Concerns in the feed sector about obtaining raw materials

Johan van Dijk of livestock feed consultancy Stigevo sees that most parties have fixed their purchasing for at least the month of March. However, according to him, compound feed parties still have to purchase significant quantities for the remaining 'short term' up to and including July. The volatile pricing makes parties very nervous, according to Van Dijk. There is also concern among parties involved in the compound feed itself. Johan Schuttert of Agruniek Rijnvallei: "With the current uncertainty, you would prefer to be covered for a certain period and be certain of supply. However, you also do not want to run the risk of long-term purchasing at a very high level with the risk that prices will drop at some point. drop for a moment."  

Short term: problem with corn
Van Dijk foresees challenges arising in the short term, especially for maize. "Ukraine supplies the majority of European corn. Last year, Ukrainian exporters had a total of 33 million tons available for export. Of this volume, only 19 million tons had been exported to date, 14 million are still in storage. We should not forget that, for example, a country like China is still waiting for large volumes of corn from Ukraine. If they also report to other exporting countries that we now also rely on, such as Brazil, it is anyone's guess what this will do to prices."

In the short term (until July), corn is also difficult to replace by simply importing it from other countries. Only after the harvest in Brazil will corn become more available again. The most obvious alternative during that period seems to be barley. This seems to be quite available in Australia at the moment.

In addition to corn, the disrupted supply of sunflower seed-related products can also cause headaches. Ukraine is one of the main suppliers of sunflower seed oil and meal. "Ukraine still had a significant amount in stock that cannot now enter the market. Here too, the alternatives are limited and the oil will most likely be replaced by soy oil. This is still available in North and South America. However, the prices are already at historically high levels. It means that prices can rise even further," says van Dijk.

According to Van Dijk, the wheat market is currently being overhyped. "Wheat appears to be reasonably available in many areas and Ukraine had already exported the vast majority of its stock for this season. India and Australia still have stocks and don't forget France. French arable farmers naturally want to get the highest possible price and may have to wait a bit but there is still a considerable volume. A larger part of this than in other years can remain within European borders."

Schuttert also sees uncertainty and emotion ruling the market. "Due to the uncertainty in the market, we already had slightly larger stocks before the raid. I do not foresee any major problems for the next two months. Moreover, as Agruniek Rijnvallei we have the option of supplying raw materials by train from Eastern Europe. "We can therefore purchase some business from Polish suppliers in particular, who can still get something from Russia." Schuttert also indicates that the stocks of wheat that are still available in France will most likely remain on the European market.

It is difficult to estimate whether problems will arise in the months of May to July, although there are a number of specific raw materials that may no longer or hardly be available. Schuttert expects that it will be difficult in some cases, especially for products that are first processed in the country of production during the season. "Consider, for example, a product such as organic sunflower oil, which largely comes from the current war region. It is possible that organic rations, especially for poultry, can no longer be composed 100% organically. Fortunately, this problem has been resolved. the political agenda and I assume that we can make Europe-wide agreements about this at that time."

Schuttert indicates that the high prices will not simply go away and expects that it will ultimately come down to the question: "Who can still afford it? Countries with less deep pockets will be the first to miss out on certain raw materials." Feed producer ABZ-Diervoeding also expresses concern in its raw materials update about the physical supply of Ukrainian corn and sunflower seed meal, because loading is currently at a standstill.

Uncertainty from August
For the period after the new harvest, expectations are very uncertain. First of all, it must be seen what impact the war will have on production figures in countries such as Russia, but especially Ukraine. "There seems to be some relaxation for maize from July onwards when the new Brazilian harvest becomes available. There is hardly anything to say about the export of Ukrainian maize in next season. First of all, production is uncertain, secondly the status and export possibilities to the European Union after the harvest," van Dijk argues.

The forecasts for the world's wheat supply are actually quite good at the moment, he further indicates. "In the Russian and Ukrainian region, the development has been quite good so far. Russia may technically be able to increase its export, production and stock from 33 million tons to 40 million tons next year. However, the big question is what will happen from the is made politically possible to implement this towards the European Union."

Schuttert does not foresee any major problems for the supply of wheat in the new season, even in the event of a complete blockage of payment transactions. "In such a situation, Russia will sell its wheat to countries that have not imposed sanctions, such as China and countries in the Middle East. Many states in this corner have so far acted mildly against Russia. This then creates space for others exporters from whom we can then purchase wheat."

The tight availability of raw materials and the unrest in the market creates a hectic situation in the compound feed sector. However, finding sufficient (replacement) raw materials for compound feed rations seems to be possible for the time being, although it will be quite a puzzle for specific components for the period from May to July. It means that prices are likely to be trading at very high levels, and possibly rising further. No one dares to predict where the top will be.