By Brian Gonder
VP & COO,
GVF group of companies
In late 2021, price increases affected the Feed and Nutrition market as products all around the world became affected by increased demand, trucking shortages, and COVID-19 shutdowns. It is uncommon to experience so many cost pressures at one time so we will attempt to explain the factors we are witnessing and why we continue to face the fallout of these uncertain times. Over the past year and a half, the market has experienced many differ- ent dynamics: From a world-wide pandemic, to natural disasters in BC, to environment shutdowns in China (due to New Years and Olympics), to a war in Europe. Below are a few of the main factors that we have seen affect the market over the past several months. We hope this helps to pro- vide clarify on the difficult supply chain situation we are facing globally.
Phosphates – China’s export ban
Phosphates have and will continue to see increases in market prices 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. Dical suppliers around the world have been put on ingredient allocation, which has pressured feed and premix com- panies. Urea, a phosphate-based product, has also seen increases and will continue to react to the ebbs and flows of the phosphate market. The up- coming planting season, and uncertain Global Soybean Meal and Wheat supplies are adding to the pressure over the next few months.
Russia and Ukraine
The war between Russia and Ukraine continues and concerns con- tinue to grow regarding oil and crop supplies for the later part of this year. Together, Russia and Ukraine supply 26% of the world’s corn and 28% of the world’s wheat production. As sanctions continue to build against Russia, oil supply continues to tighten causing increased prices on all Vegetable oil-based products. Crude oil has recently hit a 10-year high, directly affecting the cost of specific products, while also increas- ing product costs as transportation costs continue to increase due to fuel surcharges and driver shortages.
Shipping containers and trucking prices increase
Increases in oil prices, have impacted the cost of deliveries to our cus- tomers and the materials arriving to our plants and warehouses. Over the past several months, we have seen shipping containers and trucking prices increase three-to-four-fold as the demand for products continues to increase. Currently in North America, there are 153 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 a more hopeful tone that the supply chain will improve over the coming summer months. China has recently re-implemented a Zero Tolerance for COVID cases and in late March, Shanghai has gone into full lock-down. Unfortunately, this may cause a lag of returning to a more normal supply and port situation.
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 in- creased by 5,10, 15 or even 20%. We are working to continue to limit these increases however, they are affecting all aspects of the supply chain.
There is uncertainty and disparity on multiple amino products as we look at pricing and availability for upcoming months. As methionine is heavily linked to crude oil prices, methionine prices have risen and settled higher due to high oil prices stemming from Russia’s invasion of Ukraine. Interestingly, lysine has begun to soften as factories have reopened after the Olympics and Chinese New Year. As a by-product of corn, it will be important to watch corn prices over the upcoming months to determine whether Russia and Ukraine have successful planting seasons.
As you are all aware, today’s Global Supply chain is ever-changing and challenging however, the purchasing team at Grand Valley Fortifiers remains committed to sourcing ingredients as economically as possible so that we can continue to provide nutritional solutions for you, our valued producers.
This article was written for the Spring 2022 Swine Grist. To read the whole Swine Grist, click the button below.