The Surge of Animal By-products

By Gert Mulderij
Marketing and Sales Director, Vion Ingredients

The traditional proportions of prime cuts, processing cuts, and animal by-products in total carcass value seem to be reversing due to economic as well as cultural factors. This shift in value will continue as innovation and acceptance of animal by-products increases and specialized processing companies lead the way to more added-value ingredients for pharmaceutical, food, and feed applications.

In the meat industry, main cuts of carcasses are taken from the four quarters that provide prime and processing meat. The remainder of the carcass, the fifth quarter, can then be used for several other ends outside the meat market like functional proteins, pet food, and feed ingredients. Traditionally, the prime meat cuts have been valued the most due to the highest sales price and worth in the western countries and highest contribution to the total weight of carcass in comparison to the cuts used for further processing and the fifth quarter. The latter are perceived to be of lower quality, especially because these parts are not included in conventional diets in the United States and Europe.

However, Rabobank International recently published a report on the return of animal by-products that describes the valuation of carcasses is reversing, with the relatively high share of total carcass valuation shifting from prime cuts to processing cuts and animal by-products.1 There are several indications that the perceptions of value are evolving with a major change from 2009 onward. In the last couple of years, the prices for the less important pork cuts rose significantly faster than the average carcass value, whereas the prime cuts are even underperforming. Another indication comes from the export numbers. The export price per kilogram of fifth quarter products has risen strongly. For example, the price for pork by-products doubled in 2011 in comparison to 2003.

Cause of Reversed Valuation
These sharp rises and changes in value are caused by several factors. On the one hand, a partial explanation can be found in the economic recession. Cheaper alternatives are sought for several products, including the consumption of meat. More expensive fresh meat is traded in for processed products and proteins that are perceived to provide more value. On the other hand, the wealth in Asia is increasing. This rise in purchasing power has made a change in diet possible. Instead of being grain-based, meals are now based on meat. This trend is supported by the 2011 Euromonitor report on food, which indicates a global increase of fresh meat consumption. This seems counterintuitive at first sight because in Europe this number is static and even declining in North America. Therefore, this change is evidently coming mainly from Asia. Furthermore, in contrast to western diets, fifth quarter meat products in Asia are perceived as delicacies. Consequently, the value there is five times the value an animal-by product has in Europe. What is more, the (partial) opening of the Chinese market causes an increase in export.

Another explanation is the increase in applications of the meat. Due to technological advances and increasing knowledge, the potential of animal by-products is expanding rapidly. These developments further augment the safety of the feed chain and have put animal by-products back on the agenda. For example, since June 2013, processed animal proteins (PAPs) are officially allowed again for aquafeed in Europe. As a 2012 report by the Food and Agriculture Organization of the United Nations estimated a 15 percent growth of fisheries and fish farming by 2020, PAPs provide a welcome alternative to fish meal and oil.2 The use of these animal by-products contributes to sustainability because it provides a natural source of proteins and it contributes to intelligent waste management.

Besides the approved functionality of PAPs for aquafeed, the effect of proteins in other applications has long been established. A decade ago, the use of pork collagen protein was proven to increase the functionality of minced meat and sausage production. Despite these results, the use of animal by-products in Europe has been silenced for a long time. Now times seem to be changing and there appears to be an increasing demand for better emulsifying proteins. Next to the processing of animal proteins from fifth quarter products exist numerous other applications for animal by-products that continue to evolve due to technological innovations.

Increasing Competition
Due to the rise in value of animal by-products and the technological advances that bring along a broadening of applications, an accumulation in competition in the by-product processing industry is expected. Slaughterhouses are also likely to focus more on the fifth quarter, possibly expanding their activities to rendering or establishing partnerships with companies from the industry.
However, following the trend from previous years, it is expected that companies dedicated to the processing and marketing of animal by-products will further emphasize on a broader variety of applications. Due to their focus on these markets and established relationships with their customers, these dedicated companies seem to be in the best position to realize the highest value added for animal by-products. With rising competition, alternative approaches for the dedicated animal processing companies should be sought in order to maintain leading positions in their markets. Collaborations and partnerships are expected to pave the way and together with technological developments focusing on unique product developments, seem to be the only road to success.

1. Rabobank International. The Return of Animal By-Products: Is the Carcass Valuation in the Meat Industry Reversing? The Netherlands: Rabobank Industry Note #355, December 2012.

2. Food and Agriculture Organization of the United Nations. The State of World Fisheries and Aquaculture 2012. Rome: Food and Agriculture Organization of the United Nations, 2012.

August 2013 RENDER | back