Did you know the animal feed supply business in Africa holds great potentials for the continent?
Did you know that most farmers often spend up to 70 percent of their costs on animal feed alone? It’s no wonder the international trade in animal feed has an estimated turnover of nearly $400 billion every year.
Despite Africa’s huge demand for the product, it produces less than one percent of global animal feed output. The small amounts produced locally are not enough and the African market now depends heavily on imported feed from the USA, Europe, Brazil and China.
Let’s explore the market for this product in Africa and how entrepreneurs like you can harvest the business opportunities in this market…
Why is there a huge and growing demand for animal feed in Africa?
The world’s population is growing at a very fast pace and is expected to reach 10 billion in the coming decades.
To avoid global hunger, the UN Food and Agricultural Organisation (FAO) estimates that the world will have to produce up to 60 percent more food by 2050.
Animal protein will make up a huge proportion of this food and meat production (poultry, beef, pork and fish) will need to more than double to meet up with the world’s demand.
With the highest birth rate on civilized earth, Africa has the fastest growing population anywhere in the world! The continent’s population (currently at one billion) is predicted to rise to 2.3 billion in less than 40 years.
Just to give you some perspective, Nigeria (the continent’s most populated country) adds roughly 11,000 newborns to its population every day! (source: Reuters).
With all these mouths to feed, agriculture (especially livestock farming) is more than likely to become a booming industry in Africa’s future. (photo credit: hunger-undernutrition.org)
How large is the market for animal feed in Africa?
Meat and fish are the most common animal proteins in African diets.
Due to the continent’s rapidly growing population and rising disposable incomes, the demand for meat products like beef, pork, poultry and fish is growing really fast.
Livestock farming is starting to boom on the continent due to government support and efforts of farmers and businessmen to make money from the lucrative demand for meat and fish products.
This growing livestock market has in turn created a huge demand for animal feed.
Because animal feed production on the continent is very low, suppliers from the USA, Europe, Brazil and China currently dominate the African market.
Just in case you don’t know, animal feed takes up 50 to 70 percent of the total cost of raising animals. It is the single largest cost any farmer or agribusiness owner will incur to produce market-ready animals, no matter the type.
The table below shows the most common animals bred for meat in Africa and their Feed Conversion Ratios (how much feed they need to consume to produce one kilogram of meat).
As a result of the huge demand for animal feed, nearly one billion tonnes of compound animal feed is produced in the world every year. The international trade in animal feed has an estimated annual turnover of nearly $400 billion.
This trade, which involves commercial production and sale of animal feed products takes place in more than 130 countries and directly employs over 300 million skilled workers, technicians, managers and professionals around the world. (source: IFIF)
Worldwide Animal Feed Production Pie Chart (2010) – Despite an abundance of raw materials for feed production, Africa’s contribution to global feed output is insignificant and clearly provides an opportunity for entrepreneurs. (Chart source: International Feed Industry Federation.)
What are the opportunities for entrepreneurs in Africa’s animal feed supply business market?
We have established the existence of a huge (and growing) demand for animal feed by livestock farmers who want to produce and supply meat to the local market.
We have also established that Africa as a whole is producing very little feed at the moment compared to the rest of the world.
The way it is, there appears to be only two options to satisfy the domestic need for animal feed – manufacture locally or import from foreign suppliers.
We shall take a close look at these options which have the potential to provide a lot of lucrative opportunities for African entrepreneurs.
Note: There are different kinds of animal feeds but this article focuses on ‘compound feeds’. These are feeds made from a blend of raw materials and additives.
Compound feeds can be finished feed which can be fed directly to animals, concentrates that provide a part of the ration (protein or energy only) or supplements which only provide additional micronutrients, such as minerals and vitamins.
Option 1 – Manufacture animal feed locally
Most African countries have a rich supply of the essential raw materials used in the manufacture of animal feed.
These ingredients include feed grains (like millet, soybean and corn), cassava chips, groundnuts, oilseed mill products, meat and fish formulas and special ingredients like dried coffee residues, dried citrus fruit pulp, orange rinds, as well as nutritionally-enhanced meals.
In fact, most African countries like Nigeria, Ghana, Kenya, Uganda and Ethiopia export a lot of these raw materials and ingredients to South America, Europe and Asia (especially China, Russia and Japan).
Manufacturers in these countries use these materials imported from Africa to produce animal feed and then sell back to the African market (at higher prices).
Currently, the prices of these raw materials are falling while the price of animal feed is rising rapidly. As a result, African livestock farmers are buying foreign manufactured feeds at high prices.
The high cost of feed in Africa is one of the main reasons why poultry, meat and fish products made in Africa find it very hard to compete with imported ones from China, Brazil, Europe and the USA.
If more animal feed is produced locally, the profits on livestock will improve and allow local livestock farmers to compete more favourably against imports.
However, to produce feed that meets the needs of local livestock farmers and provides the same (or better) value than imported foreign feed will require some significant investment in machinery, equipment and inventory.
