KW ALTERNATIVE FEEDS EDITORIAL
Date:
28th June 2012
Reference:
KW12-06_03
Harvest concerns rising for both protein and energy feeds*
By KW feed specialist Chris Davidson
The feed markets have seen plenty of movement in recent weeks, with soyabean prices
rising in response to continued old and new crop buying by China, concern over hot, dry
weather in the United States (US) and an easing of the European debt crisis. Increases in the
corn markets have only added to this pressure.
The release of a United States
Department of Agriculture (USDA)
report earlier in June also had an
impact, with estimates for the Brazilian
soyabean crop up 0.5 million tonnes
(mt) to 65.5mt, but coupled with a
1.0mt lower figure for the Argentinean
harvest, down to 41.5mt. And this
Argentinean estimate is still higher than
most market expectations.
Protein feed markets:




Soyabean harvest concerns continue
Weather the biggest influence
Poor rapemeal availability increased prices
Summer 2013 contracts attracting interest
Energy feed markets:




Cereal prices may not now drop post-harvest
Russian wheat harvest poor in the south
Less export capacity for Russia and Ukraine
Chinese imports could be on the increase
The biggest concern at the moment is
Eurozone debt crisis:
the weather in North America, with

Still a major influence if situation worsens
crop conditions seemingly

Any fund selling a good buying opportunity

Quick reactions needed to take advantage
downgraded on a weekly basis as
 Buy in the dips to take at least some cover
forecast rains fail to appear. There is
more rain reportedly on the way, but
it’s unclear whether it’ll provide enough volume in the right places to benefit those crops in
greatest need.
The next USDA report will contain the first update to US corn and soyabean acreage figures
for some months. A shift of at least 2-3 million acres toward soyabean planting is needed to
help the current situation, but it would take a significantly higher switch to have any real
impact on current prices. At the moment, this looks unlikely.
For rapemeal, a lack of availability has increased the spot price to around £238/t. Forward
contracts for the rest of the summer and next winter are also still high thanks to the strength of
the soyabean meal price and increasing local demand as old crop rapemeal begins to sell
out.
Fundamental concerns about the European oilseed rape crop remain, with rumours that the
Ukrainian crop could be reduced by 25-50%. And as rapemeal contracts for Aug-Apr delivery
trade at around £225/t as a result, it’s the £178/t contracts for next summer that are
attracting what little buying interest remains.
0845 355 9935
www.kwalternativefeeds.co.uk
In fact, we’re seeing more and more interest in those summer 2013 contracts, and certainly
much greater take-up than for the coming winter. And with good reason – given the way the
protein markets have moved since the start of the year, prices in the mid £170s/t are worth
serious consideration, even if only to secure perhaps 30-60% cover to guard against the worst
of a repeat next year.
A recent comment from a US analyst from AgResource offered the opinion that soyabeans
appear undervalued at present, and that the price of all oilseeds could hit record levels over
the coming six months due to continuing high demand, particularly if the weather continues
to affect yields. It’s hard to recommend booking cover for this winter at current prices, but
remember that it might get worse.
Although the European debt crisis has been averted for now, it’s only a return to significant
economic uncertainty that offers any real hope of prices easing back, and buying
opportunities emerging in the coming months. And given the fragility of the supply versus
demand balance, even substantial fund selling in response to increased economic risk would
likely only produce a shortlived respite in prices.
If it does happen, be ready to act quickly to secure at least some cover going forward.
For cereals, the wheat market has firmed substantially as availability prior to harvest tightens,
and dry weather in both the US and Russia causes harvest estimates to be reduced. Rains in
Europe and northern Russia have been beneficial, but the Russian south remains hot and dry.
With rumours that the Russian harvest might now total just 48mt – some 10mt lower than
originally forecast – the view that cereal prices won’t now drop once the European harvest
begins is beginning to take hold. Concerns over global wheat supply have been further
heightened by the Ukrainian agriculture ministry predicting a crop of just 14.5mt (compared
to 21.0mt last year), whilst a recent sale of 110,000t of wheat to China reported by the USDA
is the largest sale in eight and a half years – it looks like export demand might also be on the
rise.
The price of most other energy feeds has risen as a result of increases in the cost at source,
with soya hulls now trading around £164/t for summer delivery, for example, but still available.
However, sweetstarch is currently on offer at a discounted rate of £179/t and liquid feeds
continue to be a good value source of energy in the current market, with the benefits of
extra sugars an added bonus.
* Prices correct at the time of writing and subject to change. Unless otherwise stated, all prices quoted
are for 29t tipped bulk loads delivered on-farm within 50 miles of origin.
0845 355 9935
www.kwalternativefeeds.co.uk