Feed market update – February 2017
Read our commentary on latest developments in the global cereals and oilseed markets.
Since 25 January, old crop UK feed wheat futures (May-17) have decreased by 1%, closing at £147/t on Thursday 23 February. Over the same timeframe, new crop UK feed wheat futures (Nov-17) gained 1%, closing at £137/t on 23 February.
Over the past two seasons, UK feed wheat prices have experienced a fairly unusual positive price carry, making old crop wheat more valuable in forward markets. This incentivised producers to carry their old crop into the next season to achieve a better price. However, this season, the relationship between old and new crop prices has returned to a more typical relationship. As such, old crop (May-17) futures are currently at a premium of £10/t to new crop (Nov-17) values.
The price relationship at present suggests a disincentive for growers to keep this year’s crop in store and rather to sell on the spot market. This season we have seen a tighter domestic wheat supply and demand situation, combined with a similar scenario in Europe, as well as currency volatility providing support to old crop wheat prices in the UK. However, the way markets are lining up at the moment suggests that the new crop market is running on the assumption that the supply and demand situation in the UK will return back to a normal balance, in the absence of evidence to the contrary.
Since 25 January, May-17 Chicago soyabean futures prices have fallen by 4%, to close at £376/t on Thursday 23 February. Following a similar trend, UK feed ingredient prices also decreased. Between 20 January and 17 February soyameal prices (spot, Brazilian 48%, ex-store, Liverpool) fell by 2% to £346/t on 20 January. Likewise, UK delivered rapeseed prices (spot, Erith) fell by 2% over the same time frame to £365.50/t on 17 February. The fall in global oilseed futures prices has been partly driven by the pressure of record South American soyabean output, as harvest has started in Brazil. In its latest monthly report, Conab increased its estimate for Brazilian soyabean output by 1.8Mt on the month. At 105.6Mt, the latest estimate is 11% higher than last season’s crop, which was effected by hot and dry conditions.
To read about recent developments in the feed market in more detail, click here.
Millie Askew, Analyst
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