Background ForFarmers
'Commodity prices lead to more expensive food in shops'
At feed group ForFarmers, net profit is under pressure, partly due to the relatively high raw material prices. The company cannot pass on the rising costs for, for example, grains and soya to their customers, the livestock farmers. "The farmer should get more for their products such as milk, meat and eggs," says CEO Yoram Knoop. "It is inevitable that this will lead to rising food prices for consumers."
Knoop said this at the presentation of the half-year figures of ForFarmers Friday morning (August 13). This just shows that the profit of ForFarmers is under pressure. Knoop attributes this to, among other things, rising raw material prices. ForFarmers is unable to pass on these prices to their customers, partly in view of the fierce competition on the animal feed market. “These kind of market mechanisms always slow down, but eventually it will happen.”
Knoop indicates that not only companies such as ForFarmers, but certainly the entire agricultural sector are going through a "difficult period." Prices for products such as dairy, meat and eggs are rising, but not enough for the farmer to compensate for the rising raw material costs. According to Knoop, this means that the farmer will have to collect more money for his end product and that ultimately the consumer will have to pay higher prices for the products on the shop shelf.
Brexit plays tricks
ForFarmers does not count on raw material prices to fall significantly in the foreseeable future. "Commodities are generally at a high level and for the time being we assume that these high levels will continue", reports COO Pieter Wolleswinkel, who will join the board of directors of ForFarmers in early 2022. "Just like the prices for energy." Rising energy costs are also depressing ForFarmers' financial performance, Wolleswinkel says.
In the countries where ForFarmers is active, the circumstances due to the corona measures in the first half of this year were also not always good. In countries such as Poland and Germany, for example, the consumption of beef and chicken meat was under pressure, because the catering industry and food service were under pressure. Brexit is playing a major role in the United Kingdom, causing, for example, exports of British dairy products to fall sharply. Farmers notice such developments in their financial returns, as a result of which they purchase less feed from ForFamers.
Global increase in dairy and meat consumption
Topman Knoop expects that the consumption of dairy and meat products in the European Union will remain stable in the coming period. Where in the Netherlands people talk about halving the livestock and promote vegetarianism, Knoop points out that worldwide consumption of dairy and meat will only increase in the coming years. "We sometimes overlook that in the entire discussion in the Netherlands."
ForFarmers expects pork consumption in the EU to fall slightly. For example, the pig population is declining in the Netherlands and Germany, while it is increasing slightly in the United Kingdom due to the Brexit effect. For the pig market, the feed company is also counting on lower import volumes of European pork by China in the second half of this year.
Growing outside the European Union
The consumption of chicken meat, on the other hand, continues to grow, partly due to the growing demand for chicken from welfare concepts. According to Knoop, the fact that Dutch supermarkets are now all opting for chicken meat with a Beter Leven quality mark can lead to a slight decline in the Dutch poultry stock. "But the poultry companies that remain will feed the animals with products of more added value. We can earn a higher market share in that."
Due to the stagnation of the growth of the agricultural sectors in Western Europe in particular, ForFarmers has been looking to other countries for some time to spread the risks and reduce dependence on the Netherlands. ForFarmers is active in Belgium, the Netherlands, Poland, Germany and the United Kingdom. For 2025, 2 more countries must be added, Knoop indicates the strategic plans. He still keeps to himself which countries these are, but there is a good chance that at least 1 country is outside the EU. "The opportunity is considerable. We are not looking for small steps, the choices we are going to make are extremely important."
Eric the Thrush
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