VOL. 18, NO. 4 / FALL 2023 / URNER BARRY'S REPORTER • 65
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ADVERTISER INDEX
Aqua Chile ................................................ 11
AC Freezers ............................................... 39
Bird-In-Hand............................................... 9
Catelli Brothers ......................................... 27
Chicken of the Sea
Frozen Foods ......................................... 35
Deb El Foods ............................................. 51
Deiss Sales Company/
Mag Sea ................................................. 53
Devi Seafood ............................................. 33
Direct Source Seafood .............................. 67
Sonstegard Foods/
Estherville Foods .................................. 37
Farbest Foods ............................................ 61
FOA & Son Corporation ............................ 52
Hidden Villa Ranch/
NestFresh ............................................. 45
Jason's Foods Inc ...................................... 31
Koch Foods .................................................. 7
Marvell Foods ........................................... 49
National Fisheries Institute ..................... 47
National Poultry & Food Distributors
Association (NPFDA) ............................. 51
Newport International ............................. 41
North American Meat
Institute (NAMI) .................................... 15
NuCal Foods .............................................. 57
Prestage Foods .......................................... 23
Protein Alliance/Trade Café ..................... 25
Shorepoint Insurance Services ................ 19
Tippmann Group/
Interstate Warehousing ....................... 59
Turkey Valley Farms ................................ 57
Urner Barry ..............2, 19, 23, 52, 57, 65, 68
US Poultry & Egg Association (IPPE) ........ 17
Wabash Valley Produce............................ 63
Weinstein Meats ....................................... 66
Westside Foods Inc. .................................. 55
Win Transport .......................................... 43
Livestock feed…
"Unprecedented" situation
squeezes animal nutrition
division at Evonik
Article contributed by FeedInfo,
a sister publication of Urner Barry
"As far as I can remember, this is, for sure, unprecedented".
Christian Kullmann, CEO of Evonik, was speaking of the earnings decline of his company's
animal nutrition business in an early August earnings call. As he recounts, in previous
macroeconomic downturns, like the 2008 financial crisis, animal nutrition has proven quite
resilient. However, the current squeeze is different.
"The animal feed market, which has been characterized by steady and very healthy
volume growth for decades, is now expected to show only modest growth for two years in
a row," he observed.
"At the same time, methionine prices have been falling until recently, while prices for key
raw materials such as propylene and ammonia have increased. As a result, our earnings
in Animal Nutrition, which have only shown an average year-on-year swing of below €100
million over the last five years, are now 80% below the long-term average this year, which
means close to breakeven in some months."
Going forward, the company believes that things might be turning around for methionine,
in terms of production cost and market conditions.
Resolving to reduce its cost base by €200 million in 2025, half of which will be realized in
2024, Kullmann stated that propylene and ammonia prices are coming down.
Meanwhile, CFO Maike Schuh asserted that "Q3 volumes are now starting to [head] up.
We see increasing market demand in Asia. We see increasing order activity since the
announcement of Evonik's [planned] shutdowns in Singapore."
And indeed, that shutdown-which the company estimates will take 10% of global
methionine capacity offline-is not the only supply-side issue influencing the methionine
market right now. "Adisseo in France is going out of the market, CJ in Malaysia with 60kt
and also NHU seems to be again delayed. So prices should bottom out. And this is, of
course, why EBITDA should still stay positive."
Longer term, in light of the large capacities coming online in Asia in the coming years, the
company sees its strategy as "defending [its] position as cost leader, which is translating
into different measures we have in place." This includes not only the €200 million cost
reduction program, but also the debottlenecking taking place in Singapore and the
establishment of methyl mercaptan capacity in the U.S.
In sum, the situation is described by the executives as challenging, but trending better.
In the CEO's words, "while the methionine market will remain challenging, there is a
fair chance that our earnings in this business will recover from the current absolute
trough level."