WHAT HAPPENS TO CORN?
Since our last Nutriflash in March, the situation did not improve much. The feed cost keeps on increasing to reach new records high, the highest cost since we start tracking them in 2016.
Contrarily to what we expected in march, the ingredients prices went actually up. The highest increase comes from Corn who recorded in June a price of 255 Euros, 14% above March price and 40% higher than its price 12 months ago.
The situation looks less alarming for the other ingredients. Barley is only up by 2.2%. Wheat and Soybean meal saw actually their price reduced compared to last march respectively by 2.5% and 7.1%. Canola and Sunflower followed the same trend as Soya. Therefore, the main arbitration to make in this month reformulation will be between corn whose price is increasing and wheat and barley.
One of the only ingredients that maintain the same price for the past 12 months is Sugar cane molasse. Its price stay within a range of 215-230 Euros for the past year. At the opposite, Corn DDGS had a price reduction of 7.6%.
We mentioned last march that the Poultry sector was heavily impacted as Corn is the base of all poultry and can be difficult to replace. But we arrive now to a situation where the price gap between corn and wheat triggers a reduction of the level of corn and a replacement by wheat. That will not reduce the diet cost but at least it will limit its increase.
The rest of the diet is not modified much. In the Broiler grower diet, palm oil has been added in substitution of the soya oil. In the duck grower, Sunflower meal has been replaced a portion of the soybean meal.
For the Swine sector, the situation is different. Here again, this month scenario shows that we have much more flexibility with our Pig Fattener diet where we have been able to increase the level of wheat up to 63.5% of the total recipe. That is the only diet in our portfolio where we have been able to reduce the diet cost compared to march. For the Gestating sow, the best we could do was to limit the diet increase to ‘only’ 3.3 Euros over the last 3 months period.
The Dairy diet has been heavily impacted this month with an increase of cost of 8.1 Euros per ton, the highest increase in our group. It has been affected by the outstanding increase of Corn Gluten cost by 16% on the last 3 months. Despite the situation, Corn gluten feed remains the main ingredient of the recipe. The other noticeable change is the significant reduction of the Canola meal that has been replaced by Soybean meal and…corn gluten feed.
The current situation is particularly critical for nutritionists. At the moment, the objective is to absorb ingredients price increase. The price of corn is expected to stay high for the year 2021. If you want a deeper analysis of the corn and soya price forecast, you can read this article from World-gain.com. As usual, the demands are driven by China and namely their recovery of ASF epidemic. If the farms sanitary conditions keep on improving, China will need to rebuild their stock of Corn by buying from US producers. If ASF remains a threat for Chinese pig farmers, that may reduce tension on corn price.
But one day or another, we can expect the situation to come back to normal and these new changes will create as well as a lot of opportunities for formulation. That requires to get a good anticipation of the price trends and to start formulating on future prices so that the purchasing department gets clear pictures of the deal to be made. I recommend you as well to have a look at our last nutricle on ‘future prices optimization’ – Are you optimizing your future or your past?