4 reasons for the Coronavirus impact on feed additives and what’s next

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While large parts of Europe are in lockdown most farmers are going about their business with little or no impact on their daily lives or social interaction. After all, as far as social distancing is concerned, most farmers work from home anyway. However, you as a farmer, will feel the impact of coronavirus in other ways. Here is our take on what you can expect in the coming months.

Back in January, Kemiex, the world’s leading platform for trade in pharmaceuticals, feed additives and fine chemicals conducted a survey among 97 life sciences professionals about the coronavirus impact on feed additives and ingredient trade as the spread of the dangerous new virus was accelerating. It showed that 85% expected supply chain disruptions, back when there were only around 2.800 infected in China. According to today statistics there are over 380.000 infected, with over 16.000 deaths in 196 countries across the globe.

1. The Chinese New Year and coronavirus

The biggest impact in the foreseeable future is, and will be, on products coming out of China that was the epicentre of the now global pandemic that is shaking the globe. It all started, mostly as planned, with the Chinese New Year where the whole of China shuts down for a few weeks. Buyers are used to this annual event and take precautions by stockpiling prior to the shutdown. However, the tail end of the holiday period in the beginning of February was then followed by the rapid spread of coronavirus.

This meant that with a large majority of producers lying in the heart of the Coronavirus storm did not start production up again as expected due to lockdowns. Once the Chinese authorities had control of the situation the Chinese players started coming back into the market. Production and supply are still being hampered by limited capacity due to transport, production and travel restrictions.

2. The run for toilet paper

As of the beginning of March traders were reporting that they had enough stocks of many raw materials which are acting as buffers in the market right now, according to Stefan Schmidinger, a partner at Kemiex. In the same way that we saw a run on toilet paper in the supermarkets by the general public, many buyers reacted similarly and called in large volumes of their annual contracts to play is safe, Stefan continues.

The net result is that we are seeing a spike in many feed additive prices and a lot of volatility in the market. As implied in the word volatility some additives are actually seeing an opposite trend, in that prices are stable or going down as some European producers are left with volumes that they can’t move east to Asia or see an opportunity to push out Chinese competitors.

As an example, we at Agmondo currently have favourable prices on propionic acid and other products and can deliver throughout Denmark. For the latest prices sign up here for an account and order directly online.

3. The cracks are starting to show

As of today, most of Europe is in lockdown and many employees have been sent home. While this will not affect most parts of European operations, we are starting to see longer delivery times. Transport to and from Asia, and China in particular, is expected to remain a challenge in the foreseeable future. Shipping times that were 3-4 weeks are now extending to 6-8 weeks. We at Agmondo expect that this will inevitably have a further impact on restocking European warehouses driving more uncertainty in the market and ultimately pushing prices up for most feed additives.

Evidence of cracks in the system are starting to show with Evonik issuing a force majeure on one of their amino acid products and prices on vitamins A, E, biotin and folic acid spiking in recent weeks. Many pundits are not able to get a clear information out of China right now, but the general consensus is that feed additive prices are rising in the Western world.

4. The impact on Western producers has not been seen yet

While China undoubtedly has a huge impact on the feed additive market what we haven’t started to see yet is the impact of coronavirus on Western producers. So far there have been no indications of production in Europe slowing down. Realistically though, it has only been for the last 10 – 14 days that most of Europe has been under lockdown, while China has been dealing with these issues since early February at least.

What remains to be seen is the impact of social distancing, closed borders and working from home on production capacities in the longer term. While still definitely in the realm of speculation one can’t help but ask, is what we saw in China almost 2 months ago going to happen in Europe.

Our situation and how we are going to help you

Here at Agmondo we are currently in a favourable situation with prices on our platform being updated regularly. Currently we are seeing that we are able to continue our price leadership on organic acid based products in our portfolio and if you are considering purchasing these type of products in the near future, you could take advantage of this sooner, rather than later. To do so you can sign up here for free and don’t forget that we are open to negotiation. All you need to do is click the ‘Make an offer’ button listed with each product.

In the upcoming period we will send periodic market updates on prices and trends as best we can* to all of our listed newsletter subscribers to help you navigate what could be a bumpy ride.

*The information which is summarised herein does not constitute financial or other professional advice and is general in nature. It does not take into account your specific circumstances and should not be acted on without full understanding of your current situation and future goals and objectives by a fully qualified financial advisor. In doing so you risk making commitment to a product and/or strategy that may not be suitable to your needs.

Agmondo accepts no liability for any loss or damage howsoever arising out of the use of this website or reliance on the content of the website.

About the author

Jason Lorjé

Jason Lorjé

Jason is CEO and founder of Agmondo and a veterinarian who has worked many years in the animal pharmaceutical and feed additive industry.

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