May 6, 2009
Protein feed prices continue to rise
Pressures within the protein feed markets continue to grow, rather than ease, pushing prices in the UK even higher in recent weeks. The inevitable reduction in prices has yet to appear, according to the Farmers Weekly Interactive.
Spot market activity remains the best option for immediate requirements, with very little other business being done. With prices for soymeal now at around GBP310/tonne, there''s even less activity than in previous months.
Continual demand from China plus little export activity from South America are the primary reasons why supply is pressured at the moment. Spurring price hike are the latest USDA report furnished lower-than-expected soy plantings in the US, with market rumblings that the Argentine harvest may amount to closer to 35 million to 37 million tonnes, not the 39 million tonnes previously predicted.
Low protein stocks in China were expected to create short-term demand but once replenished, demand is predicted to ease significantly. But it did not happen as the continued strong buying from China will likely continue for another couple of months. The 6 million tonnes of old crop still held by Argentine farmers awaiting a Government decision on export tariffs would also ease the situation considerably.
In the meantime, the high soy price continues to spearhead increase of other protein feeds, although rapeseed meal is currently an attractive option in comparison, and with good margins available to rapeseed crushers there''s also the potential for availability to increase. Against current prices, distillers'' pellets continue to remain competitive at around GBP160/tonne, with protected proteins such as SoyPass and Prototec (PDF) providing large savings as replacements for soymeal.
For example, just 1.2 tonnes of Prototec is needed to supply the same level of DUP as in 1 tonne of hi-pro soymeal. With the former at around GBP200/tonne, that''s a saving of around GBP70/tonne by buying GBP240 worth of Prototec to replace GBP310 worth of soymeal. Even on a crude protein basis, the saving equates to around GBP35/tonne.
For energy feeds, the advice remains the same as in recent weeks - the market is at, or close to, the likely low point with increases expected as the summer progresses. A 50 percent cover for the winter then top-up whenever the opportunity arises and further breaks in the market appear.
Recent strengthening of Sterling has made British wheat exports less attractive, but some farmers are going to have to sell old crop soon to clear stores and generate cashflow. This is one of the factors pushing energy feed prices down at present, with soy hulls at less than GBP100/tonne ex-port and palm kernel and citrus still good value spot options.
But the expectation for late summer is still definitely for prices to rise as demand - including the requirements of the burgeoning biofuel industry - climbs and production estimates fall. Wet conditions are disrupting spring sowings in the USA, while concern is beginning to emergy over the impact of current drought conditions in the Ukraine and wider Black Sea region.
Currently, the best buy for next winter is perhaps wheatfeed pellets, the price of which has dropped dramatically. In addition to being an excellent source of digestible fibre energy, at current prices and with a protein content of 17 percent, it''s also worth reconsidering as part of an overall strategy to reduce protein costs.