Market Intel

Fuel Surcharges:
Another “New Normal”?

Ongoing Mideast conflicts, particularly closure of the Hormuz Strait, add higher costs to moving feed ingredients across the globe or across the country. Diesel fuel is the main driver.

Six months ago in the U.S., diesel prices idled around $3.75 per gallon. Then the price pedal hit the metal. Now they’re now at $5.85 — up more than 50%.

To remain competitive, the world’s ocean freight operators, rail lines, and trucking firms are swallowing some of the added cost. But they’re having to pass most of it on, which appears as a fuel surcharge line in the invoice for feed ingredients.

Soybean meal: Board prices continue higher but basis is weakening amid uncertainty about U.S. renewable fuels policy. As in corn markets, Market Intel sources suggest, federal policies increasingly bind fuel and feed soy markets. Even as more soy processing capacity comes back online with the season, demand remains strong and the additional SBM is disappearing, which causes some “head scratching”. The stronger-than-usual El Niño weather pattern may delay spring rains in Brazil and impact soybean planting. Meanwhile, spot canola meal is hard to find and pricy, currently higher than spot SBM in the Tri-State. The U.S.-Canada trade dispute also fogs the markets. The soy protein products basis is steady to higher with board prices higher.

Palm & bypass fat products: There are very short supplies of palm products with high premiums paid for spot loads. Looking ahead, drought in Indonesia’s prime palm oil zone is going to affect Q1 yields. Tariffs are an ongoing a factor in pricing calcium salts. Prices for bypass fat product remain high with longer purchase lead times.

Amino acids: With the E.U.-China lysine trade dispute resolving, prices for Q4 delivery are slightly higher, with pressure up mainly from higher ocean freight and trucking costs, which affects micro ingredients across the board. Even so, there are good supplies of major amino acids, with threonine and tryptophan prices a bit higher and valine prices steady. DL methionine pricing remains steady, likewise for liquid met and hydroxy analog.

Vitamins: For Q3, vitamin pricing overall continues to soften. Supplies of Vitamins A, D₃ and E remain adequate, although sources note possible changes ahead in Q4 and early next year.  

Trace minerals: Industrial metal use, particularly for the booming data center construction, continues to push copper sulfate prices higher with comparable but smaller effects on zinc sulfate and others.

Blood products: Market Intel sources suggest supply is likely to remain tight beyond the summer, “pushing the envelope” for prices through Q3 into the holidays of Q4.

P-K-Mg: Increased targeting of Black Sea ports is pushing up phosphate prices.  Potassium chloride (KCl) prices continue to soften from the May peak, while magnesium oxide (MgO) prices are steady to firm.   

Urea: Hormuz Strait shipments are not moving, while Red Sea and Black Sea shipments are increasingly problematic, pushing prices up.

Distillers: DDGS prices continue higher with the value of corn and strong exports. There’s less concern about old crop VOM (deoxynivalenol mycotoxin), but processors are looking out for higher concentrations in the crop to come.  

Wheat midds: Prices are up again and quality is good. In the global wheat trade, Australian rains nearly balance the past months of very dry weather in Europe.

Soy hulls: Although processing plants are coming out of shutdown season, prices remain strong, which sources expect to continue through Q3.

Over the horizon… This year’s El Niño continues to grow, affecting global weather, adding to the effects of war to move commodity markets.

Available: WASDE September Report. 

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