Concerns over factors from the Schmallenberg virus to a "potentially severe" drought have dented European feed makers' hopes of a market rebound from last year, when a decline reached "dramatic" proportions in some countries.

Output of cattle feed should "stabilise" in 2012, after a 3% decline last year, Fefac, the European compound feed manufacturers' industry group, said.

And demand for poultry feed, the biggest market, is set to rise by 1%, returning to growth after its first decline for five years in 2011.

In theory, this should imply a small increase in Europe's compound feed sales, even allowing for a 0.5% drop in the swine market, a fifth successive year of shrinkage, blamed on herd reductions as farmers shoulder the cost of more stringent animal welfare regulations.

'Market uncertainties'

However, Fefac - which last year overestimated prospects for the cattle feed market, forecasting 2% growth - stuck with a forecast of "unchanged" demand for feed overall this year, noting a list of "market uncertainties".

The virus, which causes stillbirth or birth defects in cattle, goats and sheep, has also been found in Belgium, France, Italy, Luxembourg the Netherlands, Spain and the UK.

In the pig market, demand would be hurt by "the new group-housing requirements for sows which may lead to a significant reduction in young sow replacement in certain producer regions", as farmers lower the intensity of their operations.

Drought threat

Furthermore, high grain costs may prompt farmers to rely more on home-grown feed.

Cereals prices "at high levels" where they may remain "while experts are still evaluating the impact of February frost in a large part of the European Union countries, and while fear of a potentially severe drought in Western Europe is growing".

A dearth of rain is affecting crop prospects in much of western Europe, in a band from the UK through France to Spain and, in Africa, Morocco, as Agrimoney.com reported on Tuesday.

'Dramatic declines' 

Last year, EU compound feed manufacture shrank to 150m tonnes from 151.4m tonnes in 2010, Fefac said, citing the "still fragile economic situation" in the region's pig industry, and "high feed material costs".

A boost to the sector from a dry spring, which damaged pasture condition and forced livestock farmers to turn to feed instead, was offset by benign autumn weather "that favoured grass growth".

Some countries suffered "dramatic" declines in feed production, including the Netherlands, where output sank 5%, and Ireland, with a drop of 9%, Fefac said, without expanding on the reasons for the declines.

The association will at its annual meeting in June give further market details.

Huge industry

The EU is a narrow second in compound feed manufacture to the US, which produced 155m tonnes in 2010.

The European industry consumed more than 71,000 tonnes of cereals and 44,000 tonnes of oilseed cakes and meals in 2010, besides large quantities of pulses, dairy products, minerals and food sector byproducts, according to Fefac.