Prospects for raw material price stability look good through to 2015 harvest

A leading feed company director has said he’s currently looking at “stable prices through to next harvest”, a situation he added was as good for his company as it was for his pig farming customers, writes Colin Ley.

“There’s an obvious economic benefit to the farmer, attached to lower costs of input, which helps to sustain businesses, even in very volatile end product price periods,” said ForFarmers’ business unit director, Frank Thomson. “Equally, the key for us is to provide economic stability for our customers rather than volatility.”

Volatility, he added, has exactly the same effects on ForFarmers, newly rebranded from BOCM PAULS, as it does on pig farmers.  In that context, therefore, he was upbeat in his comments on the current state of raw material supplies and prospects for well into 2015.

“We’ve obviously seen drops in raw material prices since harvest this year, starting in June/July and continuing through to now,” he said. “There has been something of a plateauing on cereal prices of late, however, with a little bounce over the last two weeks. This may suggest we’re at the bottom for cereal prices, although it’s not possible yet to be sure about that.”

While France has now managed to get some of its excess feed wheat, crop which didn’t come up to milling grade, away to Spain, the fact remains that the UK has produced a very big crop this year.

“It’s a balancing act again,” said Mr Thomson. “We obviously have bioethanol plants running in England, which weren’t running as high last year as they are now, so they’re going to consume more. We also have to remember that we’ve seen a crop price drop from £170-200 a tonne down to £110-115 a tonne. That’s certainly a significant drop.

“Proteins have also been easing back in price over the same period, although not as significantly as cereals. When it comes to soya, for example, the economics of that trade is often driven by which country is the best market for them. Sometimes, even when there is a big soya crop, supplies can go elsewhere in the world which keeps the UK supply a bit tighter.

“Rapemeal prices have eased as well, of course, and there is increased by-product coming from bioethanol. 

“In summary, therefore, we think cereals are maybe near the bottom, but we’re not seeing significant rises through to next harvest. In terms of the protein market, that could ease slightly more, but not by the sort of drops we’ve already seen. 

“On soya, meanwhile, there is often a blip around April/May each year surrounding the South American harvest and whether Argentinian farmers are going to sell or not. Apart from that, you wouldn’t see anything in the market in terms of rising prices until we get through to the next crop a year from now, when we get into the next US harvest. All of which leaves us, one would suspect, with stable prices through to the next harvest.”

However, he did add the “condition” that market movements, when they happened, tended to be more dramatic in modern times than in the past.

“We are now seeing Russia, for example, starting to limit exports so that they can concentrate on domestic requirements,” he said. “That could just tighten the market up, certainly on cereals. 

“Volatility, after all, tends to be much more now, than previously, if there are any issues whatsoever. This is because, with worldwide investments and the trading of global commodities, you tend to get markets firming these days by £10-12 a tonne where in times past that would have been £2-3 a tonne.”

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