Feedwatch: Look ahead for best opportunities

With rapemeal more expensive than expected, soya bean meal easing back only slowly and spot cereal markets moving very little, the best opportunities for feed buyers are perhaps 9-18 months ahead.

Soya bean meal prices in the mid to late £240s/t for next summer now look reasonably good value given the peak of £308/t six weeks ago and spot prices just £40/t less. Prices for November-April delivery are still in the early £260s/t, though UK markets continue to be influenced by currency movements.

It means that although the rest of the world is experiencing relatively low soya bean prices – which continue to limit supplies from South America – farmers in this country need to come to terms with the potential for an extended period of higher prices, and take action to manage risk accordingly.

For soya bean meal, any price within the £240-250/t bracket should be considered a sensible buy, and at least some cover taken to guard against price rises. Back in October and November 2009 there were several opportunities to buy summer soya bean meal forward at between £220-240/t, and anyone who covered even 30-50% of requirements then will now be rightly satisfied with that decision.

Soya bean meal prices for next summer may drop another £10-20/t, but this year alone has shown they can rise by £60-70/t, even when all predictions suggest they should do otherwise. With milk prices looking set to increase, it makes good business sense to invest some of that additional income in securing essential feed supplies.

The one word of caution comes on the back of continuing reports of a very large soyabean crop in North America. Recent rains in the Mississippi Delta have helped give the markets more confidence in improving soya bean supply come the September/October harvest, but currency weakness will still dilute any impact in the UK.

Whether the threat of world prices falling lower as a result of a potential bumper US crop will force South American growers to sell is unknown at this time.

In contrast, rapemeal is definitely overvalued at present, with spot prices of £185/t delivered putting it at around 65% of the cost of soya bean meal. Historically, a more sustainable level is 45%, and although supply is still tight and demand strong, the swing away from rapemeal use has already started.

Scottish barley distillers’ feeds (26% CP, 13MJ ME/kg DM) are better value at the moment for farmers in the north of England and Midlands, with high-protein liquid feeds like Spey Syrup also a good buy. With good dry matter content (43%) and high levels of rumen degradable protein (37% CP), Spey Syrup is an excellent choice for any farm with the facilities to handle and store liquid feeds.

For energy feeds, the growing pressure of yet another good global cereal harvest appears to be equalled by rising demand from livestock feed, human food and biofuel production. This will be the third season in a row without significant weather-related problems affecting yields in the major exporting regions, and although UK farmers are facing the possibility of falling crop potential if the dry weather continues, overall world production looks set to be high.

As demand from the biofuel industry continues to grow, with new production plants continuing to come on stream in both the USA and Europe, there appears to be considerable potential for markets to rise. Predictions also suggest lower cereal plantings this autumn in response to lower prices.

Given the potential for wheat prices to be at least £20-30/t higher in a year’s time if next season saw unfavourable weather combined with reduced plantings, then November-January prices of £105/t look to be worth considering. Prices for next summer are also sensible for partial cover to limit the risk of any upside.

It also means that prices for a number of other energy feeds should be seen as a good deal. Soya Hulls are competitively prices to the end of the winter, and even next summer, with SweetStarch and biscuit meals similarly attractive.

• Prices correct at the time of writing, all prices quoted are for 29t tipped bulk loads delivered on-farm within 50 miles of origin. Prices subject to change. Keep up-to-date with Feedwatch here.