli's managers also cited the decision-making authority given to plant directors as a reason for superior results. The top person in each mill takes sole responsibility for its operations. This contrasts with the majority of state-run enterprises where most decisions are taken by committee, slowing response time and diffusing accountability.

WUDELI'S COMPETITION

Two other major agribusiness companies in China have pursued aggressive expansion strategies to increase market share in wheat flour but have struggled to keep up with Wudeli's pace. Dan estimated that Singapore-based Wilmar Group's wheat flour production is about two-thirds of Wudeli's level, while state-owned COFCO is about one third. The top three companies combined now account for 30% of the wheat that is milled for human consumption in China, said Dan.

Wudeli uses Bühler roller mills to grind wheat into flour.

Neither company has Wudeli's concentrated focus on wheat milling. Wilmar is China's No. 1 operator of soybean crushing plants and seller of branded soybean oil. It launched a national wheat and rice milling strategy more or less simultaneously when its market share in cooking oil was unofficially capped over 10 years ago. COFCO is a kind of agribusiness national champion that has to some extent replaced global giants like ADM, Cargill, or Bunge for overseas sourcing of soybeans and grain. Wheat milling is a relatively small part of its overall business.

FUTURE OUTLOOK

Dan and his brother, chief executive officer Dan Zhiguo, the second generation of company leadership, are only 50 and 47 years old, respectively, so much could yet be expected of them based on their historic track record.

But China is a mature flour market. Dan Zhimin estimated national per capita daily consumption of 200 grams. This is unlikely to go up as increasing prosperity brings more and more dietary diversity. The country's population also has stopped growing. Thus, when Wudeli's doubled capacity gets fully utilized, its market share will rise to 30%, twice the current level. Down the road will the competition authorities allow further dominance, say to 50% market share, as is the case for the largest millers in some developed countries like the United States? Only time will tell.

The first mill at a port and introduction of a new flour brand, "Haomianyuan," constitute only a minor deviation in the company's strategy of the last 30 years.

Overseas expansion is a possibility, but it is difficult to name another country where Wudeli could operate at anywhere near the same scale as it does in China.

In any case, with 40,000 tonnes of new capacity to build and use at home, the world's largest miller already has much on its plate for the next few years.

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KFMB – Kuwait’s milling giant

Already dominating its domestic market, KFMB is planning to expand its milling and baking capacities.

Few millers dominate their domestic market like Kuwait Flour Mills & Bakeries Company S.A.K.C. (KFMB). With massive port storage for imported cereals, nearly 3,000 tonnes of daily milling capacity, a chain of nine industrial bakeries and a range of processed products, the wholly state-owned company plays critical economic, social policy and food security roles in the oil-rich country of 4.4 million while generating $1.3 billion in annual sales revenues and net profit of $123 million in 2016.

Earlier this year, World Grain interviewed KFMB’s longtime top production executive, Abdulla Al Wahaibi. He spoke openly about the company, which employs nearly 4,000 and is the country’s lone wheat flour producer.

Milling in Kuwait got its start around the time of Kuwait’s independence from Britain in 1961 with majority private and minority government investment in a 120-tonne-per-day Simon Robinson mill with a silo.

Today, nearly all KFMB’s milling and grain storage operations are at a single 50,000-square-meter site on the Al Shuwaikh port in Kuwait City. The complex houses six milling lines totaling 2,850 tonnes of daily capacity. The two newest are 750 tonnes per day supplied by Ocrim in 2008 and Buhler in 2017. The latter sold its first milling equipment to Kuwait in 1972. A recently expanded feed mill can produce 500 tonnes per day of a wide range of animal feed products. KFMB has total storage capacity of 375,000 tonnes at the port in concrete elevators.

“This is the biggest grain storage at one single location in the Middle East,” observed Al Wahaibi, adding “there are three sections or complexes for wheat, yellow maize and barley. The tallest has a cell height of 59 meters.”

KFMB’s food security role hinges on the large stocks it holds. Sufficient wheat to meet four to six months of consumption is kept on hand as a strategic reserve, he noted. A two- to three-month supply of corn and barley for feed is maintained as well. USDA data show Kuwait’s wheat imports have been stable, averaging just under 500,000 tonnes annually over the last five years. The nation’s combined imports of barley and corn for feed have been as high as 800,000 tonnes per year, Al Wahaibi said.

