MARCH 2014 Price Trends $ New directions towards Q2 2014 If you look at the the USDA reports in February 2014, the reports keeps its grain forecasts largely unchanged, but gives a bearish signal to oilseed markets. However, the rapid response due to the granting of EU wheat export licences which has kept European wheat prices at large premiums to US values. This looks set to keep EU wheat stocks fragile. The new direction has also arrived on the vegetable oil market which will most likely be a lightly downward. Palm market is expected to tend further down together with soy oil and diesel prices. This to keep attracting the necessary additional demand. With this information we shares our goals to enable customers to purchase sustainable nutritional solutions, we continued to engage with our partners in the feed-to-food value chain to establish, control and manage systems for sourcing sustainable raw materials in a responsible way. In this issue of our Trouw Price Trends information (previously TopPost), we are pleased to keep sharing the latest updates on the world grain market as well as raw materials information with you, our prestigious customers. We wish you a strong end of Q1 and have great new directions towards Q2. Together we will have stronger partnership in exchanging information to keep our industry growing and have more sustainable future. Sincerely, Nabil Chinniah Procurement Lead Asia-Pacific Trouw Nutrition International Nabil Chinniah Procurement Lead Asia-Pacific Trouw Nutrition International Contents 2 4 5 6 7 8 Grains, Vegetable Oils & Proteins Marine Products Dairy Amino Acids Vitamins Minerals and Trace Elements Trouw Price Trends | March 2014 GRAINS VEGETABLE OILS & PROTEINS GRAINS In the February USDA report by the US Ministry of Agriculture and worldwide acknowledged as indicator for global crops showed a firm adjustment downward for wheat stocks both in the USA and Europe. However the available carryover stocks to the new crop year remain healthy and in much better shape than previous years. Global wheat output was lowered en the usage slightly increased resulting in stock decrease of 1,6 Mio MT. For corn the deciding usage by China was kept unchanged ast 216 Mio MT in spite signals or rumors on lower consumption. Corn carry out stocks were lowered by close to 3 Mio MT but still are at the highest point in 13 years. VEGETABLE OILS PALM OIL Stocks: 1.98mil vs 1.99 mil tones DEC (-0.3%) Production: 1.50mil vs 1.67 mil tones DEC (-8.8%) Exports: 1.35mil vs 1.51 mil tones in DEC (-10.5%) S&D expectations Malaysia 20/02 Export decreasing by approx. 5%. Production decrease at >10%. Further decrease of stock at end of Feb. is likely, supporting market on short term. Rival soy oil has lead the market upwards. Palm was able to follow. Buyers are covered very short, making it for sellers easy to ask for high prices in current market environment. Potentially market can increase another US$50 in the coming eight weeks. Market expectation in the next 3- 6 months Market Range back in 2450-2650. Fundamentally market would be testing the lower range due to S&D figures, and due to competition from other veg oil (soy) will have effect on the market price. New direction will most likely be a lightly downward. Palm market is expected to tend further down together with soy oil and diesel prices. This to keep attracting the necessary additional demand. Today soy oil at same price as palm oil. CPO Cover March and April at current prices. If prices decrease beneath MYR 2400 one might cover some future months. Prices beneath MYR 2300 considered to be attractive for long position. RSO Market is looking at soy market and corrected accordingly. Due to higher intake from biodiesel on palm or soy blend, less RSO has been used. High output from Canola in Canada and EU soft weather conditions gives positive on output predictions. In the long term (Canada aims for higher output. Where expectations coming in 12 years from 18 Mln MT 2013 to 26 Mln MT 2025). Weak crude or gas oil will put pressure on RSO as well. |2 Trouw Price Trends | March 2014 Palm oil export market are decreasing by approx. 5% and production decrease at >10%. Global output at record high levels (288 Mio MT). Weak crude or gas oil will put pressure on RSO. PKO CNO PKO discount of approx. US$ 50 per MT to CNO. This is too tight. US$100 per MT is needed to keep the PKO more attractive than CNO. CNO has to loose demand and will increase further. Stocks slightly increasing. Excellent crush margins for PKO will have positive effect on Supply, although production is moving to low cycle. PKO will follow CNO where possible. Due to bad weather conditions in the origin, consistent supply is threatened for CNO. Possibility of ‘’hole’’ in supply chain is big threat. Switching from CNO to PKO still very limited. Stay away from the short. Cover at least 3 months ahead. This is to prevent from product tightness in destination. Keep in mind, in the first months the CNO was already shipped before to the typhoon. Now new deliveries should arrive. This can interrupt