by Thomas R Zeigler, PhD, Senior Technical Advisor; Matthew P Zeigler, MS, VP Operations & Process Engineer; Sidinei Valle, Manager–Global Franchising Business Development & Operations, Zeigler, USA

 

Summary

Integration in the animal feed manufacturing industry is a common practice. Integrations take place backwards (feed and seedstock production) or forward (processing and marketing of branded products). The decision to integrate an existing aquaculture production operation into manufacturing its own feeds is a significant undertaking that merits serious consideration, analysis and evaluation of options, and due diligence. Various risks must be carefully considered, and significant benefits to be achieved. It is important to consider early on the selection of qualified advisors.

 

Introduction

Integration is a common practice for many businesses that grow and produce animals as food for people around the world. In general, integrations can occur along the production value chain as backward integration into the production of feed or the production of seed stock, or forward integration into processing and marketing of branded products. In the United States, this practice has been on-going for close to 50 years, especially in the poultry business.

In the aquaculture industry, there are numerous examples worldwide where feed production has been successfully integrated into businesses producing fish and/or shrimp. Even though feed manufacturing may not be for everyone, the most talented and ambitious business managers do consider and evaluate this opportunity at some time.

In this article, we introduce our Zeigler Bros Inc (ZBI) feed mill licensee program and also offer some perspectives and a framework to assist those considering a feed manufacturing facility, to help them better evaluate the project and to make an informed decision.

 

The ZBI Feed Mill Licensee Programme

At ZBI, we produce aquafeeds for all life stages of many of the most commercially important, farmed aquatic species around the world, including shrimp, tilapia, salmonids and several other valuable commercial species. We can help existing feed manufacturers, aquaculture production enterprises and new projects with their needs to build and support a better aquaculture production environment, from support for better feed manufacturing to new plant development and operation for integration into existing aquaculture businesses.

We recognise that integrating into feed manufacturing could be a significant opportunity for a number of fish and shrimp producers, and we are available to assist through our Feed Mill License Programme, on-going now for over 30 years.

This licensee program has supported the successful development and transformation of seven new and existing feed mills in various countries in Asia and Latin America into highly capable, aquafeed manufacturing facilities.

ZBI strongly backs its licensees with support in all aspects of aquafeed production, from mill design/redesign; aquafeed formulation and quality control (including updated information from our active R&D program); logistics and ingredient sourcing; and overall operations analysis. Our programme allows the licensee operator to utilise the globally recognised Zeigler name brand.

The ZBI Feed Mill Licensee Programme offers a proven, turnkey solution for providing locally manufactured aquaculture and specialty feeds. With a history of feed technology experience that began in 1935, Zeigler's team of qualified nutritionists, biologists, and process engineers can assist in bringing products to market that have a proven track-record of success.

Zeigler's feed mill licensee program began in the 1980s and has developed a long track record of successful technology transfer partnerships throughout the world. And unlike other programs, Zeigler offers on-going R&D collaboration to provide advancements and technologies needed to meet ever-changing market conditions.

Regarding plant design, our considerable experience enables us to competently assist in proper equipment selection and process flow, both critical to meeting targeted production capacities and efficiencies. With seven successful plant start-ups, ZBI's knowledge of a variety of production conditions can facilitate decisions with capital requirements, which could potentially save time, reduce risk, and improve return on investment (ROI).

Zeigler personnel can assist with plant start-up and provide on-going production and QA training for plant personnel. Production efficiencies and quality standards are initially established, and then evaluated through regular audits aimed at providing continuous improvement. Zeigler personnel are trained in ISO-9000, HACCP, as well as other quality certifications to help assure customers and licensee meet their market requirements.

 

Support for existing feed mill operations

Zeigler can support feed formulation, new ingredients, quality control and assurance, and other aspects of the operation of existing feed mill operations, as well as assist with plant technical audits and recommendations for equipment upgrades and other technical topics. We have over 50 years of formulating and manufacturing our own specialty diets for commercial production, with the additional benefit of offering products with a proven track record of success. To support formulation development, we are able to utilise our proprietary, large database of superior ingredients, and can assist in assessing the feasibility of locally available raw materials and their supply sources.

Changing market conditions and advances in feed technology continuously require updated and new formulation and manufacturing strategies. Unlike other programmes, Zeigler provides on-going support through its active research and development programme. New ingredients, health-based additives, advanced processing techniques, and technical field consultations are just some of the ways Zeigler can help to assure on-going success.

