One of the main impacts of the COVID-19 outbreak for the industrial world hinges around logistics. Yes, there are production issues for some products, but for agricultural inputs, getting stuff from A to B is the main problem. Agriculture is not immune to these problems and two major worries are fertiliser and feedstuffs.

Given the big impact on the price of some feed ingredients over the past week or so, we asked John Bergin, commercial director of R&H Hall, for his views on the market. That company is one of the biggest importers of feed ingredients into the country.

John focused on two main feed components, grains and proteins, and on some products within these categories.

Grains

Supply of wheat and barley is not an issue for the moment as imports are mainly being shipped from the UK, but feed wheat prices have risen by €15/t in the past 10 days and barley by €10/t. The wheat market has rallied on the back of increased demand for milling wheat as flour mills acted to purchase extra nearby milling grade wheat on the back of concerns about logistics and potential shutdowns. And at the same time consumers want to buy more food and, with time on their hands, they appear to be purchasing more flour for home baking. Behind this there is the possibility that more barley could be brought to the market if the malting industry slows down.

On maize, there are some issues around ships getting loaded in the Ukraine but, in general, importers are not too worried about supply for the moment. However, as bioethanol production comes under pressure globally, we are likely to see more maize coming to the animal feed market. This could pressure prices and indeed we have already seen maize fall by €5/t this week.

Protein sources

Soya bean meal is seen as a real concern though. John said that there are already soya bean delivery issues to the crushing facilities at ports in Brazil and Argentina as workers there get sick or governments implement shutdowns. Forward shipments seem to be OK, but this needs to be monitored closely. However, nearby soya bean meal prices have risen by €60 to €70/t on the back of current issues.

Maize distillers is an important feed ingredient here and if the production of bioethanol decreases on the back of cheaper oil, so will the production of dry distillers grains (DDGS). This is particularly the case with US and EU sources and the slowdown has already led to price increases of up to €30/t this week, plus potential issues around longer term supply.

Maize gluten supply from the US is also slow, but John believes actual supply will not be an issue, However, it seems likely that prices will be dragged up on the back of DDGS.

Reduced fuel demand and lower crude prices are negatively affecting oilseed rape crushing. Lower margins are reducing crush levels and the supply of rape meal, another important source of protein, is lower as a consequence. This has led to price increases, which are up approximately €30/t this week. However, John is of the opinion that supply will continue to be available, but price will be higher.

In summary

Summing up the current situation, John believes that availability of grains is OK for the moment. His opinion is somewhat different for the non-grains or proteins and mid-proteins. These products are going to be difficult and he is currently advising mills to secure supply for April to June. While he does not see reason for panic, his advice to users is to secure near-term requirement. As things stand currently, it would seem that longer-term supply will be strong on the back of big global crops, and prices are expected to fall back once again.

Markets are volatile because they do not like uncertainty and it strikes fear into the business. However, John said he has seen much worse volatility previously because of droughts and financial crises etc. He also commented that huge daily currency movements are adding to commodity volatility as most products are traded in dollars.