Changing global feed position brings opportunities to buy*

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Length: 801 words; 3–4 minutes

Grazing cow image

The past 4–6 weeks have seen a wholesale shift in perspective across most of the feed markets, and particularly within the UK. The strengthening of Sterling against the US dollar has helped ease imported feed prices, and the unusually warm weather across much of the country in February allowed many to get cattle grazing early and reduce feed demand.

The main concern at the end of last year was how to feed cows through the winter, with low silage stocks and reduced availability of key feeds due to high summer demand and changes in production. The closure of Vivergo and Ensus bioethanol plants cut annual distillers’ feeds supply by around 420,000t.

Falling soyabean production

Globally, Brazilian soyabean harvest estimates have been reduced from over 120 million tonnes (mt) before Christmas, to just 117mt in the latest report from the United States Department of Agriculture (USDA). The lack of USDA reporting during the US government shutdown only added to the uncertainty, as did the ongoing trade war between the US and China.

And although most of the details haven’t changed, the context has shifted considerably.

“Soya hulls prices have dropped…to just £140-150/t for current summer contracts…”

Fears that Brazil would run out of old crop soyabeans proved to be unfounded, and with the current harvest now 45% complete there’s now no chance of this happening. Concern that Argentina’s reduced soyabean harvest last year (down from 55mt to 38mt) would limit soyabean meal and soya hulls output also failed to materialise as Argentinean crushers simply imported the material they needed from the US. Soya hulls prices have dropped from around £190/t before Christmas to just £140-150/t for current summer contracts, and it’s generating a lot of interest from those looking to reduce digestible fibre costs.

Lower global demand

Chinese soyabean imports have also fallen dramatically, with the long-term trend of a 5-10% increase each year changing to a drop of similar magnitude. Whether due to deliberate moves to reduce reliance on imported proteins or falling pig numbers following the swine fever epidemic, the impact remains the same – lower global soyabean demand in the face of better than expected supply from Brazil and growing US year-end carry out stocks (due to the loss of exports to China).

As a result, Chicago Board of Trade (CBOT) futures prices for soyabean meal at US$300-305/t are close to recent market lows. Combined with improvements in Sterling’s value, soyabean meal contracts are down to around £290–300/t for May to October delivery, and worth serious consideration given the potential for Brexit developments to weaken Sterling at any point.

The markets are also unusually settled following the exit of the investment funds from agricultural commodities, concerned that there may be no solution to the US:China trade war. If a deal is struck, expect the markets to react strongly as the funds return in force.

Changing domestic supply

Domestically, the loss of British distillers’ feeds have caused rapeseed meal prices to be stronger than usual at this time of the year relative to soyabean meal. Suggestions that Ensus will re-open in March could change this, though it appears the focus will be on processing maize, and the negative impact of maize distillers’ feed on butterfats will limit its appeal through the summer.

Watch developments closely, and look to secure forward cover on rapeseed meal – and the new UK-produced rapeseed expeller – in any price dips that appear. The heat-treated rapeseed expeller NovaPro is already better value than soyabean meal for rumen-bypass protein, with similar bypass protein levels yet around 18% less expensive per tonne.

Sweetstarch image
Sweetstarch is a great value alternative to rolled cereals for energy supply.

For energy feeds, prices have already reacted to the reduced demand brought about by the good weather that appeared in February, and which followed a generally mild winter that helped grass growth. The biscuit meals like SugaRich Dairy and SweetStarch are now down in the region of £160–170/t for the summer as a result of both lower demand and falls in the wheat futures price.

Contrary to market sentiment through late 2018, it appears that Russia isn’t short of wheat and doesn’t need to restrict exports. London wheat futures for May delivery dropped from the high £170s/t before Christmas to the mid-£160s/t in late February, although there’s uncertainty over how much old crop is available within the UK (current differences between DEFRA and BPS figures equate to 800,000t of wheat!).

Barley prices have also fallen, with rolled barley currently in the high £160s/t following the withdrawal of Saudi Arabia from the market for old crop grain.

Overall, it means that many now have the opportunity to buy both protein and energy feeds for less than paid during the winter, and most likely less than budgeted for. With much greater scope for prices to rise than to fall, it’s an opportunity few can afford to ignore.

* 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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