News

Q2 Market Updates

 

  • Proteins –
    • Poultry – Limitations on supply have been a challenge as of late. Export sales have tightened supply of poultry meals. Buyers have been able to meet their needs but changes in specifications and usage rates have been required. Going forward the growth in pet food demand continues to stress this supply. If the dollar stays strong there may be opportunities with imports. However, at some point continued supply may be contingent upon increased premiums to discourage manufacturers from export.
    • Novel – Lamb continues to be tight along with Venison. Some venison has trickled into the US but no measurable amounts are available outside of what is still owed on contracts. Lamb is available but still garnering a premium due to no considerable excess of supply. Kangaroo supply is still consistently flowing. Duck, Boar, and others like Guinea Fowl and are available as well.
    • Pea protein – New manufacturers coming online but supply remains mildly tight. Prices remain above expectations with new players entering this market, but new players haven’t had considerable success yet. European and Baltic pea prices are increasing due to concerns about hot, dry weather in the region. Unseasonably warm and dry presents significant risk to crop. Offset to this is Canada seems to still have strong pea supply expectations and India remains a mystery if they will re-enter the market anytime soon. North American processors should have the supply needed but can their capacity meet the ever-increasing demand? Perhaps it’s time to formulate using other vegetable proteins or add additional protein options on the label?
  • Pulses
    • Peas – Staying with the pea subject we are looking at solid crop projections in North America and a lack of India means possibly lower pricing at crop time. For now we are at a stalemate because farmers want increased prices but traders and buyers are not yet ready to give either. Time will tell here but I still think patience is warranted. Cover short positions as necessary and wait for harvest to cover long. However, remain plugged into this market as any move from India or adverse weather conditions could change the game. If current prices fit your budget then longer positions may be warranted. Additional global news is Argentina is still in a drought, and as mentioned earlier Baltics and European region peas are at risk due to hot and dry weather in the region. All in all, I still consider the North American prices at par with potential to drop 1-2 cents at harvest if everything lines up as expected currently.
    • Chickpeas – Strong increase in planted acres in Canada and the US, good pricing showing coming from Mexico currently. I still believe the harvest should bring lower prices than current and considerably lower prices than last year. Cover short as needed but patience until harvest for long positions is warranted here. Only outlier is still India. If they move back into the Canadian market it could increase prices over current offers. Watch for this and make moves if necessary.
    • Lentils – prices currently lower than the last 10 year rolling average. Reds are a value buy right now but crop expectations are such that harvest could yield even lower prices. Are we covering the cost of inputs for these farmers? Prices this low could mean less acres next year for lentils. At harvest, if things lay out like expected, I personally would recommend taking as long of a position as you can stomach. It just can’t get much cheaper in my opinion.
  • Potatoes – More and more suppliers wanting to enter the pet food market means increased competition, quality and frankly better pricing. Low risk item with lots of current options.
  • Grains
    • Wheat – still cheap compared to the 10 year average – some moves happened and then all but disappeared again.
    • Corn – Still sub $4 corn market through EOY. Market continues to cheapen on corn and Sept Corn, which I like to benchmark against, continues to soften into the season. Take advantage of budget buys and hedges and watch for market moves or corrections but I see no back breaking changes here at the moment.
    • Soy Complex – July meal prices have broken below support levels and continue to trend downward. After the run up around Feb/Mar the prices seem to reflect a market with less anticipation of bad news. I personally would look at budgets and hedge positions and keep an eye on this for opportunity buys that meet or exceed budget. The market seems to think the nearby tightness is all but disappearing and weather reports seem to support good rainfall numbers in growing areas.
  • Vitamins – No one wants to hear it but Euro origin vitamins are all but disappearing. Supply so limited that no one wants to rely on it anymore. Chinese origin material is becoming the only option. While no one was ecstatic to hear this news the reality is that as long as you stay with strong, global suppliers like DSM and BASF, the material should be quality with strong backing from the source supplier. Prices are falling finally and supply is loosening up but lead times remain long as demand is still a little ahead of supply. Needs more time to normalize but eventually I believe we’ll come back around to decent lead times and pricing.
  • FX – Dollar is still trading strong and thus offering fair value for import materials. If you have an opportunity that meets or exceeds budget on an import material and contract options now is a decent time to make the trade.