availability. VEGETABLE PROTEINS SOY The USDA report publication for February showed global output at record high levels (288 Mio MT). Especially Brazil seems to head for a historic crop around 90 Mio MT (surpassing the USA). Overall carry out stocks were predicted at 73 Mio MT which seems comfortable. However first the new crops from South America need to be realized and physically reach consumer markets. Coming weeks therefore full focus on the transfer from US old to SA new crops. Prices have been affirmed due to this reason. |3 Trouw Price Trends | March 2014 MARINE PRODUCTS STILL SLOW FISHERY AND PRODUCTION OF FISHMEAL AND OIL IN SCANDINAVIA. As informed the fishery of capelin and blue waiting behind last years and this year expectation.Norway has still not agreed with EU about quota’s in Norwegian and EU sone.Prices are up! Secure volumes at least until meal and oil from new fishing season in Peru arrive in Europe. |4 Trouw Price Trends | March 2014 DAIRY PRODUCTS LIQUID MARKET DEVELOPMENT Still very much milk in EU and a combination of problems in certain factories and a lot more milk is causing a lot of pressure on the liquid market. Liquid whey and skimmed milk concentrate is offered at levels well below powder prices and we expect that this situation will continue for the next 7 weeks, of course depending on a lot of circumstances which we can’t influence, like good weather circumstances in (some parts) EU. POWDER MARKET DEVELOPMENT Milk production in EU is much higher compared to 2013. International demand is still strong. Producers are struggling to find capacity to process all the milk and the peak in milk production still needs to come. Global SMP food prices are still around €3,350 or €3400. Feed prices already at level €3,000, which is very strange. If food prices are staying at current levels, we won’t have to expect that feed SMP is going down further. From a historical point of view SMP prices are still high. Sweet whey powder prices are moving already for a long period between €980 and €1,050. Producers doesn’t have stocks and they export a lot towards Asia and China. So prices will stay around current levels of €980 or 990 that will be delivered for feed. Milk production in the EU is still much higher as previous year. GENERAL MARKET DEVELOPMENT Although everybody expects that we have seen the end of global financial crisis, there are still a lot of things very uncertain. Will USA be able to reduce the support to the economy without problems? Will certain EU countries be able to survive without help of Brussels (Greece, Portugal, Spain?) Will global demand stay firm with current high dairy prices? Will USD/EURO exchange rate remains at current levels? Taking into account that it is very difficult to give an answer on these questions. Producers are struggling to find capacity to process all the milk Will USD/EURO exchange rate remains at current levels? |5 Trouw Price Trends | March 2014 AMINO ACIDS QUITE MARKETS AND NOT MUCH CHANGES FROM LAST REPORT. LYSINE MARKET The global market remains in an oversupply situation and driving prices to the bottom not seen for 6 years. Producers have lately reacted and reducing their output. Producers have now increased their prices slightly with a few cents. Lysine quite with Chinese New Year and holiday, where N-AM market is weaker again with CJ new production facility to capture market share in N-AM. Demand for amino acids remains very good with current spread on soy vs corn or wheat. Price differences per region are small. Price range for Lysine HCL 1,35-1,55 USD$/kg. METHIONINE MARKET Adisseo production disruption did not improve as quickly as expected and will also impact This is only for DLMethionine, the Spanish factory for liquid MHA had enough stock build up before Christmas. For Q1 the market prices in EU and Asia where most effected and increased by at least 10 ct or higher for uncover volumes. The production stop with Unisplendour in China remains unchanged due to environmental reasons, nevertheless they keep expanding their capacity by building a new factory in Ningxia. Adisseo is on track with its new production facility and started the first startup production, by importing the raw materials from their French facilities. DL-Methionine market in Europe is getting tight as Adisseo is not back at full production in France. Addition volumes hard to find, with spot market moving in the range of 2,85-3,00 €/kg. THREONINE MARKET MeiHua with maintenance, Eppen new factory delayed in startup and CJ production in China affected by contamination. The overcapacity will put a cap on too high prices. Especially Europe is more than enough covered with Chinese Threonine for Q1. However prices increased lately from reduced output and producers asking higher prices, it remains to be seen how strong this is over the next months as slow demand is expected in China after Chinese new year. N-AM prices are stable but on higher level. More imports seen here as well. AT the moment the market is moving >1,80 USD$/kg. TRYPTOPHAN MARKET European demand is