“While the price of feed materials is being driven up by strong global demand the sterling/dollar exchange is in our favour and is helping protect local livestock producers from the full impact of the rising market” says Robin Irvine of the Northern Ireland Grain Trade Association.
The value of the pound is at a 4 to 5 year high having increased by over 10% against the US currency in the last 12 months. This has sheltered sterling buyers from the worst effects of the rise in the price of soya and other dollar traded commodities but some increase in feed costs for the summer months seems inevitable.
Current concerns for the feed trade are led by the tight supply of Soya beans in North America as we wait for a new crop harvest in October. With global demand pushing ever higher the US crop would be technically oversold with 104% of the 2013 crop already traded. This situation has pushed the spot meal prices in Chicago to over $500/ton in the last week - up by $100/ton since November.
Even the negative impact of China, which imports 60% of the soya traded on the world market, cancelling some shipments and defaulting on contracts has not been enough to take the heat out of the market. Neither has the benefit of a good crop safely harvested in South America had any significant effect on prices. While the Brazilian harvest is virtually completed and their material is readily available the Argentineans are still in the middle of harvest and are more reluctant sellers. The deepening economic turmoil in this country and a punitive tax on exports is encouraging farmers to hold on to their soybeans. A crop in store is seen as a much better hedge against inflation than cash in a rapidly depreciating currency.
In the US funds are holding on to their long positions on soya and it will probably take until late summer with a more comfortable view on stocks and prospects of a good harvest before there is any chance of any significant ease in prices.
Rapemeal has tended to track soya prices and with this material also in tight supply prices have been firm but with hopes of significantly lower levels from the new harvest in August.
The market for cereals is also showing a firmer tone as we move into the summer season. The benefit of the record corn crop and good supplies of Ukrainian maize at a very attractive price was used to offset a strong wheat market and helped contain feed costs over the winter months. With the political uncertainty in Ukraine this is now seen as a high risk origin and local traders have looked to Canada for maize. A late thaw in the Great Lakes following the intensely cold Canadian winter has delayed shipments but with good availability of grain with an EU approved GM status this will be a popular origin in the coming months. While more expensive than the winter contracts it still represents good value against wheat and we can expect to see an emphasis on maize in both intensive and ruminant diets over the summer months.
Looking further ahead there are positive signs in terms of a much better UK wheat crop but with the volatility in feed material markets continuing to confound the pundits the best predictions of the experts are often overtaken by developing events in a very short time.