We can also provide technical support to existing feed mills through production and quality assurance training for plant personnel. We do this by first, establishing particular production efficiencies and quality standards, and then we evaluate them through routine audits aimed at providing continuous improvement.

Zeigler personnel are trained in ISO-9000, HACCP, as well as other quality certifications to help assure your plant meets your market specific standards and requirements.

 

Reasons for integrating feed manufacturing

There are several reasons why an existing or new aqua-business would consider manufacturing its own feed. Probably the most frequent reason is to create a separate revenue stream and incorporate the profits related to feed manufacturing into the primary business.

Others goals can include having more control, greater protection for and confidentiality of intellectual property (IP); ready access to improved and fresher feeds; faster access to special feeds needed to improve farm productivity; managing environmental constraints – like salinity, temperature, diseases and others; providing a marketing advantage for the final product; and finally, the ability to improve logistics related to feed used in production, including its ordering, transporting and inventory management.

We believe the final decision should include most, if not all, of the above, as all these arguments can significantly contribute to improving the profitability, sustainability and competitive advantage of the core business.

 

Consider professional advice and support

Manufacturing aquaculture feeds is significantly more intricate and sophisticated than making conventional farm feeds. Aquafeeds contain more ingredients and require specialised equipment and more demanding processing methods which are essential in to properly meet the nutritional and the physical requirements to effectively feed the variety of species and sizes being produced in aquaculture production systems.

Therefore, in developing a feed manufacturing plan, an early consideration must be to select qualified advisors, and there are numerous options available. Both equipment and ingredient suppliers can assist prospective feed manufacturers. And companies that engineer and design feed manufacturing facilities can provide support, and a number of independent consultants or companies can provide and support technology transfer.

When qualifying potential technology support companies, both a track record of success in aquaculture feed production, as well as integrity, are important to select the proper resource.

 

Identifying ingredients and products

Superior feeds can only be produced starting with superior ingredients ('quality in: quality out'). Therefore, an important next step is to identify the ingredients and their suppliers, their wholesomeness and nutritional contribution, and the consistent supply and composition.

This information is essential to assist in the decision of the feed plant location and is also important in determining the type of equipment and storage facilities required. Feed mill equipment, design and process flow are determined by the products that will be manufactured, as well as the volume required per unit of time, which must be accomplished to meet the requirements of the animal production phases of the business.

Regarding formulations, as few as five and as many as 50 different formulations may be required, and these can be manufactured in as many as 12 different product sizes. Some additional product characteristics that must also be considered include colour, attractability, palatability, water stability, buoyancy, hardness, product coatings, and others.

Early in the planning process, the specifications for all required products should be determined, as these will affect a number of important decisions.

 

Proper equipment selection is critical

Pelleting and/or extrusion equipment are used to manufacture most aquaculture feeds. Each process has specific advantages and limitations that must be clearly understood.

The manufacturing equipment - including the required boilers for steam generation - represents the most expensive individual items in the feed mill. Other major equipment includes ingredient grinders, mixing and weighing equipment, computerised batching systems, and also storage for bulk ingredients.

The most important considerations when sourcing equipment include their initial and operating costs and efficiency, maintenance and repair costs, country of origin, and ready access to replacement parts. Locally available equipment should be evaluated and considered, and also used equipment if it is available and in good condition.

 

Formulation, processing and quality assurance

Knowledge of ingredients and their composition - and of nutritional requirements of targeted species to be fed at their various life stages - are necessary for the formulation of effective feeds. The feed formula can substantially affect the operating efficiency of the manufacturing equipment.

The feed formulation essentially determines the ability of the animals to express their genetic production potential. Together - considering both the formulation and manufacturing process - producing the 'right' product requires the consideration of up to 25 different product parameters, in addition to the specific nutrients required.

The aquaculture feed manufacturing process includes the following several sequenced steps: receiving, storage, grinding, weighing, mixing, re-grinding, processing (pelletising and/or extruding), cooling and or drying, crumbling, sifting, top coating, packaging, storage and shipping. It is important to consider that most ingredients are dry, but some are in liquid form.

The process flow and operating capacity of the equipment determines the plant throughput and its efficiency and must be considered during the early planning stages.

To produce wholesome, high-performance feeds, assuring product quality is vital and the pertinent provisions must be made. These include developing both ingredient and product standards, and quality assurance procedures, and also assuring the availability of adequate laboratory equipment and the presence of properly trained staff – their critical importance should not be underestimated.

