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Price volatility and reduced stocks weighing on feed market

Extreme price volatility and limited availability were the main themes currently affecting UK feed markets, with many popular feeds no longer available for summer delivery and selling out fast for the winter.

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KW straights trading manager Claire Bradley said taking good levels of cover now would be critical to both manage price risk and secure supply.

She said: “There is huge uncertainty affecting the feed markets. The trade war between the US and China may have caused soybean protein prices to drop, but it is against a backdrop of a global supply that is extremely tight compared to demand.

“The North American soybean crop had a great start, but with Argentinean output down approximately 18 million tonnes, it needs to produce a bumper harvest. August is a critical period for pod filling, so any weather scares could send prices soaring."

Price rises were likely to be driven hard by the investment funds, so any rebound could be extremely sharp, said Ms Bradley, adding any further falls will be limited by the tight supply situation, but the potential for increases was considerable, ‘particularly given possible Brexit effects on sterling’s value against the US dollar’.

“The United States Department of Agriculture (USDA) may have increased year-end soybean carry out stock estimates by 10mt to 98mt due to reduced exports to China, but it is not a reflection of any change in overall global demand,” she added.

 

“The picture is also somewhat different for soybean meal, with crush volumes in Argentina – a key source for UK imports – significantly lower than last year."

 

European rapemeal supply is also down. Not only have some crushers switched to soyabeans due to better margins, oilseed rape supply for crushing is being limited by lack of farmer selling and the potential impact of dry weather on new crop volumes.

“As a result, rapemeal or October to April delivery is up around 20/t, though heat-treated rapemeal is still worth considering for rumen-bypass protein, at around the same 19p/100g DUP cost as soyabean meal,” Ms Bradley added.

 

Tight supply was also affecting digestible fibre feeds, with the dry European weather expected to affect the sugar beet crop and subsequent supply of winter sugar beet feed. In addition, the reduced Argentinean soyabean crop has significantly cut soya hulls supply.

 

Ms Bradley said: “For UK livestock farmers, Sterling’s weakness is adding to the problem, making imports more expensive and harder to secure. Combined with everything else that is going on globally, it means that winter feed buying really must be a top priority.”

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