Sticking to the spot market


With fund mangers still investing heavily in commodities, plus limited supplies of many key feed ingredients and no clear sign when change might come, most buyers are sticking to the spot market for now. And rightly so.


The only exception to this rule is for those looking for moist feeds or digestible fibre, as pressed pulp is still readily available for contract orders and the campaign will be coming to an end in the next month or so. With few other moist feeds available at present, and pressed pulp offering good value for money this year, prompt ordering is recommended to ensure enough material can be clamped now to see out the winter.


Proteins, however, remain expensive. Soyabean meal prices are still around £290/t delivered despite recent reports that China might have overbooked and be easing back on imports for a time. Unfortunately, a dip in the value of Sterling countered the resulting drop in US prices, and with old crop supplies in South America tight and new crop harvests yet to start, the overall lack of supply is keeping prices high.


The ‘month ahead’ discount for soyabean meal discussed in this column before Christmas has now come back to around £1-2/t (compared to £10/t in late 2009). It’s still a discount, and might be worth considering if you have no cover at all for February, but the markets don’t yet appear to have taken full account of the potentially large crops about to be harvested in South America.


The estimate for the Brazilian harvest has increased from 63mt to 64mt (against 57mt in 2009), although some reduction in the Argentinean harvest forecast (currently at 53mt) due to the planting delays earlier in the season may counter this. But there is still a large volume about to be harvested, and any significant downward move in the price of soyabean meal could see a rapid exit by the fund managers and a real opportunity to buy forward.


Maybe!


Prices have been high for a very long time now, and it would only take China to re-enter the market strongly, South American harvest conditions to be poor or Sterling to remain weak against the US dollar, and the current situation might continue into the summer. Summer prices of around £240/t still offer an opportunity to buy forward to guard against these high prices continuing, but cover perhaps only 25% of requirements in case prices do come back dramatically.


The situation isn’t helped by the sharp rise in rapemeal prices seen in recent weeks on the back of very poor availability throughout January and February. High soyabean meal prices have increased demand, as has the lack of distillers’ feeds, and with low crush volumes the price is unlikely to come back unless soyabean meal prices move first. Spot rapemeal (if available) is currently trading at above £180/t on-farm, with March-April deliveries at a £10-15/t discount.


The one opportunity is in the form of the aforementioned distillers’ feeds, with Scottish barely distillers’ still available, and some new shipments of imported wheat distillers’ feeds due in the next month or so. At around £165/t for March-April delivery, it might be worth a look.


Many energy feeds also remain in tight supply, though there still appear to be large cereal stocks behind the scenes waiting to be sold at some point. Very little business is being done, however, and there are suggestions that a lot of cereal is being fed on-farm, or sold locally between farmers. At £108/t, wheat actually remains a reasonable buy for those needing additional starch, particularly if bought as caustic soda-treated SodaWheat to allow higher inclusions without running into acidosis problems.


Given that maize meal is unavailable and both processed bread and wheatfeed are in short supply, then cereals or sugar beet feed are the two main options available for non-contracted buyers. Wheatfeed is available for the summer on forward contract, and at a good price, so might be worth considering to ensure at least some cover in case cereal prices rise further in the run-up to harvest.


 

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