Starch & Fermentation

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The competitiveness of wheat gluten and corn gluten meal vs. other aquafeed

March 2016

Aquafeed – A growing outlet for wheat gluten and corn gluten meal?

Global consumption of fish and crustaceans has grown dramatically over the last 30 years driven by expanding population and rising incomes (Diagram A). The overwhelming majority of this growth has come from farmed fish (aquaculture) as volumes of wild-capture fish have remained flat since 1985 (Diagram B).

Over the same period, aquaculture output has grown at around 7.5% per year, to the point where it is now a bigger food source than beef production. Looking forward, this trend is set to continue, further encouraged by declining fish stocks and ever-stricter fishing quotas for wild capture.

The recently released LMC study entitled ‘Aquafeed to 2025: Securing the feed for rising seafood production’ discusses the evolution of

Diagram B: Wild capture and aquaculture output

1950 1960 1970 1980 1990 2000 2010

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Captur e Aquaculture

the sector so far and provides a detailed outlook of the prospects for the industry over the next ten years. The study projects the growth in farmed fish, by species (globally and by region), and in demand for fishmeal and a range of substitute aquafeed products. The result is a clear and unique view of the outlook for the sector, how it will develop, and where the challenges and the opportunities will lie. The study consists of a written report and an accompanying Excel data set and model. These allow the user to examine the forecasts in greater detail.

In this issue of the Starch and Fermentation Analysis, we draw upon the findings of the study to discuss the role of wheat gluten and corn gluten meal (CGM) in this increasingly important outlet for vegetable proteins.

Diagram A: Global production of meat from selected sources

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

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Aquaculture Beef Pork Poult ry

Page 2 © LMC International Ltd, 2016 Starch & Fermentation Analysis: March 2016

Diagram C: World fishmeal production vs. price

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1984 1994 2004 2014

Fishmeal price (U

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Produ ction Price

Declining fishmeal availability

Fish consumption is unique among meat sources in the extent to which it is still reliant on capture production. Since 1985, however, wild capture of fish has remained approximately static as shown in Diagram B. This has been due to the decline in the capture of industrial fish, such as herring and anchovy, which are processed into fishmeal. Most other fish categories have increased production to compensate for the stable wild capture. While it is not expected that the capture of industrial fish will recover, improved fisheries management through quotas should allow it to remain level.

To meet demand for fish for human consumption, the world has become increasingly dependent on aquaculture production. Demand for aquaculture has been driven by both increased consumption of luxury seafood (such as salmonids and crustaceans) and by demand for cheap bulk white fish (such as carp, catfish and tilapia). While capture production has plateaued, aquaculture has grown exponentially. Our projections indicate that, within three years, aquaculture will exceed capture production of fish.

Fish species rely, to varying degrees, on fishmeal in their feed as a source of essential amino acids. The collapse in the capture of industrial fish coincided with a period of rapid growth in demand for fishmeal. This has placed the aquaculture industry in a bind, with stationary fish capture both decreasing the availability of fishmeal, a crucial feed ingredient, while simultaneously increasing demand for fish from aquaculture. The result has been a rapid increase in fishmeal prices (Diagram C), which has rationed use of this product in all other end-uses (Diagram D).

What are the alternatives to fishmeal?

As a result of the higher fishmeal price, many of the advances in aquaculture over the past 30 years have focused on reducing the cost of aquafeed by better targeting this to the fish.

Because of their physiology, fish have a much higher proportionate requirement for protein compared to energy than land animals. Protein, however, is an expensive ingredient so improvements in aquafeed have focused on trying to replace proteins with carbohydrate or lipids, and cheaper sources of protein. Indeed, vegetable proteins such as wheat gluten and CGM (as well as products of the soy complex

such as soy protein concentrate and isolate) are all used extensively in aquafeed rations because they are cost-competitive compared to fishmeal (Diagram E). The problem, however, is that the aminoacid and fatty acid profiles of alternatives to fishmeal does not necessary meet the requirements of fish for these nutrients and this needs to be taken into account when formulating aquafeed.

Indeed, fishmeal is the aquafeed par excellence as it is not deficient in any of the key nutrients; in addition, it is easily digestible and palatable. Because of its superior nutritional profile, it commands a high price, even when its protein content is taken into account (Diagram E). The challenge for the aquafeed sector has been to develop alternatives which can approximate the nutritional profile of fishmeal.

The role of starch co-products in aquafeed

Processed plant proteins such as wheat gluten and CGM have a good nutritional profile.

Diagram D: Fishmeal consumption by sector

2000 2005 2010

Aquaculture Pig Poult ry Ot her

Starch & Fermentation Analysis: March 2016 © LMC International Ltd, 2016 Page 3

Wheat gluten is the vegetable protein that most closely approximates the amino acid profile of fishmeal. The one exception is lysine, in which, like all cereal proteins, it is deficient. It has no antinutritional factors and there is no physiological limit on the inclusion rate. However, wheat gluten is highly priced. Even taking into account its high protein content it is still among the highest priced protein sources, limiting its inclusion rate.

CGM by contrast is competitively priced and has a high protein content. However, its lysine content is too low to meet most species’ requirements. Its main value is as a source of methionine in blends with other protein sources.

