Unexpectedly large demand drives meal prices

In Germany, UFOP reports that in early March, the corona crisis led many market participants to act cautiously and sit back to observe further developments, but that attitude has changed completely in the past two weeks, as livestock farmers ordered large amounts of compound feed in mid-March, leading to an explosion in demand and increased prices.

In view of the unexpected border closures and concerns about the availability of transport capacities, German livestock farmers ordered large amounts of compound feed in mid-March. The massive purchases fuelled the production of compound feed and, consequently, manufacturers’ need for feedstock, which caused demand for protein components to explode. Other price-driving factors in the global market had an additional bearing on soybean meal. These factors included the sharp price rise in Chicago, which in calendar week 13 led to the highest price level since August 2018.

Another factor was lower soybean meal production in Argentina, provoked by the insolvency of a large oil mill. Moreover, the spread of the corona pandemic and imposition of border closures in Argentina and Brazil have also slowed transports and shipments in the ports of export, although goods traffic should actually cross the borders unhindered. The situation shows once again that the global logistics chain hits the wall in situations of crisis and domestic production of protein components – for example as by-products of biofuels production – makes a considerable contribution towards safeguarding food and supply security in Germany.

In sum, for the German market this means that the current very brisk demand for soybean meal coincides with insufficient supply. Further supply bottlenecks could occur if the pandemic were to impact even more negatively on transport logistics. Many livestock farmers are trying to forestall this very threat by stocking up. These purchases are causing prices for rapeseed meal to soar, though less so than those for soybean meal.

As a consequence of rocketing demand, prices for soybean meal have surged, on average, 19 per cent since mid March. Rapeseed meal climbed 16 per cent during the same period.