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Inflation will change the way we formulate animal feeds

Formulating feeds with increasing prices is not an easy task, especially when they are to be sold in the open market.

Rising Costs Increased Price Speedometer Inflation 3d Illustrati
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Formulating animal feed amid increasing prices is no easy task

I had the unfortunate privilege of living in times where inflation was around 25% in my home country, and saw the long-term effects of such times. My father, a trader by nature and profession, used to say that by the time he collected his invoices from customers, such money was no longer enough to buy again the same products. Since then, we all hoped that this was behind us as central banks in major regions/countries kept inflation around the nominal 2-3%. In fact, we became so accustomed to low inflation that we took it for granted. Today, in the EU, for several reasons, some self-inflicted, others not so much so, we enjoy a hefty inflation of 8-10% and it has only started. The U.S. is equally affected, although not so much so, as it is a bit further away from one of the major reasons of the problem.

Nevertheless, politics and policy aside, nutritionists in both regions must re-learn how to formulate with inflation in mind. In fact, a prominent economist predicted that inflation will be with us until 2050. I am sure he did not care what would happen after that day. At any rate, formulating with ever increasing prices is not an easy task, especially when feeds and nutritional products are to be sold in the open market. It is not easy to formulate feeds for your own animals under inflation, but having to place an immediate margin for the open market deprives you of the hope that animal products will increase at least somewhat to absorb the inflationary pressure on feeds.

Here, I do not have to mention the issue of credit line extended to customers by suppliers. This is already disappearing and, with increasing interest rates, it will be cash only very soon. In fact, many grain and feed suppliers have started reducing their credit line to existing customers and demanding cash only from new ones as they need to increase their liquidity to battle inflation and overall market uncertainty.

So, how to formulate under inflation pressure without control on purchasing and selling activities? That is going to be the topic of an article I am preparing.

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