A relatively new addition to the equation is the competition with biofuels. This industry has increased considerably in size over the last ten years due to blending objectives in the US and Brazil. As a side effect energy, food and feed prices have a much stronger effect on each other.
Finally, climate change causes extreme weather conditions to occur more often, including tornadoes, torrential rain or extreme drought. Crops fail more often and countries and supply lines are disrupted. To make things worse; peaks in feed prices do not necessarily coincide with peaks in the milk price. As some farmers in intensive farming systems (i.e. eggs) know, farm profitability can go up and down with the same spikes and volatility as feed and milk prices, with long down runs sometimes resulting in farm bankruptcies due to not being on top of animal or financial management.
In short, it is less obvious imported concentrate ingredients will be available. Production growth can't keep up with the sustained demand and stock levels are low. Therefore a small change in the export of countries and regions immediately affects world market prices. The tensions in Ukraine and Russia already affect wheat prices, as the Black Sea region is a large exporter of wheat. The impact on concentrate prices for dairy cattle remains limited, since the EU still has its own wheat provision and there are alternative resources.
Soy import the Achilles heel
A steady supply of soy as the favourite protein source in feed concentrate needs to be a completely different story in the near future. The soy used in Europe as well as in large parts in China originates largely from Brazil and smaller portions from Argentina and the US. In recent years reports appeared with words of warning concerning this dependence. Via the Dutch port of Rotterdam, a main entry point for feed ingredients from overseas, annually some 9 million tonnes of soybeans are channelled from here to other EU countries. Still the Netherlands is only a relatively small player in the overall global soy wars. China takes a huge piece of the pie with a mega purchase of 59 million tonnes of soy from the world market. That demand will increase considerably over the next six to eight years. According to the American Department of Agriculture (USDA) this increase could be 59%. These are impressive numbers, illustrative for the meaning of 'pressure on the market'.
In case the South-American soy crops plunge due to drought or a plant disease, this would need to be balanced by a very good harvest in the US, India or China. If these crops are meagre too, prices will skyrocket. It is conceivable that China will quickly purchase stocks out of strategic importance, after which time no single bean will be available for sale anywhere else.