NutriFlash - Reduce Exposure to Corn and SBM
The major events of this month is the brutal increase of corn, SBM and Sunflower meal HP price, respectively up by 6.9%, 4.0% and 6.5% representing 12 Euros per ton for Corn, 13 Euros for SBM and 15 Euros for Sunflower meal. We are coming back to the price levels of January of this year. These increases are significant given the importance of these 2 ingredients in our formulas and we will need to re-optimize them in order to absorb these changes and limit our diets cost increase.
At the opposite, Wheat and Barley price are at their lowest level for the past 12 months and this is an opportunity that we should leverage in our formulation strategy.
Poultry Diets Given the major materials cost increase, our broiler grower diet saw its cost grew from 248.8 Euros up to 256.6 Euros. Without our optimization, it would have been even heavier. As expected, Corn contribution has been reduced from 43.4% to 41.4% mainly replaced by Pea. Despite the increase of SBM price, we still have to increase its share to replace the Sunflower meal whose price increase even more (+6.9% for Sunflower meal against 4.0% for SBM) The changes we brought in the diet enabled us to save 0.6 Euro per ton.
For our Duck Grower and Turkey diets, optimization enables to save respectively 0.3 Euro and 0.5 Euro. It is not much in value but it is sufficient to create a commercial advantage against competitors. It is interesting as well to note the change of price of interest. As you know, the price of interest is the price from which a new ingredient would enter in the diet. By definition, a price of interest is lower than its current market price, otherwise that material would already be in the diet. Last month, the price of interest for wheat middlings in our Broiler Grower was 155 Euros to enter up to 5% of the diet. That was 11 Euros below wheat bran market price. Given the next context (different materials prices, different diet), the price of interest of the wheat middlings increase to 163 Euros, only 5 Euros below market price. That means that we are getting closer to see some wheat middlings entering in our Broiler Grower diet. Nevertheless, we need to remind that last time that Wheat middlings was below 163 Euros was August 2018. We still need to see wheat middlings to reduce by 5 Euros before including it into our Broiler grower diet.
This example shows as well that the evolution of price of interest is very contextual. They change constantly depending on evolution of diets and price pressure on the competing materials. They therefore need to be monitored carefully as they could be next month a saving opportunity.
The optimization gets us better savings in Swine. We save 2.3 Euros in Fattener and 0.5 Euro in Gestating sows to limit diet cost increase to only respectively +0.6 and +0.2 instead of +2.9 and +0.7. We therefore absorb 75% of the increase which give a definitive competitive advantage to be valued by our customers
Without surprise, corn and sunflower meal HP have been removed from both our Fattener and Gestating sow diets. Corn has been replaced by wheat in the fattener diet and wheat and barley in the gestating sow diet. Sunflower meal HP has been replaced by Soybean meal in the Fattener diet.
Corn may come back soon in the diet. His new price of interest is 177 Euros in the Fattener diet and 185 Euros in the Gestating sow diet against a current market price of 187 Euros. We will closely monitor corn price and we will incorporate it as soon as its market price goes below his price of interest.
As expected, SBM and Corn have been much reduced in the Dairy diet replaced by Barley and DDGS Wheat. Such work of optimization gets us to save 2.6 Euros, this is the best performance on all the diets in our portfolio.
I did not show it in this Nutriflash but we are working as well on Beef Ruminant, Lamb, Dairy goat diets. If you are interested in getting information of these diets, please do not hesitate to come back to us.
These optimizations and related savings presented above are possible because we are very confident on the mini/maxi that we are imposing to each nutrient. That gives us confidence that the arbitrations that our formulation software proposes will guarantee the level of performance of the revised diet. The second precondition is the choice of raw materials that we are offering to the software and obviously the quality of the matrix. If the choice is only between soybean meal and corn, there is not many options for the software to look at when the price of these 2 ingredients are increasing like they did this month. The nutritionist that anticipates such possibilities by qualifying as many ingredients as possible will get better prepared when prices vary. The wider is the matrix, the more option we offer to the formulation software and the higher are our chances to save diet cost through optimization. I understand that it is more comfortable and safer to work with a narrow range of ingredients but when you are pressured to reduce your feed cost, you must open your matrix to a wider range of ingredients.
These diets have been prepared with the support of Mg2mix - FRANCE