A year ago, I described what I thought were the “Top 10 Trends to Watch in 2008” (see February 2008 Render). In many ways, 2008 was a very special year with soaring highs and depressing lows. I have revisited the list and once again made educated guesses on impacts to the U.S. rendering industry in 2009.
Most of these are long-term impacts that are not dispatched in one year, even a foundation-shaking year like 2008. However, the impact of today’s economy is now the overriding factor in almost every conversation. Rather than add a new “number one” and move everything else down a notch, let’s go through the list and see how each item may change in the new shaky economic world, otherwise known as a global recession. I won’t quibble with the order and ranking, it may be a little different for each of us, but few can escape the impact of the following.
1. Increased ingredient scrutiny: As producers, processors, and others in the feed/food chain struggle with economic survival, there will be pressures to cut corners, defer maintenance, buy cheaper ingredients, and take chances. The pressures on animal feeds from recalls, customer expectations, and traceability requirements will likely intensify. This will continue to increase pressure for disease control, validation of methods, equipment monitoring, and a higher level of quality control.
There will be closer scrutiny on commodities and ingredients. The North American Rendering Industry Code of Practice program will continue to positively impact the safety, quality, and reputation of rendered products. Some will be tempted to forgo this cost, but that may be shortsighted.
2. Challenges from “organic” and “natural” food programs: The market share of these niche programs may not grow in times when consumers are cutting spending. The sales of these higher-cost products may flatten or even drop in 2009, but the longer term trend will likely survive. Properly processed meat and bone meal, feather meal, and blood meal have long been considered high quality proteins and using these products in meat production is necessary for meat production to be sustainable. The rendering industry should consider 2009 as a bit of a breather in order to catch up with this trend. Improvement needs to continue through the code of practice and similar programs, so when the economy improves and these product lines resume their growth, rendered products are included.
3. The “Greening of America”: This is another trend that will slow down in some circles because of cost, but may accelerate in other circles because of politics or emphasis in economic stimulation. The rendering industry needs to stay on top of it and explain the positive role of rendering.
Without renderers, it would be necessary to discard or dispose of animal by-products and mortalities in community landfills, compost piles, burial sites, incinerators, or, worse, left in illegal dumping places, causing a potential public health hazard. Each of the alternative methods has several limitations with respect to animal by-product and mortality disposal, with limited space being the most obvious. The new Food and Drug Administration feed rule prohibiting certain cattle materials from animal feed will awaken some sectors to this dilemma.
At the same time, renderers will be expected to control odor and meet more stringent rules on emissions as well as more stringent wastewater treatment limits.
4. Energy costs: It did not take a rocket scientist to predict that energy would be a key impact for rendering in 2008, and some correctly declared that crude oil at $140 a barrel was a “bubble,” but nobody saw a 70 percent drop in fuel costs. The new markets and increased values for fats and oils going into biodiesel quickly disappeared. This latest cycle of low energy prices is likely to be short-lived, particularly when the economy picks up again.
Attention to conservation and plant management will be important. We have not seen the end of high energy prices, so be prepared. We have also not seen the end of price cycles in energy or any other commodity, so be prepared also for volatility.
5. Same old “not in my backyard” speech: Rendering is commonly misunderstood and unwelcome in many places as “not in my backyard” pressures continue. Emphasis needs to be on the essential nature of the business as well as economic impact for livestock producers, etc. Good neighbor policies are effective, and the rendering industry will have to work hard to meet environmental expectations while positioning as a solution for broad biosecurity challenges of society and animal agriculture. The economy is not likely to have an impact on this attitude; certainly any relief on this front will be short-lived.
6. A new administration is now in charge: One of the longest lasting, most impactful events of 2008 was the presidential election. So far, Barack Obama has shown himself to be prag-matic and centrist in cabinet picks. He plans to launch the biggest economic stimulus package ever, and this could selectively impact sectors such as environmental technology more heavily than others. As Congress searches for ways (other than debt) to finance these initiatives, the current low energy prices may be a tempting backdrop in which to establish higher fuel taxes.
7. Research innovations: Research and development will continue to drive progress in the industry and will become more important in inevitable future tough times. In the big picture, research and innovation may actually be impacted in a positive way (or at least neutral) by the economy. Natural tendencies to pull back on research investment in tough economic times will likely be offset by a commitment by the new Obama administration to innovation, particularly in environmental areas. However, it may be difficult to get direct benefit to rendering research from these initiatives, so direct investments by renderers will continue to be essential.
8. Gradual opening of trade for U.S. rendered products: This has recently been fueled by the global demand for protein and the growing Chinese economy. With commodity prices waning, renderers cannot depend on the rising demand and cost of feed proteins to overcome the non-tariff trade barriers – the convenient but unscientific animal and human health excuses countries use to prevent imports of U.S. and Canadian rendered products. The rendering industry will need to continue to push for fair trade and scientific determinations of safety to open markets. Efforts to open international markets will be even more important in this economy.
9. Increased usage of rendered products: Protein meals will continue to enter new markets such as aquaculture. Rendered proteins are a viable replace-ment for high priced fish meal that is mostly a result of fish availability in the oceans rather than the economy. The availability of raw materials hinges on continued growth of livestock industries, and those are being buffeted by volatile production costs and waning exports.
The total meat and poultry produced in the United States has grown over the long-term, but that trend may take a respite with the global recession. Raw material for rendering could peak temporarily as breeding herds are thinned, and then the livestock base for raw materials and feed demand will be smaller after production is reduced.
10. Workforce issues: The continued development of employment rules for both health and well-being reasons and immigration will pressure the rendering industry as well as its customers and suppliers. Congress may, at last, in the next few years come to a long-term solution to immigration that will create more stability in the workforce, but action may be delayed until other priorities are legislated. A higher unemployment rate may make it easier to find qualified workers, at least until the end of this recession.
Tech Topics – February 2009 RENDER | back