Coronavirus: Spike in demand for feed, food and pharma ingredients

By Jane Byrne

- Last updated on GMT

© GettyImages/Samara Heisz
© GettyImages/Samara Heisz

Related tags Coronavirus China GDP

The coronavirus outbreak has triggered a spike in spot demand for food, feed and pharma ingredients along with price volatility in the past two weeks, says Kemiex.

Analysts at that global ingredient trading platform speak to large producers, buyers and traders daily. “We have quite good overview on feed, food and pharma ingredients,” ​said Stefan Schmidinger, partner, Kemiex.

In terms of whether the imbalance in supply and demand Kemiex has noted in the past two weeks for key raw materials was panic engendered, he told us: “Market fear peaked during the prolonged Chinese New Year holidays as reliable information was difficult to retrieve. From last week, most Chinese producers returned to markets with often limited capacity as transport, travel and production restrictions persist. Some provinces such as Hubei are more affected, while the situation in others is [to a large degree] under control.”

An information vacuum, he continued, was created by the sudden appearance of a highly contagious virus at a time of the year where China, the world’s workbench for ingredients, is offline for almost two weeks, and orders for the remainder of year are typically placed right after.

“After two tumultuous trading weeks, companies now have more information at hand in order to conduct scenario planning about which raw materials are truly affected, and for how long, and which products are available already or are likely to be available from March onwards.”

Traders, he said, are reporting enough stocks for many raw materials. They are acting as buffers in the market right now, he added.

“Stocks are released in a structured manner, though, and might not [be able to meet] repeat, short-term spikes in demand. Some traders say that several end users and key clients are calling considerable volumes of annual contracts to play it safe. Selected ingredient producers [would] seem to be building some additional stocks to be able to service their key clients and also their own production of finished products during a less likely scenario of continued disruptions.”

Slowed economic growth in China

According to the Kemiex survey​, ran at the end of January, few professionals expect the current situation to last beyond June, said Schmidinger.

“However, analysts predict that GDP growth in China could slow to 3% in the first quarter, from 6% at the tail-end of last year. This [development] could create financial troubles for local manufacturers with a potential longer-term impact on supply and prices for some ingredients, especially if the situation lasts until the second half of the year.

“Government-linked institutions are already injecting liquidity through preferential ‘corona-bonds’ to support troubled companies.”

Some Western companies and governments are already reassessing their strategic sourcing and global supply chain strategies, reported Schmidinger.  “This could include building strategic stocks during normal market conditions or diversifying to sources outside China or similarly concentrated markets.”

Strategic procurement and supplier diversification are key, he added.

“As an immediate action, many professional companies have deployed project teams consisting of internal and external supply chain specialists, that have been updating [different] customized scenarios and reporting to senior management [on that] several times a week.”

Related news

Show more

Related products

show more

Don't wait for heat peaks to prevent losses

Don't wait for heat peaks to prevent losses

Content provided by Lallemand Animal Nutrition | 20-May-2024 | Product Brochure

For milk and meat-type ruminants, heat stress can lead to disrupted feeding behavior, an increase in oxidative stress and reduction of productivity and...

A pioneer and leader in microbial fermentation

A pioneer and leader in microbial fermentation

Content provided by Lallemand Animal Nutrition | 05-Dec-2023 | Business Advice

For over 100 years we've been producing yeast and bacteria for a variety of markets, Lallemand has perfected the art of fermentation. As primary microorganism...

YeaMOS T—Special Yeast Cell Wall for Mycotoxin Bin

YeaMOS T—Special Yeast Cell Wall for Mycotoxin Bin

Content provided by Angel Yeast - animal nutrition | 11-Oct-2023 | Research Study

YeaMOS T, which has been strengthened the advantages of adsorption sites in the yeast cell wall and possesses excellent adsorption effect in the toxins.

Related suppliers