Easing prices for many feeds but volatility ahead*

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Image of soyabean growing crop

Brexit may be dominating the headlines, with resulting currency volatility adding upward pressure to imports, but feed prices are also being strongly affected by global trends.

The biggest influence for protein feeds continues to be the substantial drop in Chinese demand for soyabeans following the African Swine Fever (ASF) epidemic. Whilst North American exports have been much-reduced for some time – in part due to the US:China trade war – the latest data shows that Brazilian shipments are also 30% down, year-on-year.

The talks to end the trade war between the US and China are showing little significant progress, with reports of ‘constructive progress’ failing to convince the commodity markets that the situation will improve any time soon! The export of US soyabeans to China look likely to remain low for some time. 

Soyabean supply confidence

In terms of production, the establishment of the US soyabean crop is now well underway, though latest figures from the USDA (United States Department of Agriculture) suggest a planted area of around 80 million acres (ma), versus 89.2ma last year. Despite this, the overall global picture is one of increased soyabean stocks and lower worldwide demand.

“…covering protein requirements for the next 2–3 months is definitely worth considering.”

As a result, UK soyabean meal prices have eased back in recent weeks despite Sterling’s decline, with contracts available for the rest of the summer (August to October delivery) at around £310-320/t. Given the potential volatility ahead, both for Sterling and the emerging US soyabean crop, covering protein requirements for the next 2–3 months is definitely worth considering. 

US soyabean (and corn) acreages are also in the process of being resurveyed, and the release of those numbers towards the middle of August could result in price movement either way. A £10-15/t dip in winter contracts (currently around £315–325/t for soyabean meal) would likely stimulate significant interest.

The price of other protein feeds will inevitably track that of soyabean meal to some degree, but there are other factors to consider. For example, the rapeseed crop in the EU is forecast at 18 million tonnes (mt) – a 13-year low – and the UK will likely be importing rapeseed to keep crush plants running.

As a counter to this, the UK-grown and produced rapeseed expeller out of Stratford, as well as its heat-treated rumen-bypass protein variant (NovaPro), won’t be affected by any exchange rate fluctuations. For rumen-bypass protein, this heat-treated rapeseed expeller (NovaPro) is currently considerably better value than soyabean meal.

Falling energy feeds

The value of co-produce energy feeds is also looking good, with wheatfeed very competitive for August and September delivery (£130-140/t). Processed bread and the various biscuit meals, such as SweetStarch and Formula One, are also worth a look for the rest of the summer, as is maize germ at £160-170/t for August to October delivery.

Processed bread image
Processed bread is a popular alternative to the starch traditionally supplied by cereals.

As for the protein feeds, winter prices are currently a little high for most buyers despite recent falls, but it will probably only take another £5–10/t drop for that to change. Watch the markets closely over the coming weeks for opportunities to build that winter cover as dips appear.

The main drivers for these lower prices have been the good UK wheat harvest (forecast at 15.5–16.0mt) thanks to favourable weather, and a drop in US corn prices as the market waits for the updated survey of acreage. The last survey in June suggested an area of around 91.7ma, which if confirmed would bring further confidence to likely harvest volumes.

However, August is a key month for corn pollination, and the weather through this month will have a big impact on yield potential. Expect some volatility as the markets react to weather reports as they’re published, and the overall trends for the crop emerge – hot weather will not be good!

Currency volatility ahead

For UK markets, currency fluctuations continue to have a big impact, and the lower value of Sterling will definitely make it easier to export the expected wheat surplus. However, barley yields are have also been reported to be good, so there will be downward pressure on wheat prices domestically. 

Against this backdrop, ongoing Brexit negotiations and the threat of a ‘no-deal’ exit will likely take centre stage for UK feed buyers. The potential for currency volatility to add up to 10–20% to imported feed prices is significant, and completely unpredictable. 

The main challenge for those looking to build winter cover will be choosing a price to begin booking contracts. That will depend on individual appetite for risk, and the potential scope for prices to rise or fall.

In most cases we’re still a long way below recent historic highs, with more room for prices to go up than down. Staying in close contact with market trends, and your feed supplier, is going to be critical.

* 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.

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