Wageningen University: Livestock farming complex dependent on requirements for feed origin

The economic consequences of closing the feed-manure cycle depend on how protein-rich feed is made available. If livestock feed production is to take place in the Netherlands, there will be an inevitable shrinkage of the livestock farming sectors. If feed imports from other EU Member States are allowed, the consequences will be limited, especially if other EU Member States accept feed from third countries. If the EU closes its borders to protein-rich feed imports, the price of this feed will increase sharply and the competitiveness of the various livestock sectors will be undermined.

These are some of the conclusions drawn by the social innovation project ‘Economische effecten sluiting voermestkringloop’ (‘Economic effects of closing the feed-manure cycle’).

Dutch livestock production relies heavily on feed concentrates
Livestock production in the EU is partly dependent on protein-rich raw feed materials from third countries, particularly soy from North and South America. This is particularly true of livestock production in the Netherlands because of its highly developed intensive livestock farming and its infrastructure being favourable for the supply of raw materials from overseas (ports).

Income reduction due to cost increases
If the Netherlands were to restrict itself to only European raw materials, price increases in concentrates would be expected, depending on the protein content: a 1.5% increase for meat pig feed, 3.6% for broiler growth feed and 16% for protein-rich cattle feed. Because of the narrow margins, these price increases could potentially lead to substantial income decreases if the cost increases are not compensated by higher yield prices. Rough estimates for this are decreases in income of around €10,000 for dairy farmers (with silage maize rations), €13,000 for meat pig farmers and more than €30,000 for broiler farmers.

Competitive position under pressure
If all EU-27 Member States were to restrict themselves to EU feed exclusively, concentrate prices would rise much higher. This would change the competitiveness of livestock sectors within the EU in relation to those outside of the EU. This could lead to greater imports of animal products (dairy, meat and eggs), particularly if the EU decides not to take compensatory measures to level the playing field. Companies in the EU would then have little to no opportunities to pass on the (additional) costs to the end users.

Alternative protein-sources are not viable yet
Currently, replacing large quantities of North and South American soy with EU-produced soy is not a realistic option. In the short and medium term, soy will not be grown in large quantities in Europe. Insects are another alternative source. At the moment, however, there are legal barriers to using insect proteins in animal feed. The price is also still too high for use in farm animal feed. Animal meal offers more potential in the short and medium term: in particular, animal meal from pigs used in broiler feed provides high quality feed at a lower price. It seems that the current EU-level legal obstacles will be substantially reduced this year. The actual use of animal meal in animal feed will then mainly depend on the preconditions for its use and the market acceptance of its use in animal feed.

Agricultural policy aspects
There are barriers in agricultural policy to closing the feed-manure cycles in the ways outlined. Agreements made on the EU common market and on international trade in the WTO context prevent government action by both the Netherlands and the EU for regulating imports. Manure legislation (application standards) and animal rights are more effective for protecting the environment. There are more opportunities for national policy in this area. Because the EU is a deficit area for vegetable protein, imports of vegetable protein will be needed to meet the demand for animal products (dairy, meat and eggs). Restricting the import of protein-rich raw materials for animal feed could then potentially lead to additional imports of animal products at the expense of EU production. Therefore, it seems unlikely that the EU will stop importing soy. Nevertheless, there is increasing social pressure to make the soy chain more sustainable (e.g. to avoid deforestation), which requires additional efforts from the European animal feed industry.