Weather drives up feed prices

The Argentinian soya harvest is under way with yields much reduced by prolonged dry weather.
The Argentinian soya harvest is under way with yields much reduced by prolonged dry weather.

With so much happening in the world market for feed materials it is difficult to know where to start a summary of recent developments in the trade.

As usual it’s a combination of weather, politics and funds, but with the added element of a Trump power-play to bring an extra bit of uncertainty and confusion to the mixture.

At a local level it’s all about the weather with low temperatures and high rainfall ensuring a prolonged period of winter feeding. Fodder supplies are running short and the demand for compound feed is exceeding expectations – particularly in the south of the island where the “beast from the east” and poor grass growth has ensured that the expected flush of spring milk from the rapid increasing dairy herd has failed to materialise.

Compounders are struggling to keep up with demand and spot purchases have been necessary to top up the contracted tonnages of feed materials.

Shortages of some of the key ingredients in ruminant rations have been a feature with corn products from North America still suffering the effects of logistical issues caused by hard weather and frozen waterways preventing movements to the ports. Soya Hulls are another commodity in short supply as new buyers from around the world compete for the limited tonnage available from Argentina.

Top up tonnages at high prices will be a feature of the market for some weeks and it will take a period of lower production to allow the logistics to catch up with demand and a less pressurised market to be restored.

Weather is also a key element in the soyameal market as the prolonged drought in Argentina has caused harvest forecasts to be revised downwards – to less than 40 million tonnes - compared with production of around 60 million tonnes in each of the last three years.

With Argentina the main source of soyameal and soya hulls into Ireland this is bound to impact on local protein prices.

Lower production forecasts were also the message from last week’s USDA report which highlighted reduced planting intentions for both corn and soya following a period of poor returns to growers. This news brought a surge in prices on the Chicago Board of Trade amid concerns about future supplies.

Meanwhile threats to the market in grains and proteins made the banner headlines as the trade battle between the US and China heated up. President Trump’s introduction of a 25% tariff on 130 products imported from China was aimed at protecting the intellectual property of US exporters and will earn $50 billion for the US treasury.

The Chinese response was to levy a similar tax on 166 products imported from America - including corn and soya. With two million tonnes of US soya shipped to China every week the supply issues were immediately overshadowed by concerns about the effect this would have on soya exports.

The market for US soya fell by over $10/ton initially but quickly recovered to finish the day in positive territory while the potential for this trade to switch to Brazil was reflected in stronger prices for the South American crop.

With this level of confusion and uncertainty traders will focus on the immediate supply issues and wait for a degree of stability to return to the market before making long term commitments.