Feed demand hope for cereal prices

TEMPERATURES have have had a sudden drop from an almost balmy 17°C two weeks ago to zero and winter arrived with snow and sleet showers, between the rain. This has all added up to make November the second wettest month of the year to date and wetter than in any month of 2014.

This should prompt more animal feed requirements which, until now have not been much in demand.

Whatever the UK position, a decline in global demand for animal feed is forecast due to a reduction in consumption. This will see total maize usage in animal feed down by 2% year-on-year – the second highest ever decrease of maize usage in feed rations in the EU, which is where most of the decline came from. However, world maize production is forecast down by 3m tonnes and will see a 3% decrease in world stocks, compared to last year. The contra to that is that China estimates its 2015 maize crop at 225m tonnes, which is up from 216m tonnes in 2014.

For the last two weeks, UK wheat prices have been on a downward , but slow spiral and November, 2015, Liffe feed wheat futures are near to contract lows at £112.35, which is 20p down on the previous week and for November, 2016, the quote is down 85p to £125.50.

Ukrainian wheat production for 2016 is now forecast to be 17.7m tonnes compared to 24.2m tonnes in 2015 and the reduction is due to the planted area falling to a 10-year low due to poor planting conditions. And, from the same region, Russia’s 2015 cereal harvest production is expected to be 102.7m tonnes, compared to 105m tonnes in 2014.

The International Grains Council has revised its forecast for 2015 global cereal production down to 1996m tonnes, compared to 2030m tonnes in 2014.

Sterling has strengthened again against the euro to a three-month high of €1.43 to £1, which does nothing to help UK exports competitiveness. This will mean lower payments rates for many

UK farmers, when all other factors remain unchanged. In September, 2015, €1 averaged £0.7313, which is down 6% from the exchange rate used for 2014/15 payments, 20% lower than the most recent high rate used in 2009 (€1=£0.9093) and the lowest since 2007 (€1=£0.6968).

The UK average ex-farm full specification bread milling wheat price for the week ending November 12 was £118.40 per tonne – the lowest price since July, 2010. This narrowed the UK average ex-farm milling premium to £11.30 per tonne, which is well down on the £20 premium just two months ago.

The AHDB has released its ‘Early Bird’ survey for harvest 2016 and the arable area is slightly up by 12,000ha to 4.53m ha and oilseed rape area down to just over 500,000ha. Wheat is similar to last year at 1.8m ha but the area of spring wheat is rising within the total wheat area.

In contrast to last year’s trends, the winter barley area is estimated to be down 4% to 424,000ha year-on-year. However, the expected 10% increase to 727,000ha in spring barley area, if realised, will more than offset the reduction in winter barley and would be the highest area of spring barley since 2009 (except for 2013, which was driven by poor weather conditions in autumn 2012) taking the total barley area 5% higher than in 2015.

The 2016 area for oats is expected to increase by 13% to 148,000ha, compared to 2015, which is similar to the fall witnessed last year and, if realised, this would be 9% higher than the previous five-year average.

The oilseed area is expected to decline in 2016 by 14% for the fourth consecutive season to 565,000ha and 19% below the five-year average and would be the lowest area since 2009.

While the strength of sterling is keeping pressure on feed and malting barley export values this week, the euro also fell to a seven-month low against the dollar last week, with €1 equating to $1.065 and forecasters are predicting parity by the end of the year.

A weaker Euro versus the dollar has not yet had the desired effect of raising EU oilseed rape prices and while oilseed rape crush margins are being squeezed, there is little prospect of prices rising.

The feed bean market remains static with plenty of demand from animal feed compounders, but premiums for human consumption beans are coming under pressure as Egyptian buyers are buying cheaper and better quality beans from the Baltic States, which is keeping UK bean prices under pressure.Plus there’s still quite a lot of the Scottish bean crop sitting with its feat in water and which might never be harvested.

Bad news continued with the GB weekly average potato price last week dropping by £4.11 to £137.86 per tonne and the free buy price fell by £3.82 to £134.31 per tonne. Though the condition of crop in store is generally good, there have been odd cases of sprouting and deterioration in some ambient stores. Skin finish defects in some stocks include scab and black dot.