Projecting international demand for and supply of protein feed.

Abstract

South African imports of protein feed (oilcake or meal) increased 210% from 1990 to 1998/1999. Over that same period local production increased by only 14% and imported protein feed now accounts for over 50% of local requirements at an estimated annual import cost of about R1 billion. Internationally, protein prices reached high levels in 1996/97 following increased Asian demand but then fell considerably in response to the Asian financial crisis and increased supply. The South African Protein Research Trust, who invest in research aimed at stimulating the local protein industry, are interested in the most likely long-term trends. Projections of world meal prices and local protein requirements under a variety of scenarios indicate the possible cost of future imports and the potential for local production. These can help strategists to make informed decisions when evaluating plans that impact on future production capacity. Two interactive spreadsheet models have been developed which estimate protein usage and price under various scenarios and thereby serve as a decision support system. The first model projects future world supply of and demand for oilcake and calculates equilibrium price and consumption using estimated price elasticities of demand and supply. Demand projections are driven by estimated population and income growth while supply is forecast based on past production trends. The model incorporates dynamic income elasticities of demand that decline with rising real incomes. Assuming a 3% annual growth in supply the model forecasts that real price for protein meal will remain relatively constant at 1999 prices to 2020. However, if supply increases linearly price is forecast to increase 22% by 2020. Developing Asia, notably China, accounts for most demand growth and projections are sensitive to income growth assumptions for China. A second model estimates South African consumption of oil cake to 2020 Novel features of the model include: the price of protein is endogenous as it is generated by the international model; it incorporates estimated rates of technological progress in livestock production, and predicts the resulting real price change and; use is made of declining income elasticities of demand. Population growth projections include the estimated effect of AIDS which could reduce population growth rates by killing adults and children and reducing fertility amongst women who are HIV positive. Total protein consumption in 2020 is projected at 1.54 million tons (a 24% increase from 2000) under low income growth and 1.96 million tons (a 58% increase from 2000) under high income growth. Declining broiler, egg and pork product prices (projected to decline in real terms because of expected technological advances) contribute to increasing protein usage even in the absence of significant real income growth rates. Population growth remains the most important demand driver and scenario analysis reveals that alternative population growth rates impact significantly on projections.