An increase in futures prices has combined with a further weakening of sterling to once again push spot soyabean meal prices above £300/t this last week writes Colin Shepherd of KW Alternative Feeds.
It’s a significant backwards step, and one that’s also increased the price of forward contracts for next summer by £15 20/t, with an immediate impact on forward buying activity.
It means the focus has shifted from longer-term coverage to more immediate requirements through to the end of February. And with the spot price currently £10/t ahead of contracts for December delivery, anyone without full cover for next month should act now to secure supplies immediately.
This “spot premium” also looks set to remain as we go through the next couple of months. Supplies remain tight, and renewed buying interest from China has helped to push weekly export sales well above expectations, to an impressive 1.35mt.
South American crop
The price rise comes despite the general expectation of a substantially greater South American soyabean crop than last year. Latest reports show Brazilian plantings are 61% complete – and in ideal conditions – while the current difficulties being experienced with low soil moisture levels in Argentina should soon be over thanks to the forecast of rain this week.
Of more concern, and a significant contributor to the prise rise, is the re-entry of fund buyers into the commodities markets. There has been substantial fund buying activity within the soyabean futures markets, creating a “false” demand in the face of limited supply. The good news, however, is once the current peak passes, a rapid exit by those same fund buyers may create a dip in prices below those recently seen – keep a close eye on markets to make the most of any buying opportunities that may result.
However, be aware commodity values in the UK are also still being heavily influenced by currency fluctuations, with the Dubai debt crisis typical of the factors having a major impact on exchange rates over the next two to three months.
The higher soyabean meal prices have also had an impact on rapemeal prices. However, with little rapemeal available on the spot market and crush volumes settling back, rapemeal prices are unlikely to follow any drop in soyabean meal prices to the same extent. A large proportion of this year’s rapeseed crop was crushed early in the season in response to high oil prices and strong demand, with crushers selling a lot of the resulting rapemeal forward on the back of the high soyabean meal prices. There is little left available for sale on the spot market, and with the Christmas shutdown period now close, all rapemeal requirements through to the end of January should be booked immediately to guarantee supply at a reasonable price.
In addition, recent weeks have seen cereal prices creeping up, with the price for January delivery of wheat about £107/t on-farm. Selling activity remains relatively limited, keeping supplies tight, though exports to date are below those achieved by this time last year. There are indications that substantial volumes are still being held on-farm in the hope of further price increases.
Other energy feeds have followed, with tight supply having an impact on specific feeds like maize meal. Of the energy/protein feeds like distillers’ feeds, wheat distillers’ pellets are in short supply, whereas barley distillers’ pellets are available and £20-25/t cheaper. For those in the south west or close to the Humber, maize gluten remains the better option.
Finally, there’s a lot of wet, acidic maize silage on-farm this winter, so demand for digestible fibre feeds like sugar beet feed and soya hulls is likely to be high. Although demand has been slow to appear, there’s a strong possibility that regardless of price, supplies may tighten rapidly once livestock producers realise the importance of such feeds in balancing this winter’s rations. Order now to avoid getting caught out in months to come.