By Brian Gonder
VP & COO
GVF Group of Companies
Over the past year and a half, we have had many different factors affect the market, from the pandemic, to a natural disaster in BC, an environmental improvement shutdown in China (due to New Years and the Olympics), to now a war in Europe. We continue to face factors that affect many different facets of the market. Below are a few of the main factors that we have seen challenge the market over the past several months which helps provide clarity on the difficult supply chain situation.
Phosphates – China’s export ban
Phosphates are increasing dramatically in the market due to China’s ban on phosphate exports through June 1, 2022. As we get close to planting season, the demand will continue to increase and will also cause prices to swell. Dicalcium phosphate (dical) suppliers around the world have been put on ingredient allocation which has pressured feed and premix companies – as we know this is the primary source of phosphorus in animal diets. This limitation has driven the Canadian government to grant feed companies permissions to lower levels below Table 4. While those levels are not harmful in the short term it is definitely something that is being watched closely as purchasers work closely with nutritionists. The upcoming planting season, and uncertain Global Soybean Meal and Wheat supplies are adding to the pressure over the next few months.
Palm Fats – Effects of Russia’s supply of oil
At the time of this article, the war between Russia and Ukraine continues to be a major concern. As sanctions continue to build against Russia, oil supply continues to tighten causing increased prices on all Vegetable oil-based products. Oil has recently hit a 10-year high, which has seen a Palm Oil reaction to those highs, as well. While CPO supply can still be fulfilled from other countries, the increased price will drive Palm Fats, until sanctions on Russia are removed.
Shipping container and trucking price increases
Over the past several months we have seen shipping containers and trucking prices increase two-to-three-fold as the demand for products continues to increase. Currently in North America, there are 9 loads waiting to be shipped for every one load shipped. Many of these increases have been due to port backups and natural disasters. With Chinese New Year, and the Beijing Olympics behind us, there is hope that the supply chain will improve over the coming summer months.
Inflation – Everything from key ingredients to water bottles
Across Canada, we have seen inflation affect almost all products and services. Canada’s consumer price index for 2021 was over 5% for the first time since 1991. Many products throughout different industries have increased by 5,10, 15 or even 20%. We work to continue to limit these increases while they continue to affect all aspects of the supply chain.
While feed prices have been a difficult hurdle for all producers, with no softening over the past year nor in the short term. There is hope as we see restrictions lighten in Canada and in other places throughout the globe. We also see things such as an increase in ethanol production which means a higher production of distillers. As manufacturing moves forward to meet consumer demands inevitably, we will see an improved supply of co-products for the animal feed industry!
This article was written for the Spring 2022 Dairy Grist. To read the whole Dairy Grist, click the button below.