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Feed Ingredient Market Update

After 12 months of a remarkable lack of weather concerns the last few weeks have seen increasing concerns about the lack of rain in Argentina. This has now fed through to the Chicago futures market and so UK soya prices are also rising, passing £350 on farm for the first time in over a year. The Vivergo biofuels plant in Hull remains closed and looks unlikely to open again before the end of summer 2018 earliest. The Ensus plant on Teesside continues to run but not at full capacity, so the wheat distillers market is under-supplied. That has put a floor in the mid-protein market, so rapeseed meal and sunflower products are also well off their lows. HDF products are also relatively expensive. UK sugar beet was well sold in the autumn so there is little un-sold material left. Imported sugar beet products are available but tight and expensive. Whilst soya hulls have become more available with shipments from S America and at a more normal discount to sugar beet, they are trading at around the same price as wheat. Even palm kernel meal is up £25 from its lows as the Indonesian/Malaysian producers continue to find new homes for their product, reducing the need to sell it cheaply to Europe. All these issues leave cereals looking something of a stand-out buy for animal feed. We have seen a marked lack of exports of wheat which means London futures have traded in the same narrow range since Christmas. The gap to barley varies across the country but is still at a level to favour its use in feed and certainly well under wheatfeed which is hitting its seasonal price peak thanks to the spike in feed demand from sheep farmers. On top of all this is the rise of vitamin prices. New environmental legislation in China has been limiting the production of the world’s largest producer of vitamins, so prices were already rising last autumn. However, a factory fire in a BASF plant in Germany knocked out an ingredient for around 45% of the world’s supplies of vitamins A and E. Prices of these key ingredients have gone up massively (eight-fold in the case of vitamin A), so the industry is looking at price rises due to vitamins alone of £3-5/tonne. Add all this together and it is clear that feed prices will be going up at some point over the next few months. There will be some respite in spring as demand pressure reduces on ingredients like wheatfeed and it seems unlikely that cereals will race away but all the other standard feed ingredients plus premixes mean we are looking at price rises this spring/summer.