Australia is the sole wheat source with the exception of about 50,000 to 60,000 tonnes of durum and CWRS normally imported from Canada for pasta and high protein bread. One swing mill is utilized for semolina. Corn and barley originate in Argentina, Australia and the Black Sea.

Panamax-sized vessels 225 meters in length first offload two or three holds at deeper Gulf ports before proceeding to Kuwait City at the Gulf’s northern end where the draft is only 9.6 meters, limiting the maximum wheat delivery to 46,000 tonnes. There is a single berth but 400 and 600-tonne per-hour ship unloaders permit offloading at 1,000 tonnes per hour and rapid vessel turnaround.

Flour

The bulk of flour production is for the main food staple, pita type Arabian flat bread weighing 50 to 75 grams each. KFMB’s own bakeries produce 4.5 million pieces per day. They are sold in packages of five at a fixed government price of just 50 to 75 fils (17¢ to 25¢).

Al Wahaibi estimates the sales price represents about 50% of the production cost. The Kuwaiti government provides a direct subsidy so that KFMB can carry out this social welfare policy and make a small profit as well. Over half of flour production is for pita bread.

KFMB operates a central bakery that consumes about 100 tonnes per day for production of European style rolls, buns and toast bread. McDonalds, KFC, Burger King, Pizza Hut and Subway are just a few of the numerous international fast-food restaurant chains in Kuwait that depend on KFMB to reliably supply standard baked foods or specialty flour to exacting specifications.

Around 15% of production is a highly refined white “patent” flour used for making cakes and pastries, Al Wahaibi said. KFMB can export about 60% of this nonsubsidized flour to other Gulf Cooperation Council (GCC) countries that form a tariff-free zone. Demand is highest in neighboring Saudi Arabia, especially during the period leading up to Ramadan.

Shipments of various flour types through Kuwait-based traders to Iraq have been climbing as well despite the financial and security challenges of dealing with the wartorn country. Basra, a major Iraqi city only 180 kilometers distant, is the main destination.

Al Wahaibi

Al Wahaibi attributes his company’s export success to “high quality wheat, top milling technology and strong quality control standards and efficient sales team.” The company grinds a wide assortment of flour types both for its own use, for small package retail sale in stores and for the hundreds of small private bakers in the country. Brown flour, white flour, biscuit flour, flatbread flour, whole wheat flour, barley bread flour, chappati flour and pastries and logaimat flour are all featured on the company’s website, in addition to crushed wheat and peeled wheat. The executive said KFMB may have the only bakery in the Middle East making glutenfree goods like toast bread, Al Wahaibi buns and rolls. He said such a product line stems more from KFMB’s social consciousness than a desire to add to its bottom line, since demand is limited and the cost of grinding alternatives to wheat is high.

Product is transported through stainless steel spouting at the KFMB mill in Kuwait. Photos courtesy of Buhler.

Another example of the company’s social responsibility is its early adoption of fortification of its flour and wheat-based products in line with GCC standards for iron, folic acid and other vitamins and minerals.

Though pita bread is the key staple food consumed by most households daily, KFMB still faces the management challenge of seasonal demand. Because of the extreme summer heat exceeding 45 degrees Celsius most days from May to September, Al Wahaibi explained, a good part of Kuwait’s population, including the heavy proportion of expatriates, leave the country for extended periods, necessitating a 40% to 50% reduction in output.

KFMB has devoted resources to build a well-recognized logo and “KFMB” brand name across its broad range of wheat-based retail products, including flour, pita bread, toast bread and buns, pasta and biscuits. Packaged cooking oil refined from imported soybean oil, corn oil and sunflower oil also carry the KFMB logo.

“We have been named one of the top 100 brands in the Middle East,” Al Wahaibi noted.

Feed

“In general, the strategic growth of the company will be in feed milling,” he said. “We will expand our current animal feed capacity from 500 tonnes per day to 1,500 tonnes per day and eventually to 3,000 tonnes.”

The company makes mixed feed from bran, corn and barley for sheep, goats, camels, cows and horses, according to government-approved formulas. It also sells yellow corn, wheat bran and other raw materials to the country’s large integrated poultry producers with their own feed mills.

