Low feed prices globally a potential opportunity to secure cover*

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Whilst global soyabean prices are near recent lows, the impact of Brexit uncertainty on exchange rates is keeping UK soyabean meal £15–20/t higher than it would otherwise be, reports KW senior trader Chris Davidson. However, that’s not the case for energy feeds.

“Worldwide, the supply of cereals is looking particularly strong this year, with good harvests through most of Europe and US corn plantings now back on track after earlier delays,” he explains.

“The latest United States Department of Agriculture (USDA) report increased predicted global corn production by 3 million tonnes (mt), and reduced consumption estimates 6mt. So despite world wheat output looking lower, there’s still plenty of confidence in the markets going forward.”

Potential price pressure

However, short term trends in the UK could add pressure to prices. Earlier strong farmer selling to make space for a bumper wheat crop has slowed, and there are indications that export activity could be accelerated to beat any Brexit deadlines. 

“The biggest influence in this country is going to be the value of Sterling, with a 10% drop potentially adding a similar amount to the price of any imported feed and home-produced feeds likely to follow,” Mr Davidson continues. 

“…current prices are looking very competitive compared to the summer and last winter..”

“Compared to the scope for prices to rise, there’s much less room for further reductions, and current prices are looking very competitive compared to the summer and last winter. For example, processed bread is £100-115/t for the winter, and confectionery blends like SugaRich Dairy available at £140-155/t, and booking some contracts now could be a good move.”

Opportunity to buy

With protein feed markets at a similar place, it’s another opportunity to build cover for the winter. Mr Davidson’s advice is to consider the ‘basket’ of feeds needed as a whole, and look for opportunities to secure portions of each feed as prices look good.

“Rapeseed prices are holding up, but there are good options available. UK-produced rapeseed expeller is £190-200/t for the winter and will be less affected by currency volatility, whilst its heat-treated counterpart NovaPro (£240-250/t) is still better value than soyabean meal for rumen-bypass protein.

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

“Just keep in mind that there’s still a lot of uncertainty ahead, and not only due to currency fluctuations,” he continues. “The unresolved US:China trade war continues to affect market confidence, and although post-Brexit tariffs are likely to have limited impact on feed prices, the negative effect on UK farm incomes could be significant.

“Given how low feed prices currently are globally, taking a good level of cover now to manage those risks is definitely worth serious consideration.”

* 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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