Compound feed prices continued to rise in January, with pig feed in particular becoming significantly more expensive. This is a response to the previously increased prices of dominant feed raw materials such as wheat and barley. Meanwhile, the global grain market is increasingly becoming dominated by the trade war that US President Donald Trump is waging with China, among others. This could further drive up compound feed prices.
Figures from Wageningen Economic Research show that pig feed increased by €5 to €308,50 per tonne in January. This is almost the same as the price level a year ago. The decrease that followed in the months that followed has been undone by the price increases in recent months. Sow feed and piglet pellets also became considerably more expensive last month. The upward stimulus for cattle feed is more moderate. For example, A-feed increased by €2 to €307,50 per tonne.
The cause lies in the physical grain prices. For example, the quotation of feed wheat in Rotterdam rose by more than €10 to €241,50 per tonne between the beginning of November and the end of December. Grain maize and barley rose in the same order of magnitude. The cause of this must be sought in limited availability, although there is no shortage. The fall in the euro/dollar exchange rate in recent months is also noticeable in the background, which has made the import of overseas feed raw materials that have become more expensive in dollars for European producers.
Risk premiums due to impending trade war
Typically, there is a two to three month lag between the commodity market and compound feed prices. Since January, the physical prices of barley and wheat have not risen any further, which is a positive signal for livestock farmers. However, the futures market prices are picking up again, especially in Chicago. There, wheat rose to $212 per tonne yesterday, the highest level in over a month. Soybeans in Chicago have nevertheless climbed to almost $395 per tonne, the highest level since last summer.
Uncertainty has crept into the commodity market now that the US wants to impose a 10% import duty on Chinese goods. The idea is that China will retaliate with a duty on American (agricultural) goods, although soy and wheat have not yet been specifically named. During his previous administration, Trump also waged a trade war and China retaliated with, among other things, a duty on American soy. The coming period will show whether the air will drain from the market again and the risk premiums will be reduced, or whether the higher prices will hold. In the latter case, this is not good news for compound feed prices in the coming months.