Soya bean volatility likely to remain

Transitional markets mean there will be feed opportunities for some, reports KW feed specialist Chris Davidson

It is a transition phase for the soya bean markets, with the North American harvest nearing completion and attention already switching to South American plantings.

The weather still has the biggest potential to affect prices, with the investment funds likely to exaggerate any movements we see in the market.

Soya bean

This volatility is going to remain, but at least recent weeks have seen some respite from the highest highs of the last year. The US soyabean harvest is now 80% complete, compared with a 69% average at this time of the year, with yield reports continuing to come in as “better than expected”.

The supply to US ports also continues to be strong as farmers offload some of their crop straight away, and the post-harvest increase in supply certainly eased pressure within the markets. The imbalance between overall global supply and worldwide demand largely remains.

Chinese soya bean imports for the past 12 months, for example, total 59.2m tonnes, up from 52.3m tonnes during the same period last year, with the United States Department of Agriculture estimating a total for the 2012 year closer to 61m tonnes.

Current USA soya bean export commitments also appear very large and are 35% ahead of last year, with soya bean meal exports 31% ahead. As a result, stocks look likely to run low towards the end of winter, and this could force prices higher, particularly if any delay to the South American crop limits availability of new crop soya beans in March/April.

Reports of less than ideal weather in Brazil and Argentina are already beginning to wcause concern.

How quickly prices react remains to be seen, and depends on further news regarding South American soya bean plantings and germination. Any significant negative news could see prices quickly bounce back towards previous highs.

Rapemeal

Forward contracts for rapemeal have broadly followed the soya bean meal market, but with nearby positions remaining firm on the back of ongoing tightness of supply, particularly in the north of the country. This lack of availability has pushed prices to the point where imports are starting to enter the market, and along with growing confidence in the imminent arrival of wheat distillers’ feeds from both the Ensus and Vivergo bioethanol plants, this is now helping to keep a cap on prices.

There does still appear to be a lot of business remaining to be done on the mid-proteins for the winter, however, with many holding out for improved supply and a corresponding reduction in the price. Whether this will come depends on how well any extra supply fulfils outstanding demand.

Consider getting perhaps 75% of all winter protein requirements booked now to guard against problems with the South American crop, with 100% cover an option worth considering given the potential for prices to rise again before Christmas. Any new supply of bioethanol wheat distillers’ feeds could provide an opportunity to fill remaining protein needs, depending on price and availability.

Finally, don’t forget the better value still offered by rumen-protected protein supplements compared with soya bean meal if the requirement is for high quality rumen-bypass protein.

Energy feeds

Prices for cereals and other energy feeds also remain strong, with rumours of an export ban being introduced by the Ukraine adding pressure to the markets. The Home-Grown Cereals Authority is predicting the UK will be a net importer of wheat this crop year (the first time in a decade). China continues to show strong demand, recently making its largest single wheat purchase in two years by buying 295,000t of Canadian spring wheat.

Availability of alternative energy feeds also remains limited, with UK sugar beet feed extremely tight, for example, although soya hulls are available in the mid £170s/t ex-port for those needing digestible fibre. For starch, the confectionery blends are still better value than cereals, and more reliably available than maize meal, while millers forced to process bigger tonnages of low bushel weight wheat have increased wheat feed volumes resulting in spot prices now at a £20/t discount to November/April forward contracts.

Information supplied by KW Alternative Feeds, supplier of a range of feeds for UK farmers. For more information visit www.kwalternativefeeds.co.uk