1 NSW Agriculture, Wagga Wagga Agricultural Institute, Wagga Wagga, NSW 2650 (firstname.lastname@example.org)
2 NSW Agriculture, Yanco Agricultural Institute, Yanco, NSW 2703 (email@example.com)
3 NSW Land and Water Conservation, Sydney, 2000 (firstname.lastname@example.org)
Canola meal is a significant component of livestock feed in Australia, and is a rich source of protein for livestock. Its usage has been growing rapidly in recent years, with the increase in availability as a result of increases in canola production and processing. In this paper, the role of canola meal as a feed source is analysed. The aim in the paper is to assess the current impact of canola meal as a feed and the likely impact of future changes in availability and price of canola meal. Using a least-cost feed ration approach, the impacts of changes in price of canola meal are analysed for different livestock industries. The feeds that are replaced as the amount of canola meal used increases are also identified. Using the same analytical approach, the extent to which increased future supplies of meal could be absorbed by the livestock industries is also examined, and some limits are defined. The findings in this paper have implications for the future use of canola meal as a livestock feed in Australia, and ultimately for the canola production and processing industries in Australia.
KEYWORDS Value, Economic, Nutrition, Demand, Price
Canola meal is a significant component of livestock feed in Australia. Its usage has been growing rapidly in the recent years in Australia, with the increase in availability as a result of increases in canola production and processing. The processing industry has also been expanding. The increased availability of canola meal reflects the increased supply of canola oil in the market and the local processing of canola. Although meal is a by-product, the demand for canola meal has had a significant impact on the overall profitability of the canola crop that has ultimately assisted canola oil to compete in the market.
Canola meal is being used as a feed in the livestock industry because it is a rich source of protein. In that role, canola meal has to compete with other grains or meals that also provide protein. The usefulness of canola meal for the livestock sector can be further increased either by improving its quality (including its protein content) or by reducing its price so as to make it a more competitive feed. Since it is a by-product with a lower price than oil, it will be not economical to increase its share at the expense of the oil content in the seed.
While research can be undertaken to increase the nutritional value of the meal, one key way in which canola meal can be made more competitive is to reduce its price to the livestock sector. With the increases in production currently taking place, the supply of canola meal is likely to increase substantially. The aim in this paper is to assess the current role of canola meal as a feed in Australia and to assess the increase in demand that is likely to occur if the price falls with the increase in production of canola.
The impact of changes in supply and a reduction in price for canola meal was analysed using an aggregate national-level linear programming least cost feed mix model (Brennan, Singh and Singh, 1999). The model includes four poultry, three pigs and five ruminant industries (for details see Hafi and Andrew 1997) and considers 43 feed ingredients and estimates the least cost balanced feed rations for 12 livestock industries simultaneously.
The information the nutritional requirements of different livestock categories, and any relevant nutritional constraints, has been provided by Tony Edwards, an animal nutritionist, of ACE Livestock Consulting Pty Ltd. The data on availability of different feed grains and their prices were obtained from ABARE (Ahmed Hafi, personal communication) and Australian Bureau of Statistics.
A reduction in canola meal price will not only lead to increase in its demand but will also reduce the feed costs for different livestock industries. The impact of increased use of canola meal can be defined by its impact on the least cost feed rations for different live stock categories. The feeds that are replaced as the amount of canola meal used increases can also be identified. Using the same analytical approach, the extent to which increased future supplies of meal could be absorbed by the livestock industries is also examined.
At present, with a price of $220 per tonne for meal, the livestock sector uses approximately 0.416 million tonnes of canola meal annually. The impact of a change in the canola meal price at $40/t intervals from $100/t to $340/t is shown in Table 1. At $100/t, demand increases to 1.025 million tonnes, while at $340/t demand falls to zero. For all prices above $315/t, the livestock sector ceases to use canola meal. At the same time, total feed costs increase as the price increases, so that there is a saving on current costs of $96 million if the price were to fall to $100/t, while an increase above $220 would lead to an increase in total feed costs. The availability of current levels of canola meal at $220 per tonne means that feed costs are $23.2 million lower than if canola meal were not available.
Table 1: Impact of Canola Meal Price on Usage and Feed Costs
Canola Meal Price Consumption Total feed cost Change in cost
($/t) ('000t) ($million) ($million)
$100 1025 1427.6 -96.3
$140 1006 1468.5 -55.4
$180 786 1505.3 -18.6
$200 416 1515.6 -8.3
$220 416 1523.9 0.0
$240 329 1531.7 7.8
$260 289 1537.9 14
$300 44 1546.6 22.7
$340 0 1547.1 23.2
Of course, not all of the livestock industries are equally affected by the availability of canola meal. In Table 2, the usage of canola meal by different livestock industries is shown. At the current price of $220/t, Broiler (Finisher), Pig (Grower/Finisher) and “Other livestock including horses” are the main users. If the price were to fall to $140/t or less, Dairy and Feedlot beef would be the main users of canola meal. As the price increases from current levels, the last industries to cease using canola meal would be Broiler (Starter) and Layers.
Table 2: Consumption of Canola Meal by Industry at Different Price Levels
Canola Meal Price ($/t)
$100 $140 $180 $220 $260 $300 $340
Broiler - Starter 18 18 18 18 18 18 0
Broiler - Finisher 103 103 103 103 103 9 0
Layers - Pullet 9 9 9 9 9 0 0
Layers 16 16 16 16 16 16 0
Pig - Weaner 19 19 19 19 11 0 0
Pig - Grower/Finisher 102 102 102 102 102 0 0
Pig - Breeder 29 29 29 29 29 0 0
Dairy 310 310 310 0 0 0 0
Feedlot Cattle 252 236 31 0 0 0 0
Live Sheep Exports 18 15 10 0 0 0 0
Grazing Ruminant Supplement 20 20 20 0 0 0 0
Others - Including Horses 128 128 118 118 0 0 0
Total 1025 1006 786 416 289 44 0
At the lower prices, canola meal largely replaces barley and lupins in the livestock feed mix. At the higher price levels, canola meal largely replaces cottonseed meal and oats.
The findings in this analysis have implications for the future use of canola meal as a livestock feed in Australia, and ultimately for the canola production and processing industries in Australia. Even at prices below $100/t, there would be no more additional demand for canola meal by the Australian livestock sector (at current livestock numbers). Thus it is apparent that with the present nutritional composition of the meal it is unlikely that there will be a market for canola meal in Australia much beyond 1 million tonnes per year. Therefore, as the production and processing of canola increases beyond that point, export markets will need to developed for canola meal or genetic improvements will need to be made in the quality of the meal to increase its demand in the livestock industries.
1. Brennan J.P., Singh R.P, and Singh I.P. (1999) "Economic Issues in Assessing Research Priorities in Feed Grains Nutrition" Contributed paper presented at the 43rd Annual conference of the Australian Agricultural and Resource Economics Society, Christchurch. NZ
2. Hafi, A. and Andrews, N. (1997), Regional Feed Markets in Australia, Report prepared for the Grains Research and Development Corporation.