 

Risk assessment

Judicious due diligence and proper plant location, design and construction can minimise environmental risks such as wind, rain, hurricanes and floods. And with proper operating procedures and safeguards, fire risks – which can be devastating – can be prevented. And the risks associated with financing feed sales can be adequately managed with the proper credit policies and proper securities.

Possibly the most difficult risk to evaluate when considering the integration of an aquafeed mill is the issue of prevailing diseases, which can severely affect the amount of feed required, and thus, plant operations and costs.

Examples of major diseases that have globally caused billions of dollars in losses include the Early Mortality Syndrome – also known as Acute Hepatopancreatic Necrosis Disease (AHPND) – in the penaeid shrimp farming industry, and the Infectious Salmon Anaemia (ISA), a viral disease of Atlantic salmon.

Before making the final decision to produce your own feeds, it is highly advisable to consider visiting with existing feed manufacturing companies and look into creating a strategic alliance or negotiating to obtain some or all of the benefits desired.

 

Proper planning and continuous improvement

The decision to integrate into the feed manufacturing business should only be made after careful due diligence and the preparation of a feasibility study including both a business plan and an in-depth economic analysis.

The total cost for a new feed mill can range between US $3,000,000 and $15,000,000 including inventories – these are not insignificant investment amounts - and certainly one of the decision criteria must be if the project provides adequate return on investment.

Another important step in the planning process is to project the monthly tonnage through the mill over the next five and possibly 10 years. If increased tonnage is in the forecast, it is important to plan for that increase in the initial design and build phase of the mill.

Installing a properly sized electric service and providing the space for additional equipment will save significant sums of money in the future, as retrofitting undersized mills can be very expensive.

A business option to consider could be outside sales; selling feed to other aquaculture producers can significantly reduce operating costs by increasing the number of tonnes produced, but the associated accounts receivable can increase the cash required to operate.

Most aquaculture animal production systems are of a cyclical nature, requiring different products in different quantities at different times. Therefore, the production plan must consider the capability to produce the maximum quantities of the different products that are required during any specific time of the production cycle, or to provide sufficient warehouse space so that the products can be produced in advance, stored, and be available as needed from inventory.

Compliance with new and possible future regulatory standards concerning food safety must be considered, and major certification programmes - such as those from the Global Aquaculture Alliance's Best Aquaculture Practices, or from GlobalGap - also have standards for feed plant compliance.

Businesses that operate successfully know that the only thing that is constant is change and dealing with change must be part of the operating strategy. This requires developing specific tactics to maintain excellence in critical areas of the project, such as employee training and retraining to assure proficiency; product improvement through ingredient selection and formulation; testing new feed ingredients and additives; properly designed animal trials adequately compare new products and formulations, and expeditious problem-solving.

It is also extremely desirable to carry out independent audits of the feed manufacturing enterprise to assure efficient and cost-effective production and guarantee compliance with quality assurance as well as with regulatory standards and procedures.

 

Perspectives

At Zeigler, we can help both existing feed manufacturers and aquaculture production businesses, as well as new feed mill or integrated projects with all their needs to build and support a better aquaculture production environment, from technical and operational support for better feed manufacturing all the way to new plant development and operation for independent operation or for integration into existing aquaculture businesses.

The decision to integrate an existing aquaculture production operation into manufacturing its own feeds is a significant undertaking. It requires serious consideration, analysis and evaluation of options, particularly because the investment can be significant, and because the process and its management are more involved and complex than just producing feeds for farm animals.

And the decision to make better feeds in an existing operation is also a significant one. Zeigler can give technical support to stand-alone feed mills through various paths, including technical audits, and production and quality assurance training for plant personnel.

This is accomplished by establishing particular production efficiencies and quality standards, and then by evaluating these through routine audits to generate continuous improvement. Our personnel are trained in various quality certifications to help assure each plant meets your market specific standards and requirements.

In summary, as our past industry successes in several countries and over many years demonstrate, there can be significant benefits to be achieved with Zeigler support for both existing feed mills as well as for new plants, which may operate independently or be part of a larger integration. We stand ready to help and are available to assist interested parties who want to make better feeds or get started in the production of their own feeds.

When it comes to the decision to make better feeds in an existing mill or develop a new feed plant in an integration, we believe that doing the 'right' things will lead to the 'right' decision for growing profits.

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