Feed companies don’t need a crystal ball
Last Tuesday I attended a presentation on the annual results of Dutch feed company ForFarmers. When the CEO was asked to give a prediction on the future of raw material prices he grinned and said: “I don’t know and I won’t say”. Obviously, there is no crystal ball in the feed business, ‘only’ common sense, entrepreneurship and innovation strength.
Raw material prices are a daily business for ForFarmers, the biggest compound feed producer in Europe. Raw materials are scarce (and thus pricey) and this will become even more a topic of concern in the future. It's a given.
A crystal ball could come in handy to know if the trend of soaring raw material prices will continue. By knowing the future prices and fluctuations, you know what to expect and you can adjust. But be realistic; nobody really knows and we can't predict the future. Look at what happened recently in the Ukraine? This had an acute effect on the grain prices coming from certain regions in the country. Extreme and unpredicted weather conditions have a direct effect on raw material prices. Instead, feed companies should take a different approach in order to be prepared for the future by – for example - looking at alternatives for the most expensive raw materials (soy among others), make the feed production process as efficient as possible, improve the internal organisation, optimise the logistic process from feed mill to farmer (reduce costs!) and innovation. Next to that, volumes remain important to be profitable. Many feed companies therefore are very active in acquisition.
The margins for big feed companies such as ForFarmers can be found in all these approaches. "Growth is very important for us. We want to be number one or two in the countries were we are active (for the moment the Netherlands, Belgium and Germany). We also want to increase our product portfolio to offer 'total feed to farm solutions'. This means that we also want to add smaller products to our portfolio, such as pre-starters and milk replacers", said CEO Yoram Knoop at the annual results meeting. Indeed, every farmer is different, has different production goals and a different vision. Selling him or her a standard type of feed is 'old fashioned' and not in line with what the modern farmer wants. It also involves giving the right advice and other related issue around the animal diet. The whole idea of getting closer to the farmer and building trust is something I have heard from different animal feed companies lately. It almost seems like a need trend, let's all bridge the gap between feed miller and farmer.
I think a crystal ball to be able to sustain in the world of volatile raw material prices is not needed, as long as the feed sector uses its common sense and listens to the farmer and hence follows up on the demands. In the end, it all comes down to improving the business by selling the best total feed concept and giving the best price for the feed at farm level. Added value it is and no farm is the same! Oh, and the crystal ball is a fairy tale and should be thrown in the rubbish bin.
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