FORTUNATELY, WE CAN REFORMULATE!!!
As far as the price of raw materials is concerned, we are assisting to the reverse situation compared to the situation of our last Nutriflash in June. The price on Corn reached its highest point in July at 285 Euros / ton but it is now going down to 230 Euros in September. At the opposite, Wheat price keeps on increasing to reach its highest point on the last 12 months at a price of 250 Euros. I remind you that Wheat price was 191 in October 2020. It is an increase of 30% in 12 months. We therefore need to revise our formulas and balance when it is possible the wheat by the corn.
The situation on Soybean Meal looks better as we are getting close to the price level of 2020. Canola meal price is slightly reduced as it is coming back to its level of the beginning of the year.
It is important to notice that the price of Lysine HCL reached a price of 2,000 Euros, its higher level of the year and 66% higher than its price on September 2020.
Reformulation is more than ever a strategic process for feed manufacturers.
Poultry diets highly benefited from the price reduction of the Corn as it is structurally the main ingredient for that species. Corn is replacing Wheat in both broiler and duck diets, nearly 1 to 1. Given this month price situation, we have been able to simplify the broiler diet to only 4 ingredients and save 17 Euros in comparison of June formulas equivalent to 5% of the diet cost. This the perfect example to illustrate that reformulation is the only way to maintain feed manufacturers competitiveness. Without such flexibility in revising the diets, it would not be possible to maintain profitability under the pressure of competitors.
Regarding the duck diet, the adjustment of the diet is more complex. Even if the price of Wheat increased, the price of the wheat bran and wheat middlings decreased which enables us the increase of usage in the Duck diet. Overall, the reformulation of our duck diet generated a saving of 11 Euros.
After being removed in the past Nutriflash, Corn is back in our Swine diet in replacement of a portion of the wheat. The replacement is major for the pig fattening diet and more limited for the gestating sow. We can notice the usage of Canola meal for our both diets.
Even if they are lower than for the Poultry, the savings are nevertheless valuable with 3.2 Euros in Pig and 2.9 Euros in Sow.
The use of Sugar beet pulp is a common practice in Europe as source of fibers. During gestation, the requirement of the sow are very high, between 20 and 22% of the total diets and not many ingredients are sufficiently rich in fibers to enable the diet to reach 22%. Sugar beet pulp, Palm kernel meal can help to do so. When using rice bran or wheat bran, we will need to use 80% of them in the diet to reach the required overall level of 20% of fiber. The other solution is to use a processed concentrated source of fiber that contains up to 96% of fiber. Only few % can be used as an alternative to Sugar beet pulp.
The cost of our Dairy cow diet is getting lower by 20 Euros compared to June as all the main ingredients of our diet see their price reduced on the quarter. The changes of ingredients price did not trigger any major revision on the diet.
The graph below is summarizing the cost evolution on the period. The impact of the variation of the ingredients price varies a lot between formula. Without any reformulation, all the formulas except the Gestating sow and the Dairy cow would have got an increase of cost (in red in the diagram). As we discussed above, the opportunities of reformulation depend as well on the species. In this quarter situation, we have been able to save up to 17 Euros on Broiler but nothing on Dairy cow (in blue in the diagram). As result, we have been able to regain competitiveness on all the species. Even if the cost of the Pig fattener diet is going up by 5 Euros, it would have been up by 8.2 Euros without our reformulation.
We will keep monitoring the variation and let you know our analysis for the next quarter.
Comments