Feed Commentary
Prices Facts Figures » Pricing » Feed Commentary »
Market News
Wheat prices are now exclusively being driven by the growing crop. Over the last week, wheat has been the driver of global grain prices after spending the last year as a follower of maize. Last Monday (14 May), UK November 2012 feed wheat futures closed at a three month low of £147.70/t. Since then, the market has experienced a noticeable rally, closing yesterday (21 May) at £160.45/t – an increase of almost 9%. Prices were £0.50/t lower mid-morning today (22 May).
Weather concerns for the growing crop are the current driver of the price increase. In southern US states, mainly Kansas and Texas, dry conditions have returned leading to crop stress. This has led to the USDA downgrading the condition of the crop. As at 20 May, 58% of the US winter wheat crop was in good or excellent condition, down 2% points on the previous week. The US wheat harvest is now under way with 11% of the crop gathered in Texas by 20 May – on par with a year ago, but ahead of the five year average (4%). In Oklahoma, 14% of the crop had been harvested, ahead of a year ago (2%). With the US winter wheat harvest underway, the true impact of weather stress will be seen.
Dry weather issues also emerged from Russia last week, causing anxiety to return to the wheat market with the market still holding memories of the 2010 drought.
In Ukraine, UkrAgroConsult report higher temperatures over the last week, which has resulted in crop stress. On 1 May, UkrAgroConsult forecast the wheat crop at 14.180Mt, down from 20.6Mt in 2011. The lower crop forecast is attributed to large amounts of winter kill, reducing area of the crop and diverting land toward spring cropping. With the unfavourable growing conditions seen recently, it is logical to expect further adjustments to these forecasts. It is the fortunes of the Ukrainan maize crop which is likely to be of greater interest to the EU feed sector. Due to winter kill, greater maize plantings have been forecast – leading to a record production estimate of 21.25Mt on 1 May (17Mt in 2011). If realised, this could result in greater maize exports, with southern Europe a key destination.
In Europe, grain production and stocks are expected to be lower than last season. Spring weather has been very variable, making forecasts difficult and liable to change post-harvest. Strategie Grains last week cut their wheat production estimate by 4Mt to 122.7Mt (www.strategie-grains.com).
As always before harvest, it is difficult to assess if the market is responding to fact or hysteria – especially as the Russian crop is involved.
For maize, in complete contrast to the last year, it is following wheat. US planting is still progressing well with 96% of the area planted by 20 May, against a five year average of 81%. This keeps the US on track for the largest area since the mid-1930’s. This is the first milestone for US maize to reach on its journey to a record forecasted crop of 376Mt, which if realised, would be almost a 20% increase on 2011.
Soyabeans
In contrast to grain, soyabean values fell last week with new crop Chicago futures reaching $473/t – the lowest level since late February. Prices however, did rebound on Monday. Last week’s declines have been attributed to investment fund activity as the tight supply fundamentals haven’t changed.
In the US, 76% of the crop has now been planted, way ahead of the five year average of 42%. The big unknown is the total planted area and how farmers have split their acres between maize and soyabeans. Also, the arrival of an early winter wheat harvest in southern states may see further soyabean plantings – essentially double cropping.
Argentina’s Agriculture Ministry has reduced its 2011/12 soyabean harvest forecast to 41.29Mt from the 42.9Mt it estimated in April. This is a 15% reduction from the 48.9Mt produced last year.
April saw a 26% increase in Chinese soyabean imports compared with the same period last year to 4.88Mt. Imports are also expected to rise this month to 5.7-6Mt.
In the UK, Hi-pro soyameal prices are at record levels at £353/t (East coast) on 18 May, up £12/t.