There is some welcome confidence returning to the markets with the March report from the United States Department of Agriculture (USDA) confirming an expected soya bean harvest of around 50m tonnes in Brazil and 80m tonnes in Argentina, writes KW’s James Butt-Evans.
Prices have certainly settled a bit as a result, particularly for the summer, though supply issues continue to affect contracts for delivery for the next couple of months.
The South American soya bean crop is reportedly now beyond the most critical growth stages that can be affected by the weather, and although harvest in Brazil is proceeding slowly, progress is being made. Immediately after the publication of the USDA report, forward prices on the Chicago Board of Trade (CBT) dipped in response to the good news, though the impact on UK prices for soya bean meal was lessened by a weakening sterling.
However, there continues to be a logistical “bottle neck” holding up current shipments of soya beans, soya bean meal and soya hulls out of South America. With most demand still directed to the USA – a situation which will continue until the South American harvest is much nearer completion – it is this immediate supply issue that is keeping nearby prices high.
Soya bean meal for April-July delivery is around £375/t, compared to nearer £353/t for August-October contracts. But with availability potentially under threat for at least the next 60-70 days, the recommendation is to cover any remaining requirements to the end of July immediately regardless of cost.
Feed markets at a glance
- South American crop now appears safe
- Summer prices expected to fall in time
- Shipping issues still a concern until July
- Book now to secure supply
- Supply of rapemeal still tight
- Expensive against soya bean meal until August
- Late summer and winter contracts worth a look
- UK spring planting held up by cold weather
- Harvest volumes expected to be down
- Wheat feed prices could rise as a result
- Imported sugar beet feed now available
And although summer prices should drop further once South American exports start up, there’s still the unknown factor of potential extra global demand that’s been waiting for prices to fall, particularly from China. Booking at least some cover through August-October would appear to be a sensible risk management strategy to guard against any unexpected price increases.
Rapemeal availability remains limited until the new crop harvest begins, and that’s keeping prices for April delivery firm, while May-July contracts are being supported by the supply challenges facing soya bean meal. As a result, rapemeal appears expensive compared to soya bean meal until August – consider taking some cover but be aware that any drop in late summer soya bean meal prices will likely see rapemeal follow.
One option worth considering is to switch to a liquid feed for at least part of your protein requirements, with the high protein molasses blends good value for the summer. Typical summer contracts in the low-mid £180sq/t for a 38% crude protein (CP) molasses blend, for example, makes it a better buy than rapemeal if rations can be reformulated to take account of the extra energy supplied.
And when the additional benefits of adding molasses to the diet are taken into account, the low protein liquid feeds also continue to offer good value for energy this summer, despite the easing seen in wheat futures prices during March. This dip was caused by lower exports from the USA and favourable crop reports, although the physical price being paid in the UK remained higher due to a reluctance in farmer selling.
Those with crops in store seem happy to wait, hoping that stocks will get tighter – and prices higher – before harvest. There is also some concern emerging that the UK will be a net importer of wheat yet again this next crop year.
UK spring planting has been delayed by the cold weather, and there’s likely to be a much greater area of spring cereals this crop year due to the appalling conditions last autumn. The overall impact on UK cereal production is hard to determine, but general opinion is that it will be a smaller harvest overall.
One knock-on effect could be the need for UK flour mills to continue using imported wheat for the rest of the year, and this is likely to impact the summer price for wheatfeed, which stands at £175/t. Soya hulls are another good buy once past May, with June-October contracts at £180/t worth considering.
For those needing a cereal replacer, the potato co-products remains a good option for supplying starch, whilst those needing digestible fibre can now access supplies of imported sugar beet feed. With soya hulls supply tight, it’s probably the best option currently available.
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