US government shutdown puts soyabean market in limbo

With the size and quality of the North American soya bean crop currently pivotal to the direction protein meal prices take during the next three to four months, the US government shutdown brought a nervousness to markets in late October.

The shutdown included the United States Department of Agriculture (USDA) putting a hold on any new reports or updates on the progress of the US soya bean harvest.

It left the markets with little clear direction, resulting in figures being circulated that ranged from 20-60% of the soya bean harvest being complete, and potential yields varying between 41-43 bushels/acre.

There have also been strong rumours – none of which could be confirmed – concerning the extent of Chinese demand for US soya beans, the level of which will have a direct effect on how long it takes for much-needed soya bean meal supplies to arrive into the UK.

The US government shutdown has also created uncertainty in the world financial markets, resulting in many of the investment funds looking to pull out of agricultural commodities and move instead into traditionally safer options like gold and the US dollar.

The immediate impact was a fall in the Chicago futures markets, although this didn’t translate into a similar drop in physical prices due to the nervousness around the lack of reliable information.

Supplies of soya bean meal into the UK remain tight, a situation not helped by shippers unwilling to commit loads without clearly booked sales, and buyers understandably sitting back in the belief the market will (at some point) fall. It appears there is still a lot of protein feed volume to be bought before the end of the winter, and this will continue to put pressure on supplies even if the price does start to ease.

With more questions than answers at the moment, the advice remains the same as it has been for the best part of the last six months – avoid the spot market premium, don’t book too far ahead in case prices do ease, but keep at least 1-2 months cover going forward to guarantee supply.

However, because of the current difficulties, there is growing interest in alternative protein feeds, many of which have been offering better value for money than hi-pro soya bean meal.

Rape meal has been very competitive, though the relative gap to soya bean meal has closed following strong demand from the European compound feed manufacturers, particularly for the period from November to January.

But it’s still more cost-effective to replace expensive hi-pro soya bean meal by combining rape meal with additional rumen-bypass protein.

The various distillers’ feeds have experienced similar strong demand. Imported EU distillers’ feed is still available for the winter, although now at a slight premium, with contracts for November to April delivery currently about £234/t. But with good levels of energy as well as protein, and valuable digestible fibre to balance any additional cereals in the ration this winter, it’s still a good buy.

The wheat market rose recently following the need for grain merchants to take cover on the futures markets when unable to buy off farm. It’s expected the market will remain tight until the new year, though compared to the average for the last three years, current prices still look good.

There have also been concerns regarding cereal plantings in various parts of the world, with key exporters like Russia and the Ukraine reportedly affected, and the Argentinean wheat crop thought to have been lower than expected.

Global demand for wheat is looking strong, while UK barley prices are being supported by the exports that are now underway, so consider taking some cover rather than being caught out by the spot market.

On other energy feeds, soya hulls have strengthened as expected due to high demand, plus shippers experiencing difficulty in securing additional supplies.

Contracts for the winter are still competitive against other digestible fibre sources like sugar beet feed and citrus pulp at £165/t, so now could be a good time to book any remaining requirements.

Wheatfeed prices have also strengthened as the high quality of UK milling wheat allows millers to reduce production rates, while sweetstarch is experiencing good demand as a cereal replacer.

At £175/t for a consistent feed with a higher energy content than wheat, November to December forward contracts are definitely a good buy.