Rabobank: Aquafeed Industry Should Change Strategy to Win Competition, Offset Overcapacity

The aquafeed industry should consider new strategic\r\ndirections that can "potentially have a much larger impact on their\r\nperformance financially", Rabobank argued in a new report.

After years of growth, the aquafeed industry is experiencing\r\na deceleration, with increasing overcapacity in nearly all key markets\r\nglobally, the bank pointed out. Intensifying competitiveness, lower\r\nprofitability, and slower aquaculture growth than achieved historically also\r\nrepresent challenges for the industry's development, Rabobank's report\r\nhighlighted. 

In recent years, the main strategy deployed by aquafeed\r\nplayers has been to try and produce functional feeds, a way to reverse the\r\ncommoditization of aquafeed by adding medicinal or other functions to the feed.

For example, in the salmon industry, functional feed can\r\nincrease salmon resistance to sea lice. In other industries, such as shrimp,\r\nfeeds able to accelerate growth rates can be marketed as functional feed,\r\nalthough there is no universally accepted definition of what functional feed is\r\nexactly.

And it is not always clear to farmers what the additional\r\neffect of functional feed has been, due to many conflicting variables. Many\r\nrefuse to pay the premium price, making this strategy only partially successful\r\nfor the aquafeed industry, Rabobank said.

The bank argues in its new report that there are four other\r\ngeneral strategic directions which aqua feed companies can take, or choose\r\nfrom, even though saying there is nothing wrong in producing feed which is\r\ndesigned with a certain functionality.  

Digitalization, data,\r\nautomation

Emerging technological innovations are often developed by\r\nsmall startup companies or producers in developing countries who struggle to\r\nfind capital to scale up their production or implement the systems. Aquafeed\r\ncompanies "can be instrumental in accelerating the adoption of\r\ntechnologies, not only through partnerships for joint research and development\r\n(R&D), but also through investments into selected innovative\r\ncompanies", Rabobank said. In this way, they could offer new technologies\r\nas part of their product.

The combination of feed, data, and aquaculture farming\r\ntechnology can be one of the key drivers of growth and efficiency improvement\r\nfor the industry, the bank pointed out. 

Another area in which feed suppliers might focus on is the\r\nadoption of a "multi-platform" strategy, combining animal health and\r\nnutrition to combat disease and parasites in aquaculture. strategies.

The combination of feed with one or two other inputs can be\r\na "powerful way to create value for farmers and improve the profitability\r\nof input suppliers", according to Rabobank.

However, a key challenge for aquafeed players is the\r\ndifficulty in finding appropriate acquisition targets specialized in aquatic\r\nanimal genetics or health products, as both of these sectors are either already\r\nconsolidated or they are very small local players. 

New aquaculture\r\nfrontiers

A third area of potential growth for feed suppliers is the\r\ninvestment in novel feed ingredients, an area of rapid innovation.

These could be based on algae fermentation technology,\r\nproducing algae oil as a replacement to fish oil in salmon feed, or on\r\nmicrobial proteins, bacteria grown on various substrates, such as methane gas,\r\nto produce a high-quality protein to replace fishmeal and soymeal ingredients\r\nin aqua feeds, Rabobank said. Novel proteins and oils are also produced from\r\nwaste or offal from food and beverage production. These waste streams are used\r\nas a feedstock for farming insects, such as the black soldier larvae, which can\r\nbe processed into high-value feed proteins used in aquafeed.

Combining feed with a range of complementary inputs, such as\r\ngenetics, animal health products, data analysis solutions, hardware, and farm\r\nmanagement software can help to extract previously unobtainable synergies,\r\naccording to the report. 

There are also novel ingredients that can replace\r\nantibiotics, such as bacteriophages, which have virtually none of the drawbacks\r\nof antibiotics, the bank said. Rabobank noted that, despite the huge potential,\r\nonly a few direct investments have been done by aquafeed suppliers, with the\r\nexception of Cargill. 

The fourth direction to for feed companies to drive the\r\n"frontiers of aquaculture" is to collaborate in the development of\r\nnew farming technologies, such as recirculating aquaculture systems (RAS),\r\noffshore aquaculture and with new species. 

Here too, aquafeed companies can play a role as an investor\r\nand technology partner, opening many new avenues for growth in aquaculture,\r\nRabobank said. In many cases, especially since RAS requires specialized feed,\r\nthis will require the participation of the feed industry, at least as a\r\ntechnical partner.

Rabobank stressed aquafeed players are well-positioned to\r\nact as investors in a number of rapidly evolving aquaculture technologies,\r\nranging from novel ingredients to new farming techniques, such as recirculating\r\naquaculture systems or offshore aquaculture.

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By partially transforming into aqua-technology suppliers or\r\naqua-venture capitalists, feed companies may be able to enter the higher-growth\r\nand higher-profitability segments of the aquaculture inputs industry and drive\r\nthe growth of the entire aquaculture industry, Rabobank said.

Source : Undercurrent News