Grains are moving but what about feed prices?

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As the first shipments of grain leave the Black Sea ports, it carries with it much optimism for grain markets this year.

Grains have started to move again, and it is signaling some stability in the market though our problems may not be over. As the Black Sea ports start shipping, it is improving supply and helping ease market and price pressures.

This small injection of hope is already reflecting in lower cereal and meat prices. The FAO Cereal Price Index fell 11.5% by the end of July, compared to its June value. Coarse grains are the biggest winners, with prices declining for the fourth consecutive month, down 11.2%, though still much higher than their 2021 values. FAO noted that the deal to unblock Ukraine’s ports have resulted in world corn prices falling by 10.7%.

“The spillover from weakness in wheat and maize markets also pressured sorghum and barley prices downwards, respectively, by 12.8% and 12.6%,” added FAO.

Now people want less meat

This is a welcome respite for feedmillers and producers looking to catch a break from a never-ending cycle of high costs. However, the question is whether the damage done is too deep to repair in the immediate term.

Whilst in 2021, consumers were able to take on some of those high costs, continued pressures on cost of living indices mean that few are going to be able to absorb it this year.

Companies like Dabaco in Vietnam are already reporting significant losses in its half year profits. In the meantime, the feed additive market in Indonesia is finding few takers.

More importantly USDA reports also indicate a downward trend in meat consumption in major markets like China. They forecast soybean crush levels in both 2021/22 and 2022/23 to be below expectations. This is mainly due to lower demand from the animal feed sector.

FAO in its overall forecast also expects cereal use in animal feed to contract in 2022/2023. They expect more cereal to be used as human food than in animal feed. This signals a longer-term trend in changing food consumption.

Making feed cheap again 

A worrying trend, but this just means that feedmillers must continue to find ways to bring down the cost of macro ingredients. Unifeeds in the Philippines for example has signed an agreement to boost local corn production with farmer organizations.

Such initiatives by livestock companies is becoming quite frequent in the last few years. And if there is anything we can learn from this, it is that integrators need to start thinking in terms of an ‘agriculture’ company, not just ‘meat’.

Read more:
Factors to consider when tweaking feed formulation
Optimism abound as grain markets look to Q2 of 2022
Higher costs slash TFM’s Q2 profit by 30%