Greater feed production capacity is needed to support livestock breeding at home.

Bühler sifters are part of the KFMB mill in Al Shuwaikh port in Kuwait City. The complex houses six milling lines totaling 2,850 tonnes of daily capacity.

“Our barley and corn imports will have to increase from the current levels” of 50,000 tonnes of barley – 20,000 tonnes respectively per month, he asserted.

Most sheep and goats consumed in the country are imported on the hoof by sea. Kuwait was the first country to import live sheep from Australia in converted automobile transport ships. Saudi Arabia has followed suit. Most of the imported animals are fattened and slaughtered leading up to the Muslim feast holidays.

A more humane but probably less economical approach would be to raise the animals locally. However, Kuwait has limited grazing during its short and intermittently rainy winters. More feed production is needed. In addition to the subsidized fuel, electricity, water and flour available to all consumers, the state provides ration cards to its citizens. They make up only 30% to 40% of the total population due to the large number of immigrant workers.

Kuwait imports live sheep from Australia that are sold locally for $160 to $180. Kuwaitis get monthly ration cards that contain rice, cooking oil, skim powdered milk, pulses and frozen chicken at a subsidized price.

Future

Feed production is an opportunity, but the No. 1 task of KFMB is to continue to expand milling and baking capacity to satisfy the needs of a still growing population, Al Wahaibi said. More bakeries will be launched. The company is looking to add 20,000 to 30,000 square meters of land adjacent to its site to make room for new plant operations. Other challenges include mechanization and automation of production processes in part to reduce dependency on expatriate workers. For every Kuwaiti employee of KFMB there are 20 non-Kuwaitis. The largest contingent come from Egypt followed by India, Bangladesh, Sri Lanka and the Philippines.

History

KFMB has a colorful history resulting in part from its proximity to Iraq. The company converted to 100% government ownership in 1987. The next year Kuwait Bakeries Company was merged into it. Sadam Hussein’s conquest and annexation of Kuwait as Iraq’s 19th province was just two years later in August 1990. During the seven months of occupation an Iraqi manager was appointed to run the company, the wheat stores were emptied, and much flour production was diverted northwards as well. Before it could be put into production, a recently commissioned vegetable oil refinery was dismantled and shipped to a city in northern Iraq never to be returned.

Following the Iraq War of 2003, the UN World Food Programme contracted with KFMB to store and supply wheat and produce flour and other products for humanitarian distribution in Iraq.

Since then with KFMB as a national anchor of food security, Kuwait has continued to be a stabilizing force in the region.

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South Asia’s feed industry growing

The Indian subcontinent long has been one of the world’s most undernourished regions in terms of caloric intake and consumption of animal proteins.

Poverty has not been the sole reason for the latter deficiency. Religion and culture also have played a role.

Over the last 10 years rapid economic development and greater dietary acceptance of meat, particularly poultry, as well as eggs and fish have resulted in sustained high rates of growth in feed processing and in production and trade of maize, soybeans and other coarse grains and oilseeds.

With a combined population of 1.6 billion people, the major countries of South Asia — India, Pakistan, Bangladesh — as well as smaller ones like Nepal and Sri Lanka all have seen average growth rates of 8% to 10% in compound feed production due to dynamic investment in modern feed and livestock operations.

Greater planting and increased yields of maize, most of it for feed use, has resulted in a near doubling of production in just a decade, prolonging the region’s decades-old green revolution.

South Asia’s surge in maize and feed production is examined nation by nation in the survey that follows.
(Data sources: Alltech 2015 Global Feed Survey, USDA, and World Factbook)

Nepal’s first steel grain silos were supplied to Probiotech’s feed and
soybean processing operation about 10 years ago by Scafco Corporation.

India

Population: 1.27 billion

Maize production: 24 million tonnes

Feed production: 29 million tonnes

The world’s second most populous country now ranks fifth globally in maize production, sixth in soybeans (10.5 million tonnes), fifth in feed, third in eggs (84 billion pieces), and fourth in chicken meat (4.5 million tonnes), per USDA data.

Nevertheless, India’s meat and egg consumption on a per-person basis is just a small fraction of that of China or the U.S., with the first and third most people. Thus a long period of sustained growth in the feed and livestock sectors may be anticipated.

