As corn and soybean prices continue to rise, we expect a similar trend for amino acids. Low to no inventory levels at the end of the supply chain, along with a series of planned maintenance shutdowns at factories around the world, would normally further strengthen this trend. However, a quick glance at the data for a few selected amino acids reveals a whole different story.
Lower Amino Acid Prices
World prices are stabilizing and in many parts of the world prices are already falling. How can this happen? Producers first send lower price offers to their larger customers in the hope of securing large sales before the market drops further. These buyers negotiate prices and inform their contacts throughout the supply chain of a market change.
A chicken game
As rumors of falling prices spread, traders and buyers who have been waiting for the market to fall begin to test the market by trading in larger volumes. Their apprehension of buying too too soon in the middle of a market that could fall further results in a chicken game, in which 2 players argue over who will give up last. Producers with full warehouses face buyers and traders with empty lots.
The question becomes: which will fail first?