Whether you believe that prices will continue to rise through 2022 or that a crash is imminent, Q1 is widely expected to be an expensive quarter for global supply chains.
Forward contracts uploaded to Glowlit show an average increase of 22% in Q1 for the 4 main amino acids comprising the largest share of feed costs. Those prices are bound to eventually make their way down the supply chain. Already we are seeing the media stoke fears of impending inflation.
There is one major flaw in this argument, however. In the feed industry, prices are ultimately driven by demand, and demand comes from consumers buying goods at the supermarket and eating out at restaurants. Without an increase in salaries along with prices, demand at the end of the supply chain will struggle to keep up.
So how do we know whether demand will actually increase or decrease? Unfortunately, the answer isn’t so clear. When looking at an end product indicator like pig carcasses, the data is mixed. While prices around the world are decreasing, the price of pig carcass in China has spiked over the last month.
When faced with so many diverging predictions in a wholly unpredictable market, the Glowlit team goes back to what is certain. Benchmarked forward contracts offer us a glimpse into the future of feed ingredient pricing.