increasing for Europe and especially in USA. Therefor Ajinomoto decided to allocate more volume outside EU, where also prices are much better for Tryptophan. CJ realize that their volumes are easily booked in Europe on Q1 and therefor decided to stop offering and NOT accepting any new contracts in Q1 also supported by additional sales in USA). Evonik was already out of EU or at higher price level. Price in EU is > 14 €/kg for spot business. With current price level < 15 USD$/kg (12 €/kg) it is attractive to keep Tryptophan in grower and finishing diets for pigs. Both CJ and Ajinomoto have no intention to increase prices above 13 €/kg, also this would attract the Chinese producers to start up production again. |6 Trouw Price Trends | March 2014 VITAMINS VITAMIN E VITAMIN A Prices have stabilized and the market is in anticipation what will happen moving towards Q2. The question is: will the Western producers persist in their attempt in playing a leading role pushing the prices up. The second question: will the Chinese now follow? The answer to the first question will be probably NO. We see BASF offering prices in the US market below USD 10.00. In the EU BASF was not very active as they claimed (one week ago) not to sell (and also not will sell) below €8.00. But BASF also mentioned that they cannot afford themselves not to be present in the market for another quarter. Vitamin A is very scarce especially in North America. Output is limited and price move up sharply as we speak. It is not expected that this price increase will stop Now BASF has obviously changed the plan: today we have received a quote significantly below the below the €8.00. It is likely that DSM will also fall back. This leads to the conclusion that the market will further decrease in Q2 and also that there is no market leader who can guide the market towards an accepted price increase. Prices have stabilized and the market is in anticipation what will happen moving towards Q2. CALPAN Market is now at USD 18.00 and moving towards the USD 20.00 as the two mayor suppliers - Xinfa and Xinfu - have the ambition to push the price further up. FOLIC Producers are forced to limit their output due to pollution. Prices are at around USD 28.00. Three producers indicate that they will push the price further up targeting USD 35.00 VITAMIN D3 D3 is still moving down although the biggest decrease is in the past. Price is expected to be USD 9.00. Vitamin A is very scarce especially in North America. Producers are forced to limit their output due to pollution. $ |7 Trouw Price Trends | March 2014 MINERALS & TRACE ELEMENTS Phosphate fertilizer demand remains strong and prices have increased by up to 40% since the bottom in late 2013 though are more stable over the past 2 weeks. Phosphoric acid is following the upward trend with contracts for Q1 up by $40-70/ton. Though feed prices are currently stable with Q1 already covered the fundamentals continue to suggest Q2 will be up in all regions as suppliers use this as a reason for increasing. In reality producers have been increasing their profitability by not passing decreases as Phos Acid came down especially during 2013. No firm offers in EU yet but we expect €15-30/tonne. Suppliers already indicate $0-25 higher in US and Canada. We expect EU suppliers to use the sale of Tessenderlo to Ecophos and Ercros to Timab as further argumentation why prices will increase due to risk of shortage of supply though in reality we do not see the actual risk as high despite some current short term production issues at Tessenderlo. Copper metal has weakened slightly since the previous report due to a more bearish sentiment. Copper Sulphate prices remain stable/weak with potential disruption due to production issues at one of the Russian producers being mentioned but not yet confirmed. Copper Sulphate pricing remains stable/slightly weak though the market is fairly quiet with Q2 contracting still to start in earnest. Zinc oxide prices are stable/up especially in EU where some suppliers are sold out and others asking 5-10% higher prices or restricting volumes offered for Q2. As with copper the market is quiet with most Q2 contracting still to begin – whether the current firmer prices will remain or slip back will become clear in the next 2 weeks but on balance we see more upside potential. Adopted from various sources TROUW PRICE TRENDS brought to you by: Trouw Nutrition Asia Pacific MM 2100 Industrial Town • Jl. Selayar Blok A 3-2 Cikarang Barat • Bekasi, 17845 • Indonesia Phone: +62 21 89983325 • Fax: +62 21 8998 3326 www.trouwnutrition.co.id • www.nutreco.com TPT010/NL/170314/AP Disclaimer This information should not be distributed to other parties than yourself without prior written approval of the author. Furthermore no legal or other rights can be obtained from this information. The content has been verified independently and is only intended for information purposes. The receiver is responsible for his own verification of this information using independent sources. 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