Recent weeks have seen feed prices dip temporarily, but as discussed many times in this column, it’s the result of fears concerning the ongoing euro debt crisis rather than any change in the fundamentals of supply and demand.
Any such dips should be seen as the best buying opportunities we’re likely to see for the rest of this year, and booking at least some forward cover should be seriously considered when these lower prices appear.
And as expected, there were plenty keen to buy when the market dropped, quickly pushing prices back up again.
Overall, the situation has become worse, not better. The weather in North America continues to be compared to the drought of 1988, with the condition of the US soya bean crop now reduced to just 29% in the “good-to-excellent” category, compared to 60% this time last year. The markets are heavily focused on what little rain is currently forecast for the main soya bean-growing areas, and if it doesn’t meet expectations there’s likely to be further upward pressure on prices.
South America is still not offering any significant volume of exports until 2013, so there’s no respite in terms of additional global supply expected from that direction. The effect has been seen across all protein feeds, with rapemeal closely following the price of soya bean meal, and a premium for material bought on the spot market.
Feed markets at a glance
• Dry weather still dominates feed markets
• Yield concerns for corn, soya beans and wheat
• USA, Russia and the Ukraine worst affected
• No sign of significant change in short term
Best buys for feed:
• Rapemeal better value than soya bean meal
• Rumen-bypass proteins most cost effective
• Liquid feeds continue to buck current trends
• Imported sugar beet feed now best for fibre
Outside of the dips caused by fund selling when the eurozone crisis re-emerges, the best buying strategy is probably to at least avoid those spot premiums. Aim to secure protein requirements at least one to two months ahead, using any dips to book perhaps a portion of what’s required for the winter.
In terms of which feeds offer the best value at the moment, rapemeal is still a better buy than soya bean meal, despite high demand compared to supply, while imported maize distillers’ feed is available for the rest of the summer at about £265/t, with a slight discount for the winter. But it’s liquid feeds that are the must-buy this year, with high-protein liquid feeds offering a great opportunity to reduce protein feed costs, whether you already have a tank or need to get one installed.
And for those needing the high-quality protein normally supplied by soya bean meal, it’s the specialist rumen-bypass protein supplements like heat-treated rapemeal and rumen-protected soya bean meal that are still the most cost-effective options.
The dry weather also continues to worry the energy feed markets, with the USA, Russia and the Ukraine all still suffering. Pressure from reducing harvest estimates has pushed wheat prices higher, but they’ve also been driven by the rise in corn prices as the condition of the US crop worsens.
As a result, November new crop wheat prices have already hit £180/t ex-farm, and there continues to be questions raised regarding the quality of the UK wheat crop following this summer’s rain. Reports have also suggested millers are finding imported German wheat cheaper than domestic milling wheat.
We may yet see a significant increase in the volume of wheat offered to the feed market as a result of both downgrading and sales lost to imports, but unless there’s a substantial shift in the fortunes of the US corn crop, prices are unlikely to tumble to any great degree. It could, however, represent an opportunity for anyone able to incorporate additional wheat into winter rations.
Some rumours have been circulating that the US government will be lobbied to stop the use of corn by the US bio-ethanol industry in a bid to free up additional volume for feed use. Any such political move would take time, and the situation may need to get much worse before such intervention is considered – at the moment, such rumours would seem to be little more than wishful thinking.
The price of alternative energy feeds has also continued to rise, with soya hulls now trading at about £180-185/t for winter delivery. Imported sugar beet feed at a similar price is the better-value feed at the moment, and is rightly taking most of the interest from those needing digestible fibre.