News

Q4 Market Updates

 

Proteins

  • Salmon Meal – Norwegian meal has seen stable to reduced pricing for Q4 and into 2019. Speculation and forward indications point to some reductions for 19 but the jury is still out to see how the season goes and if those darn sea lice cause anymore problems like they have in the past. Fingers crossed we get good results, the dollar trades fair for conversion purposes, and ocean freight rates stay stable or improve so we can all yield some benefit in 2019.
  • Lamb Meal – Upward pressure due to continued raw material (bones) being traded a bit more than normal. Seems there have been some interested parties making some larger than normal purchases on raw material and that has resulted in increased pressure on forward pricing. What remains to be seen here is how many people will stand the increase or simply formulate away or lower inclusion and just what is the intended use of these raw material buys? Will this re-enter the supply stream in the future and drop prices again? Maybe but for now, if you aren’t making plans to cover some volumes on this material, it would be wise to reconsider and get some coverage on the books to prevent anymore run ups.
  • Poultry meals – Everyone is talking tariffs lately and poultry in general has taken some big hits on exports. This means increased supply of raw materials for rendering and Mechanical Separation. Expect this market to continue to have downward pressure on it with ample supply but pay attention to the export markets for the indications of change. If something breaks open and new export buyers come to the table or China and the US come to some terms on the tariffs then we might see it turn back upward but for now, the supply is good, the pricing is fair and improving and all seems a bit in pet food’s favor here.

 

Pulses/Legumes

  • Let’s talk crop first on this one. Canada and the US have had really nice yields, good quality and a good turn in pricing compared to this time last year. Many folks have forward contracts to complete so pricing is chasing farm pricing by a little bit but overall things have made a fair turn around from last season here and quality on many pulses has been good to great frankly.
  • The big elephant in the room for pet food right now has been the whole canine DCM issue. The FDA warning was confusing to many and concerning as well. The challenge for most manufacturers in pet food is not being over-leveraged if something more negative comes out. However where are the facts in this case? What will the end results be? Who knows at this point and there is still demand to supply for pet food consumers. The market being what it is on most pulses, along with overall supply, it’s safe to do some booking even if you cover a smaller percentage than normal allowing for possible reformulation if it ever came to that. Since no one has a crystal ball on this issue, protecting margin and supply will be important for the short term. Major call out here would be if India makes any moves to re-open their import market for pulses the risk of a run up in pricing is pretty high. Supply is there so no worries about major shortfalls but pricing could move off what seems to be the bottom for now.

 

Vitamins

  • Taurine has been on everyone’s mind lately with DCM being brought up. Unfortunately for those wanting non-Chinese Taurine, one of the manufacturers in Japan is closing their doors in 2019 and that leaves only one other Japanese manufacturer. The remaining supplier has conveniently decided a price increase is warranted due to increased demand, and now 50% less competition. Good for their bottom line but negative impact to those looking for non-China Taurine. Ample supply and decent pricing on the Chinese material is out there if needed
  • Vitamins – BASF plant in Germany is back online, China still issuing new regulations on pollution control for plants there and a lot of the panic has subsided. What the net effect is for us all is some reductions in vitamin costs, more stability in current supply but still and undertone of cautious optimism. Depending on what happens for Chinese suppliers there is still risk in the market but overall much lower than we had seen during the first half of 2018. Remain up to date on this market as many things could change still. Majority of B vitamins, C and E remain stable although some pressure on B12 due to some environmental violations by a Chinese manufacturer. Some Amino Acids have pressure on supply but most are fairly stable as of late.

 –Robert Lee, Strategic Sourcing Manager