Market decline

Feed market update – favorable weather conditions trigger grain market decline


More favorable weather conditions in June saw a welcome drop in global grain markets as UK pork producers continue to struggle against record production costs.

Despite the steady rise in pork prices in recent months – the SPP stood at 157.57 for the week ended June 26 – margins remain under pressure. Input costs remain high, having recorded a record 174p / kg average in the first quarter, driven by wheat prices above £ 200 / tonne and soybeans at around £ 360-370 / tonne.

Cereals

While grain prices remained high for much of this quarter, better weather conditions in June began to ease concerns about the supply of new crops, according to AHDB analyst Megan Hesketh, UK off-farm feed wheat spot prices losing more ground than barley prices. The discount of barley relative to wheat fell from £ 3.70 / t to £ 15.30 / t. This reflects the tight availability of barley in the UK as the end of the season approaches, Ms Hesketh said.

“Rains and cooler temperatures in the US cornbelt eased supply concerns in June, putting pressure on feed grain prices. However, hot, dry conditions in the northern plains caused U.S. spring wheat harvest ratings to drop to their lowest level in 33 years. Despite improving corn conditions, this concern has limited declines in world wheat prices, ”she said.

As US corn enters its key growth phase, the weather will be critical in the coming weeks for crop conditions and price direction. If the weather changes direction towards hot and dry, we could see some price volatility, or even price increases, in July, she added.

More favorable weather conditions in the EU boosted the supply outlook in June. The latest EU Crop Monitoring Report (MARS) increased the yield forecast for all winter crops and spring barley. This puts many EU cereal yield forecasts ahead of the five-year averages. France and Russia have started their winter barley harvests, which may take some price risk premium as the grains start to arrive.

Globally, the International Grains Council (IGC) increased the 2021/22 grain supply by 9 million tonnes this month to a new record. This increases global grain stocks for the first time since 2016/17.

“However, stocks remain weak and the market is sensitive to weather news. There is also a risk of further reduction in the Brazilian 2020/21 maize crop due to water stress, which, if achieved, could increase market sensitivity, ”added Ms. Hesketh.

“As we look into the new season in our home market, recent rains have been good for harvest prospects. Some manufacturers are now turning more to a 15 Mt wheat crop. This could ease tight supplies in the UK and increase price pressure in the coming months as the harvest begins. “

Protein

Global Oilseed supply and demand appear to be more comfortable for the new season. Global supply is expected to increase for rapeseed, soybeans and sunflower seeds in 2021/22. As total production grows faster than demand, ending stocks are also expected to increase.

Importantly for the UK, the EU-27 2021/22 rapeseed production forecast increased in June to 17.0 Mt, 0.5 Mt more than in 2020/21, added Ms Hesketh.

For soybeans, the supply of new crops (2021/22) seems more positive in size. Rains throughout June eased concerns about the state of soybean crops in the United States. Improved crop prospects weighed on prices. Large year-over-year increases are forecast for crops in the United States, Argentina and Brazil. Reports on US and Canadian acreage are expected this week, which could confirm the direction of prices in the short to medium term.

“Vegetable oil prices have come under pressure from the outlook for reduced demand. In the United States, a court ruling facilitates exemptions from biofuel blending requirements for small refineries. However, it is not yet clear how this might affect oilseed demand or meal prices next season, ”she said.

With a tight supply for rapeseed, prices remain higher than those for other oilseeds. Despite the significant drop in soybean prices in June, rapeseed enjoyed some support as dry and hot weather in Canada caused supply problems.

Cash

From May 24 to June 28, the British pound appreciated slightly against the euro, but fell against the US dollar.

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