LOS ANGELES, Calif. (PRWEB) — The Animal Food Production industry benefited from increased demand during the past five years. Growth in global meat consumption and herd stocks, such as beef, pork and poultry, produced modest revenue gains during this period, as meat producers consequently demanded more livestock feed. The number of American households that owned a cat or dog reached an all-time high at the end of 2012, according to the American Pet Products Association. This rise in pet owners caused a subsequent increase in demand for pet foods, boosting demand for industry products and driving revenue growth. Overall, IBISWorld expects industry revenue to grow at an average rate of 1.8% per year to $56.5 billion during the five years to 2013. In 2014 alone, revenue is anticipated to increase 7.7%.
Operators often use corn and soybean inputs for feed production. The shared usage of these industry inputs in biofuel and livestock feed production, coupled with the increased demand from both sectors, caused feed prices to rise during the past five years. To offset higher feed costs, producers invested in new equipment in order to raise product efficiency and the volume of feed produced. Despite rising feed costs, which hampered profitability, production efficiencies enabled industry profit to expand. Attracted by higher profit margins, as well as increased demand from downstream markets, the number of enterprises increased at an average annual rate of 1.3% to 2,667 during the five years to 2013.
Looking ahead, the industry's future prospects appear optimistic, with faster revenue growth anticipated through the five years to 2018, compared with the previous five years. Forecast increases in disposable income and pet ownership will positively drive demand for pet food. Exports are also anticipated to grow during this time, as emerging markets expand and world demand for meat and animal feed increases. Advancements in crop technology and alternative energy sources, combined with product innovation, are projected to reduce input price volatility. Consequently, industry revenue is forecast to grow during the five years to 2018.
The Animal Food Production industry has a low level of concentration. The top four companies in this industry are Cargill Inc., Mars Inc., Nestle SA and Archer Daniels Midland Company. The industry has experienced a slight increase in concentration since 2008 due to increasing demand for pet food. Because consumer spending on pet food has escalated since the recession, many producers responded by switching production lines from livestock feed to pet products. Merger and acquisition activity by major players such as Cargill, ADM and Mars is expected to occur during the next five years as they attempt to cut production costs and increase profitability.
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