A 2015 Rabobank survey projected 8% annual growth in Indian compound feed production for the next five years, slightly higher than expected GDP increases.

Maize production nearly doubled in the period from 2004 to 2014, but production has leveled off since then partly due to a sharp decline in exports to Southeast Asia as international prices fell. The potential for further production increases is still enormous as domestic demand for feed and starch production continues to rise.

Maize yields, though increasing, are still just 2.5 tonnes per hectare, less than half the world average of 5.5 tonnes per hectare. In some top producing states like Andhra Pradesh, where the use of single cross hybrid seed is widespread, yields have nearly caught up to the global average.

Maize is a pan-India crop with production exceeding 1 million tonnes in at least eight states. The two southern states of Karnataka and Andhra Pradesh make up nearly 40% of production. Maize is grown year round but the rainy summer kharif season, dominated by the southwest monsoon, accounts for 70% to 80% of annual plantings.

The government has introduced a minimum support price for maize to help stimulate output, particularly during the dry winter rabi season, helping to even out availability throughout the year.

The city of Gulab Bagh in the northern state of Bihar, with a large rabi harvest, is the site of the country’s largest delivery center and market auction place (“mandi”) for maize with up to 2,000 trucks arriving daily and maize accounting for the bulk of the 2 million tonnes of cereals and legumes traded there annually. Much of India’s maize exports to neighboring countries, including nearby Nepal, are purchased at this mandi.

The Compound Livestock Feed Manufacturers Association of India (CLFMA) reports 233 members comprising a rapidly expanding formal sector. CLFMA estimates the value of feed production at $15 billion. Broiler, layer and dairy made up 38%, 32% and 26%, respectively, of the production per the Alltech Feed survey. However, CLFMA reports that compound feed accounted for only 50% of poultry and 10% of total cattle feed and aquafeed requirements in India.

David McKee, far right, visits a grain trader near Birgunj, Nepal.

Domestic soybean meal consumption has increased to about 5 million tonnes per year, up 50% from the first years of this decade. As a result, India may soon lose its status as an exporter of soybean meal and become instead a major net soy complex importer. During the three years from 2010 to 2012, soybean meal exports made up 59% of total average production of 7.7 million tonnes per year, but exports fell to only 17% of total production from 2014 to 2016.

International players are stepping up their presence in oilseed processing. In May 2016, Adani Wilmar, a joint venture between Asia’s largest agribusiness group Wilmar International and India logistics giant Adani, acquired a two-thirds share in Ruchi Soya, India’s biggest soybean processing company. Adani Wilmar already had eight seed crushing units across India with daily capacity of 7,400 tonnes.

By value, milk is by far India’s most important agricultural commodity and India is the world’s top producer. As breeds with better genetics replace traditional cows with low milk yields, the adoption of compound feed for dairy cattle may be expected to increase at an even quicker pace. India’s enormous wheat and rice milling sectors, processing a combined 150 million to 200 million tonnes per year, are a major source of bran and other byproducts for all types of feed, but particularly for cattle.

Pakistan

Population: 202 million

Maize production: 5.2 million tonnes

Feed production: 6.2 million tonnes

Pakistan’s feed and livestock enterprises constitute the country’s most technically advanced and competitive agribusiness sector, according to many observers. The feed millers association counts over 150 producers of pelleted feed, supplying over 70% of total broiler feed requirement. Poultry production has been almost fully transformed from a backyard to commercial activity in the last couple of decades.

Government market intervention in the corn sector is minimal aside from 40% import tariffs. Production, which is almost exclusively for feed and starch use, has risen two-thirds from 3.1 million tonnes in 2006 to 5.2 million tonnes in 2016, according to USDA data with less than 10% increase in planted area. The high domestic prices boosted by tariffs have stimulated increased spending on inputs. International seed companies are well established in Pakistan. High yielding varieties and hybrids now make up 40% of the planted area and 70% of overall production, according to the most recent USDA report. In the Punjab region, two maize crops are harvested annually and 65% of overall production benefits from irrigation.

The country imported 1.7 million tonnes of soybeans and 700,000 tonnes of soybean meal in 2016 to make up for the short domestic supply of vegetable proteins. Soybean imports were almost nil up to 2014 when the government imposed import tariffs, now fixed at 21%, to support local crushers. Soybean meal imports have fallen by a third since the peak of 1 million tonnes in 2013, but total soy complex imports are still 2.5 times higher than just three years ago.

