Straights prices firm as compounders buy
By Peter Grimshaw
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STRAIGHTS prices are firming on the back of feed compounders actively buying protein and grain supplies to cover themselves for winter, according to commodity traders.
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Although major commodities are still at low levels, most are trading forward at higher values than they fell to last winter. But rapeseed meal is a notable exception, said Mr Tremain (see table).
The big buyers may be making sure they are covered for their winter needs, but farmers who buy straights are generally keeping out of the market in the hope that prices will go lower.
However, Mr Tremain believes farmers should look very closely at their position for winter rations.
“It would be unwise to have no cover for the winter period, although we dont advise anyone to get 100% coverage. The trick is to get a fair average price, rather than buying on the cheapest day.”
Many milk producers have held off because of fears that buyers could suddenly insist on non-GM feed ingredients.
“The GM issue now seems unlikely to come to a head on soya or gluten this winter,” said Mr Tremain. But milk producers in particular should check with their buyer before committing to forward contracts on feed, he added.
Cargills Martin Douglas, responsible for livestock feeds, warns that the chances of even lower prices, while a possibility, are outweighed by the risks that they will rise.
“Prices may fall back a little, depending on the weather and predicted crop production, but there is a definite floor to the market. It simply will not stand a fall of more than £15/t from the current position, though it is perfectly capable of rising by over £70/t.
“Saving the last £5/t means very little to the bottom line, compared to the risk of losing £50/t.”
Mr Douglas said UK compounders and big buyers had been actively covering their winter needs at current price levels, while farmers have generally not been active.
“I dont think well see the price levels of six weeks ago again this winter,” he predicts. “Soya is already £8-9/t higher than a month ago. Were very definitely seeing a movement northwards.”
Nor will prices start to ease once the major buyers have filled their order books.
Mr Douglas maintains that, once the volume side of the business is done, shippers will be able to sit on the balance of their stocks and wait for the spot market to pick up again.