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03-02-2017

Feed material volatility continues

We saw price volatility for UK feed materials in 2016, due to the effect of ‘Brexit’ on currency exchange rates and increased Fund activity. While the final UK exit package is being resolved and other European countries look to elections, this increased volatility is expected to continue well into 2017, says ForFarmers’ Phil Watkins.

When considering the soya market the focus is mainly on South American weather. Having been too wet during the planting period, it’s now slightly too dry for perfect conditions, so to keep the Funds from driving this market higher, more rain is required during the next few weeks.

Rapemeal has firmed slightly, but still represents good value. The forward premium has eased and it’s now probably worth increasing forward cover even into the new crop positions. Although wheat distillers’ are currently expensive it is anticipated that they should ease when bioethanol plants look to sell forward.

Global grain stocks are high, but the majority is in the Americas or Russia and the Baltic region. Northern Europe’s more recent harvest was probably at least 10 million tonnes light with most of this being in the EU’s major exporter, France.

The UK’s harvest was average, at best, and due to sterling’s devaluation the UK has been more competitive in the export market. Along with this, UK demand looks strong as bioethanol plants with potential to use two million tonnes annually are expected to continue. While this is good news for arable producers, it may lead to a shortfall that could spike the market as we move closer to the 2017 harvest.