Prior to the recent surge in soy imports, cottonseed meal had been the main source of vegetable protein, but its production has declined 22% to 1.4 million tonnes since peaking at 1.86 million tonnes in 2014.

Though the predominantly Muslim country faces none of the cultural taboos that prohibit beef consumption in its giant neighbor, broiler meat still dominates as a meat source. A USDA report said that feed conversion rations for broilers have improved from 2.2 kg to 1.6 feed per kg live weight since the early 2000s. About two-thirds of maize production goes to poultry feed. Wet milling for starch production uses up most of the remainder of the crop.

Bangladesh

Population: 156 million

Maize production and imports: 1 million tonnes (author’s estimate)

Feed production: 3.1 million tonnes

The most densely populated large country in the world with about 1,000 people per square kilometer, Bangladesh has made tremendous strides in the last 10 to 20 years not just toward self-sufficiency in rice production, the source of over 70% of caloric intake, but also increasing dietary protein.

Fried chicken outlets like Kentucky Fried Chicken as well as a half-dozen copycats (BFC – Best Fried Chicken, CFC – California Fried Chicken) are ubiquitous in the crowded megalopolis Dhaka.

The poultry sector has several large operators with hundreds of thousands of layers and broilers. Many are integrated with feed milling. The country’s largest agribusiness companies like Meghna Group and City Group are active in soybean crushing. Soy complex imports consisting of beans (1.2 million tonnes) and meal (300,000 tonnes) have tripled since 2006.

Domestic maize production is small but increasingly substituted for the second rice crop in some areas. Most maize comes from nearby Bihar state, one of northern India’s largest producers, in unofficial cross border trade.

Byproducts from 34 million tonnes of milled rice production in Bangladesh constitute a major starch component for poultry feed. In addition to rice bran, automated rice mills in Bangladesh may generate up to 2 million tonnes of rice flour available for poultry feed by grinding off 15% of the endosperm to make so-called miniket, a milled rice category that appears longer and finer and commands a premium price.

Nepal

Population: 29 million

Maize production: 2 million tonnes

Feed production: 750,000 tonnes

The explosion of compound poultry feed production in Nepal in recent years is a case study of economic development improving diets.

Probiotech's food processing complex in Birgunj, Nepal, includes the country's first large compound feed mill.

A dozen years ago there was a single producer of pelleted poultry feed in the country. Today there are said to be over 50 such companies, 20 of which have capacity of 10 tonnes per hour or more, though Nepal’s per capita GDP is still smaller than any of India’s 29 states and territories and its population is less than 15 of those states.

Nepal is mainly a Hindu and Buddhist country. Thus eggs, broilers, and, to a lesser extent, fish, have been the major drivers of increased animal protein consumption.

But this dietary change has been learned behavior transcending just a generation. Mr. Keshab Bikram Khadka, the proprietor of one of Nepal’s largest feed milling companies, Shree Daonne, in the border city of Bhairahwa, is well known under the name Swami Tathagat for his campaign spanning 30 years to teach Nepalese how to cook chicken meat.

Most feed milling is clustered in three large cities on the border, with India on Nepal’s southern lowland plain called Terai, an irrigated zone extending from the northern Ganges plain. Up to two-thirds of maize used in feed milling is imported from India mainly due to quality considerations. The bulk of poultry production is in the Chitwan valley halfway between the Terai plain and the heavily populated Kathmandu valley to the north.

There are at least two soybean crushers. The largest, Probiotech, which was also the original producer of pelleted feed, recently upgraded its plant with dehulling equipment in order to produce the country’s first high protein soybean meal.

Nepal’s grain logistical infrastructure also is improving. There are at least five feed milling companies with steel silos for storage of maize.

Sri Lanka

Population: 22 million

Maize production and imports: 500,000 tonnes (author’s estimate)

Feed production: 770,000 tonnes

At 35 kg per capita, Sri Lanka has the highest rate of compound feed production per capita of any South Asian country. Soybean meal imports reached a record 230,000 tonnes in 2016, twice the level of 10 years ago. Bran from 3 million tonnes of milled rice production and 1 million tonnes of annual wheat imports is available as a feed component.

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