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Feed for Thought

Feed Mill Management

Once again we’re on the razor’s edge

December 3, 2012

This past week I was fortunate to be able to spend two days in Paris. I was not just another Eiffel Tower visitor, Christmas lights observer or one of the many in front of the large stores with dressed windows and exhibiting brands.

I was actually under other lights, in “Palais Brogniart” with major French feed industry buyers during the Cereopa and Aftaa annual congress. They’ve been quite pessimistic in front of Bunge, Cargill and Noble speakers (to name only a few). They’ve been explaining that cereal prices will probably continue skyrocketing and that protein will, this year, mainly be driven by soybean as other protein sources (rapeseed, for example) are not yet sufficient.

One point made me shudder – everyone seems to expect an extraordinary harvest in South America, although fields are only just now being sowed and even then, not all fields are being used. This means demand is so high that every year we need an extraordinary harvest and cannot handle a climate, financial or political crash. The new report from Rabobank agri Commodity Markets research department confirms we have another volatile year ahead.

And in the Paris congress, Mory Dore, from the financial risk department of the Caisse d’Epargne LDA Bank, and Pierre Sabatier, strategist from Prime View and author of a book about China economy realities, told the feed industry buyers that in front of volatility, buying gold or agri commodities seems the most interesting just now… also for funds, even if some of the last had shortened their agri commodity positions.

The question of the importance of fundamentals – in my view, cereals – might soon come under the media’s attention. But will the press understand the importance of supplying the feed industry? I’m uncertain about feed’s image.

No one in feed or animal production is willing to say that “we move in the best circles.” The political weight of this industry is not as heavy as the automotive or energy industries. Just a fact: some additives like gum are not useable in feed anymore as it is used in the “gas from schist” extraction and, as such, its price is also increasing.

Population growth and the transition to more animal products being used as food are established facts. The IFRI’s last report about the importance of meat and animal products to improve well-being in developing countries confirms this.

Another fact has been brought to my attention: in 1960, the price of 1 kg of chicken was equal to 25 baguettes. Now the same chicken portion costs less than 5 baguettes.

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