Animal feed manufacuturing is a capital-intensive business. To start up, you would require machinery such as bagging equipment, boilers, conveyors, mixers, dryers, scales, extruder, pelleting equipment and grinders.
Vehicles will also be required to transort raw materials and finished products (although these can be leased when you need them).
The raw materials for making feed will also require a good amount of capital. To save costs, most feed manufacturers like to take advantage of price fluctuations of feed ingredients by buying in bulk when prices are low; or by contracting for supplies months ahead.
Most often, corn and soybean prices are the key drivers of feed production costs around the world.
It’s very important that the feed you produce meets nutritional requirements in terms of energy, protein, fiber and vitamins. Your main business as a feed manufacturer is to buy the raw materials and blend them in the feed mill according to the specifications provided by an animal nutritionist.
In this business, there is little room for error because if the feed does not contain the right nutrients, animals will not grow the amount of meat required for the farmer to make a tidy profit.
Although locally-produced animal feed faces strong competition from foreign manufactured feed, the size of the demand in the market makes room for local feed makers.
A large number of livestock farmers cannot afford foreign feeds and will gladly buy local versions which may not be as nutritious, but are cheap and very affordable. (photo credit: ag.auburn.edu)
A recent interesting development is AgriProtein, a South-Africa based business that makes animal feed from maggots. Yes, maggots produced by millions of flies on its farms in South Africa. To learn more about this interesting business idea, check out: From Maggots to Millions, How AgriProtein, A South African Company that makes millions from maggots.
Option 2 – Import from foreign suppliers
As competition tightens in their home countries, feed producers across the world are looking to high growth markets like Africa to sell their feed and many of them need local partners and distributors to penetrate the African market.
The quantity of animal feeds imported into Africa every year from Asia, Europe, South America and the USA is worth over $10 billion.
Demand for foreign feed in Africa is high. Why? Well, foreign feed is much more nutritious than locally-produced feeds and are able to produce more meat from animals.
Although they are more expensive than the local variety, some farmers are willing to bear the extra cost for the quality and higher feed conversion ratios that foreign produced feeds provide.
Entering the foreign feed supply business requires much less capital than the manufacturing option. Above all, you can play at different levels of the market depending on how much capital you have.
You could import directly from the foreign suppliers, or become a wholesaler or a retailer selling directly to the local market.
If you’re interested in finding good suppliers of quality animal feed, online marketplaces like Alibaba.com and Tradekey.com are some of the most popular platforms to meet buyers and sellers on the international markets.
Registration is usually free and thousands of interested buyers and sellers visit these sites everyday to see what’s on offer. It’s a very convenient and inexpensive way to meet potential feed suppliers on a global scale.
Some things you should consider before you start an animal feed supply business…
Before you take that leap into the lucrative animal feed marketply business…
Before you take that leap into the lucrative animal feed market, it’s very important that you consider the following points very closely…
Do you need a permit or approval?
Some African countries are starting to discourage imported feeds (through high tariffs and bans) in order to protect and stimulate local production.
Does this apply in your area? You need to confirm if there are any legal or government restrictions that may prevent you from doing this business.
If you’re interested in manufacturing feed locally, you’ll need to check with the local authorities for any health, safety or environmental approvals required.
What are the needs of your target market?
There are feeds for different livestock and this determines the demand in any market.
What does your target market need?
Are there more pig farmers in your country than fish farmers?
Do the poultry farmers in your target market produce more layers (for eggs) or broilers (for meat)?
The feed requirements will differ depending on the type of livestock the farmers in your location are raising.
Quantity and quality is another major factor to consider. Does the market want to buy feeds in large or small quantities based on what they can afford?
Do they prefer to buy and stock feeds or do they prefer to buy in small quantities as the need arises?
Understanding the needs of your target market allows an entrepreneur to start a business that has a better chance of success.
How strong is the competition?
There’s nothing complex about the feed business (especially the foreign feed supply part) and anyone with enough capital can start a business in this market. You need to take a close look at your market and find out who the current feed suppliers are.
Are there many of them or just a few?
Are there different feed brands or just one major type?
What do consumers say about the brands in the market? Are they satisfied or won’t mind trying something better?
If you find that your target market is underserved, it’s often a good sign of a lucrative opportunity you can exploit. On the flip side, taking the existing competition for granted can push you out of business.
The animal feed supply business in Africa is a big opportunity
Animal feed production and supply will play a significant part in Africa’s future. All the present and predicted factors (like fast population growth and rising consumption) are expected to lead to a vibrant and lucrative livestock market in Africa.
As we mentioned above, animal feed is the single most important element in livestock farming.
If you believe this business will work for you, it’s important that you start working on a business plan as soon as possible. You could also choose from many more amazing business ideas in the Business ideas section of this website.
We would love to hear from you about your successes, challenges, advice and questions. Do not forget to leave a comment in the section below and share this opportunity with your friends.
To your financial success!
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