Inquired…
…with Jürgen Vedder about the impact of rising raw material prices on the feed market.
Empty supermarket shelves and rising prices - the raw material crisis in the food industry is intensifying. Breeders also notice this when buying feed for their animals. We inquired about the current situation in the feed market with Jürgen Vedder, Managing Director of Mischfutter Werke Mannheim GmbH.
Mr. Vedder, the feed costs for our rabbits are increasing more and more. What is this attributed to?
Various factors influence the price development of our feed. Currently, the biggest factor is the availability of raw materials on the world market. The general scarcity of raw materials and the large, global demand for limited resources are driving prices up. It should be noted: Every raw material is listed and traded on so-called commodity markets. All raw material prices are completely traceable, it is entirely transparent.
Why don't you buy locally, that is, regionally?
We do that whenever possible. But the harvests of the last two years have been - globally speaking - poor. Droughts and storms, as well as the pandemic, play a role here. Now one might say, "Buy from the farmer next door and you have to deal with the world market." But: Even the farmer next door knows the market prices and the value of his goods. If the harvest in the USA was poor, the Americans buy on the world market. The result: Prices go up. Fortunately, we have many regional farmers as suppliers, which ensures supply, but does not improve prices.
What impact does the war in Ukraine have on prices?
Since February 24, the market situation has deteriorated drastically. The war in Ukraine and the associated sanctions against Russia mean that almost a third of world exports are cut off. Because a large part of European grain is grown in these countries. So already limited goods are now even less available - and this will not improve in the near future.
Don't you make contracts when purchasing your raw materials to regulate prices and obligations?
Of course, we make so-called contracts with our suppliers for our raw materials. Delivery quantities and dates, as well as prices, are agreed upon in the medium and long term. But in times when prices are only going up, these contracts are concluded more cautiously. Many suppliers think they can achieve an even better price elsewhere. This makes it difficult to conclude contracts. We not only produce bagged goods but also bulk goods. For both, we calculate the quantities of our raw materials and buy based on this.
How flexible can you react to changes in demand in the current situation?
Imagine a competitor raises their prices or can no longer produce due to the raw material situation. Then you suddenly have 10 times the order quantity of a "normal" daily average and can only react to a limited extent in terms of purchasing. Because we currently have to calculate everything well. Procuring raw materials is extremely problematic at the moment. Or you pay entry prices beyond reason.
Could you provide our readers with a concrete example?
Very gladly: Corn cost €216 per ton in March last year. At harvest, everyone hoped for lower prices, but from autumn we were at around €250/ton. In the last three weeks alone, corn has seen a price increase of 40%, so today you pay €350 per ton. Or soybean meal: In March 2021 we were at €400 per ton, in autumn soybean meal rose to up to €500/ton and today we are at €590/ton. That is a price increase of almost 50%. And that's not the end of the line. The price of our feed bags alone has gone up by 30%, not to mention the increased energy costs.
Even if you have contracts, you can calculate how long the raw materials from them will last with a 10-fold amount of unplanned production quantity. Now one might say that you adjust the recipes based on the available raw materials, but that is an absolute no-go for us. The compositions are not changed, the quality remains the same! The customer must be able to rely on that.
What should we expect in the near future in your opinion?
I can only speak for Mifuma as a manufacturer. We will increase the prices for rabbit feed by about €1.07 per 25 kg again. Unfortunately, we cannot avoid this. This means we are increasing our prices for the second time within two months. Overall, this is a price increase of €1.61/25 kg bag compared to January. I am aware that many will groan about this. Because with all the ongoing costs, which are also rising, the pensioner does not suddenly receive more pension. But with this raw material situation, we cannot react otherwise, because we also have to work economically and responsibly. As soon as the raw material market allows, we will lower the prices again.
Do you think Germany is too dependent on the Eastern European raw material market?
No, I don't think so. Raw materials and raw material prices are traded globally today. Ukraine is rightly called the "breadbasket of Europe." Because there are the best soils and a good climate, which ensures rich harvests. The same applies to Russia, by the way. No one could foresee this war, with its terrible consequences. And by that, I mean only secondarily the global grain market, but above all the human tragedies for the women, children, and also the men in Ukraine. It remains to be seen whether Ukraine and Russia can come closer together. This will depend on whether and to what extent the Ukrainians can cultivate their fields and sow the grain for the coming year. Unfortunately, fertilizers are also a very scarce commodity at the moment. You notice, there are many uncertainty factors. The market will certainly relax again. The only question is: When? But that also means that we cannot return to "old prices" for the time being.
Mr. Vedder, thank you for the interesting conversation and your assessment of the current situation.
From the Rabbit Magazine 04/2022