Diagram F reveals that different fish species have different protein requirements with carnivorous fish needing higher inclusion rates of proteins than omnivorous fish such as carp. In addition, carnivorous fish tend to have a discriminating and demanding palate, which poses challenges to feed formulators. In the carnivorous diet, both wheat gluten and CGM are small but crucial ingredients. Wheat gluten, in addition, has important functional properties as it acts as a binder to help increase the water stability of the feed. This is particularly important as fishmeal and other marine proteins are difficult to turn into pellets. Wheat gluten is also used as a binder in shrimp and prawn feed.

Outside of aquafeed for carnivorous species, corn gluten meal is used in carp feed, where it has good digestibility. China is currently the largest user of corn gluten meal in its carp sector.

Wheat gluten use in aquafeed

Wheat gluten is a co-product of wheat wet milling. In addition, it is also obtained from wheat processing in some dry milling plants.

Global wheat gluten output is estimated at around one million tonnes. Europe, namely the EU, accounts for just below 70% of world output (Diagram G); it is followed by China at 15-20%. Other regions accounts for very small portions of production.

The main outlet for wheat gluten is as a bread enhancer. Its use is very large in Europe where it is mainly used to enhance the breadmaking characteristics of locally grown wheat.

Currently, aquaculture absorbs 20-25% of global wheat gluten supply; however, this share varies significantly between regions ranging from a relatively small portion of total consumption in Europe (where it is used in the salmonid sector), to at least 70% in some parts of Asia, where wheat gluten is used as a binder in the large shrimp and prawn sector.

Corn gluten meal use in aquafeed

CGM is obtained from corn wet milling. Its output is much larger than that of wheat gluten and is estimated at over 4.5 million tonnes per year. China is the largest producer (Diagram H), owing to the size of its corn starch processing sector. It is followed by the US.

Unlike wheat gluten, CGM is not used in food applications. Its largest market is the livestock feed sector, where it is valued for its relatively high protein content. Aquafeed, however, is also an important outlet for CGM and currently accounts for 0.85-0.90 million tonnes of its use globally. China takes the lion’s share of this. As mentioned above, this ingredient is used in the

Diagram F: Protein requirements of selected fish species

Carp

Catfish

White leg shrimp

Tilapia

Rainbow trou t

Atlantic Salmon

Giant Tiger Prawn

Kuruma prawn

Barramundi

Seabass/Seabream

Recommended dietary protein level for fish at grow out stage

Diagram E: Price of main protein sources on a protein basis

US$/tonne

Price, prot ein basis Price, commercial

Page 4 © LMC International Ltd, 2016 Starch & Fermentation Analysis: March 2016

diet of carp, of which China is the largest producer. This fish (alongside other low value fish such as tilapia and catfish) is very popular in low income markets as it is resilient, thrives on a variety of diets and it is able to survive out of water for relatively long periods. This allows it to be distributed live (a useful attribute in places lacking refrigeration).

The prospects for wheat gluten and CGM in aquafeed

Production of fish from aquaculture has grown exponentially over the last 30 years due to a combination of decline in wild fish stocks and rising demand for luxury species (such as salmonids and crustaceans). The latter species, being carnivorous, have a high requirement for proteins in their diet. As availability of industrial fish has declined, the industry has become increasingly reliant on alternative protein sources. Among the co-products of the starch industry, wheat gluten and CGM are important ingredients in aquafeed rations.

Looking forward, demand for fish for human consumption will continue to grow rapidly. In

particular, we forecast low value white fish and crustaceans to witness the fastest growth rates. These developments will drive expansion of the aquafeed sector, which we project to grow at a healthy rate of 4-5% per year over the next decade (Diagram E).

Other things being equal, this growth will place an unsustainable burden on fishmeal supplies and further drive up the price of this key feed ingredient. However, we expect aquafeed producers to continue to reduce inclusion rates of fishmeal in order to contain costs. Meanwhile, the need to replace fishmeal will create large demand for substitute proteins.

Demand for wheat gluten is projected to expand. However, it will remain an expensive feed ingredient, which means that it will predominantly be used as a binder. Ensuring the stability of the feed is a particular issue for shrimp feed as it is consumed slowly and therefore its water solubility needs to be controlled. While wheat gluten is used as a binder in white leg shrimp production, which will grow rapidly, it also has a large use in salmonids culture which will expand in Latin America, the EU and other Europe.

Corn gluten meal use will expand as it is included as a cheap protein source and binder. While its lysine content is too low to meet most species’ requirements, it is a good source of methionine. Therefore it is likely to be used particularly in blends with soy protein concentrate which is deficient in methionine. In addition, the use of corn gluten meal in carp feed means its consumption will grow rapidly in China.

Diagram G: Geographical distribution of wheat gluten output

Australia

China

Eastern Europe

EU

Latin America

North America

Diagram H: Geographical distribution of corn gluten meal output

China

North America

EU

East Asia

South East Asia

Latin America

South Asia Rest of the world

Diagram I: Growth in the aquafeed market to 2025

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Ot hers (marine pro tein, lipids, etc) Carboh ydratesVegetable protein Processed animal protein