Animal feed is becoming more and more expensive worldwide due to the limited supply of feed raw materials and the associated high raw material prices. For many livestock farmers it is a challenge to keep production costs in the green. Does this lead to the end product becoming more expensive in the end?
The impact of rising feed costs is becoming increasingly clear to livestock farmers. For example, it takes more effort to keep margins positive. In the United Kingdom, the so-called 'milk-feed price ratio' fell to 1,12 in December. This is the lowest level since July 2016. Such a low ratio between the milk price and the feed price increases the chance of a contraction in milk production. In the spring of 2019, a ratio of 1,16 was achieved and production decreased in the summer months.
Particularly high feed prices
The latest UK Feed Market Report shows that prices for both wheat and barley remain high. At the end of January, UK feed wheat (ex-farm) price was £204,50 per tonne. Converted that is €232,60 per tonne, an increase of 34% compared to last year. The price for feed barley is 22% higher, at around £155 per tonne (€176 per tonne). In the Netherlands, the price for barley at Beurs Goes is €192 per tonne, which is about 26% higher than last year. Wheat is currently paid €211 per tonne: +24%.
In addition, there is additional demand for protein-rich feed from livestock farmers, but the price has risen sharply due to the limited supply. In the Netherlands the price for, for example, brewer's grains is € 2,90 per percent dry matter. In the same period last year, the price was 'only' €2,50 per percent dry matter. The high soy price in particular puts a floor in the market. The CBoT is quoted at $13,87 per bushel, up nearly 40% from a year earlier. The effect of the high soy price is also visible in the United Kingdom. The concentrate price there has now been converted to €283 per tonne, which is approximately €25 higher than the 5-year average.
Livestock farmers in Russia also struggle with the high feed costs. The prices for rapeseed and maize have also risen sharply in the past period. On the Matif, rapeseed is quoted at €444,75 per tonne (+13%) and the price for maize has risen to €219 per tonne (+30%). Where a Russian livestock farmer bought maize in 2019 for 7 to 8 rubles, this has increased to 15 to 16 rubles over the past year. In short: costs on the farm have increased by about 40%.
End product becomes more expensive
Now that the costs on livestock farms are rising so sharply, various analysts expect that the price of the end product could rise by 5%. This is because the prices for feed raw materials are not expected to fall in the short term, given a relatively tight supply worldwide. And, if the livestock farms still want to write green figures at the end of the year, they cannot sell their product for the same price as last year. But then the question arises: who is going to pay for that?