02 July 2015 | Online since 2003

Banking analyst predicts feed price falls



25 April 2014 10:29:21|News

Banking analyst predicts feed price falls


An analyst with a leading European bank says he expects feed prices to fall over the next year despite the recent rise in grain prices sparked by the crisis in Ukraine.

Nan-Dirk Mulder of Rabobank says he expects the prices of wheat, corn and soya to all fall over the next 12 months, although he says feed prices are likely to remain volatile and there are still threats to prices from the political crisis in Ukraine and from the possibility of poor weather in the United States. He says the egg industry should remain prepared to deal with such volatility.

Wheat futures spiked in March after Russia sent troops into Crimea on the pretext of protecting Russian-speaking citizens. At the end of February the UK May wheat futures stood at £156 per tonne. By the middle of March, after Russian troops were sent into Crimea, they had hit £170 per tonne. As the crisis escalated, markets took fright that supplies could be disrupted from what is a very important region for global trade in grain.

Nan-Dirk Mulder told delegates at the International Egg Commission (IEC) conference in Vienna that the Black Sea region was an important global source of both wheat and corn. Ukraine, Russia and Kazakhstan together exported 38 million tonnes of wheat - as much as 25 per cent of global trade - and 21.5 million tonnes of corn, which represented some 21 per cent of world trade. "You can imagine that turmoil in these markets makes investors concerned," he said. But whilst the markets inevitably reacted to what was happening in Ukraine, the reality of the situation was a little different, said the analyst. The production outlook in Ukraine was very good, he said, and the main export ports for the country were in the Odessa region to the West, which was not affected by the current political crisis. "The reality is not that dramatic," he said.

As well as the political uncertainty in Ukraine, Nan-Dirk Mulder pointed to a warning of weather problems in America as another potential threat to feed prices. "There has been a warning by the US weather authorities that for this year there is a 50 per cent chance of a return of El Niño effects," he said. "This is very important because it could have a huge impact on global grain markets," he said. "This is a development you should definitely follow in the next months."

However, despite the potential effects of political unrest and the possibility of severe weather conditions, he said there were developments that would have a beneficial impact on supplies and he said that over the next 12 months he thought these outweighed the negative concerns. He said grain and oilseed areas would be at record levels, forecasts for production looked good and there was a slowdown in demand for biofuel. There was also lower demand in China because of outbreaks of avian influenza there and because of a slowdown in the Chinese economy. "Over the next year the balance is moving to the bearish side," he said.

He said he though that the main feed ingredients - wheat, soya and corn - would all fall in price over the next year. "If we look at wheat we expect that global production will be high," he said. "This is more than enough to justify a reduction in the price of wheat over the next three or four quarters."

He said the position was similar with corn and expectations for soya beans were linked to those for corn. Higher potential returns had encouraged farmers to shift from planting corn to planting soya. "If you look now to the global situation for soya beans, you see that, especially in the United States, there is very large planting now, soya bean planting, that will come onto the market later this year. That will have more impact on supply." He said Brazilian supplies also looked good. "With soya bean the situation is definitely bearish. A pretty sharp decline in the prices of soya beans is expected until the end of the year," he said.

"How will this affect the global egg industry?" He said there were many differences in price levels around the world, but the egg industry would mostly benefit from falling feed prices. He said that low feed prices were positive for an industry that - particularly in Europe - was suffering from imbalances. He said the introduction of a ban on battery cages had led to an oversupply of eggs in Europe. It would take time to bring the market back into balance and improve margins as a result, but he said margins were generally closely linked to feed prices. As feed prices fell margins on eggs improved. "We expect until the end of the year a pretty good situation for the industry."

Volatility would remain. Stock levels of grain were improving but were still relatively low and he said that "any changes in the fundamentals," like the recent crisis in Ukraine causing cereal prices to rise, could have an impact. "You should be prepared for a return of volatility in feed prices." However, he said that margins should be better for the egg industry in the coming 12 months.

Download




Comments


No comments posted yet. Be the first to post a comment

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


Start Date: 24 June 2015
Worker required for jobs in busy agricultural building contractors based in Petworth, West Sussex

We are looking to recruit an enthusiastic ground worker to join our team.  Our work is mainly based on farms in the...


Start Date: 2 July 2015
Kennel hand / cattle person: job in Sweden

We are situated in the north of Sweden , we have 70 pedigree Angus and a kennel of 45 Siberian Huskys.

We normally employ...


Start Date: 23 June 2015
Harvest worker required on large arable farm in Lincolnshire.

Harvest helper required for general harvest jobs including carting,rolling and mowing. Pa1 and pa4 would be an advantage. Acc...


Start Date: 29 June 2015
Farm workers wanted for jobs in NZ 

Opportunity of a lifetime working in beautiful New Zealand!! Large scale dairy operation with 1000+ cows in peak times.  farm...


Start Date: 2 July 2015
Job for Harvest Tractor Driver>>> LIncoln

5000 acre arable unit requires experienced operator for next 5 months, possibly longer.  Immediate Start.  Based 5 ...





Top stories you may have missed
5 June 2015 | Cattle

A strong pound and increased red meat imports coupled with a plentiful dome...


5 June 2015 | Arable

Depression is affecting Wales' farming industry and there is a need to use ...


5 June 2015 | Arable

With just one week to go before the final judging and announcement of the w...


5 June 2015 | Finance

A rural law expert has highlighted the importance of good succession planni...


5 June 2015 | Farmshops

A south Yorkshire dairy farming family is pulling out all the stops to prom...


4 June 2015 | Finance

Predicting what is going to happen to wheat prices is a challenge, but in s...


4 June 2015 | Agri Safety

A Lancashire based livestock theft prevention scheme is aiming to go nation...


4 June 2015 | News

A female farmer has been recognised by the farming and conservation industr...


4 June 2015 | Finance

The new Conservative government appears to be preparing to implement cuts f...


4 June 2015 | Arable

The Rural Payments Agency (RPA) will have mobile support units at the follo...