Opportunities ahead as feed markets settle downwards*

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Length: 652 words; 3-4 minutes

Pouring wheat grain image

The biggest story to hit the feed markets in recent weeks has been the emergence of a far larger than expected Russian wheat crop. The sheer scale of the potential 21% increase on last year’s harvest – itself a new record – had a substantial impact on energy feed prices.

“Current predictions suggest a total Russian wheat crop of 80-85 million tonnes (mt),” explains KW senior trader Chris Davidson. “Last year’s crop was already a record at 72.5mt, and the previous record prior to that was just 63.7mt.

“The increase this year alone is close to the entire UK wheat harvest!”

Changing price trends

Cereal prices had been firming due to concerns about the effect of dry weather on US wheat crops, before easing back as it became clear that only high quality wheats were affected. With global stocks of feed wheat still rising, news of the huge Russian crop caused an immediate price dip.

“From a peak of around £145/t, UK wheat futures fell even lower than the current £138/t, and in the near term the downward pressure on prices could remain,” Mr Davidson continues.

“But UK prices will tend to remain firmer than elsewhere. With both bioethanol plants running, domestic supply and demand are finely balanced, and the weakening value of Sterling is making imports less attractive.”

Global trade impact

Logistical limitations mean that Russia simply won’t be able to physically export its entire surplus this year, although world trade is already being affected. European exports, for example, are more than 50% down on last year.

“Further out, there’s definitely potential for the US quality issues to cause a rally in wheat prices, with further support possible from a likely poor Australian crop,” Mr Davidson adds.

“…many of the alternative energy feeds continue to offer better value…”

“So look for opportunities as the market settles, and remember that despite the price drop many of the alternative energy feeds continue to offer better value than rolled wheat. At 14.5-15.5MJ ME/kg DM, the confectionery and breakfast cereal blends (SugaRich Dairy, Formula One), for example, offer 6-13% more energy for a similar delivered price or less, whilst molasses-based liquid feeds (Molale) have dropped £8-10/t for the winter thanks to higher global sugar production.”

Growing soyabean stocks

In terms for protein feeds, the focus is on the North American soyabean harvest which is now getting underway. Though it’ll be 2-4 weeks before any clear trends emerge, weather conditions remain favourable and the latest United States Department of Agriculture (USDA) report raised yield estimates to 49.4 bushels/acre (bu/ac).

“Combined with a 5 million acre increase in plantings, that would produce a record crop,” Mr Davidson states. “However, many expectations are closer to 47-48bu/ac, for a total crop 100-150 million bushels less than last year.”

British wheat distillers' feed image
British wheat distillers’ feed supplies both digestible fibre and high quality protein.

Either way, the trend is for growing worldwide soyabean stocks, and despite some reluctance for South American farmers to sell the pressure on prices is still downwards. Nearby rapemeal prices are also dropping as crushers are forced to clear unsold stocks, and British wheat distillers’ feed continues to remain competitive.

“Aim to secure remaining protein requirements for the winter and even next summer in any dips that emerge as the US harvest progresses,” Mr Davidson advises. “Anything below £290/t for summer 2018 soyabean meal is a historically low price regardless of where the market goes to from here.”

Winter fat options

Mr Davidson also recommends checking winter cover for protected fats as prices are expected to firm over the coming months as the seasonal peak in palm oil production comes to an end. With many of the main milk supply contracts increasingly weighted towards butterfat content, high C-16 fats (Butterfat Extra) are a priority for many.

“We’re also seeing interest in more sustainable alternatives like OptiPartum-C…”

“We’re also seeing interest in more sustainable alternatives like OptiPartum-C that achieve the same effect as protected fats by enhancing digestion and driving intakes. Used weight-for-weight to reduce protected fat in the diet by half without any effect on performance, the cost can be £100-400/t less depending on the type of fat replaced.”

* 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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