Claudine Heron, President of the NI Grain Trade Association comments on feed material price trends:

Global commodity prices rise on weather concerns

Global grain and feed prices have continued their sharp increase over the past few weeks as weather events threaten output potential in some of the worlds’ main exporting regions.

Claudine Heron
Claudine Heron

After a favourable start to the campaign a scorching Southern Hemisphere summer has dried up hope that Argentina might replenish global corn supplies after a lacklustre US harvest. Argentina is normally the second largest exporter of corn after the US but, hot and dry conditions during the crucial flowering stage in December and January, have reduced production estimates from around 30 million tonnes to 20 million tonnes. With world corn stocks at historically low levels relative to demand the market is nervous and prices have increased £20 tonne from the lows seen in December.

The drought has also affected soya production in Southern Brazil and Argentina but the damage should not be as severe as corn. Although timely rains arrived in some areas - irreversible damage has been caused elsewhere and production is currently forecast to be 5-10% below last year. Soya prices have also been supported by the strength of corn and the expectation that maize plantings will increase at the expense of soya in the US this spring. Chicago soymeal futures have jumped £40 tonne from the December lows and with corn providing better rewards at current price forecasts we can expect soya prices to remain strong in the short term. 

As more favourable weather sweeps across the corn/soya areas of Brazil and Argentina the focus has switched firmly to Europe where the market is trying to assess the impact of severe winter weather on crops. Wheat futures hit an 8 month high in France as freezing temperatures spread to Western Europe from the Black Sea region with parts of Russia and Ukraine suffering most. Poor weather during planting, a lack of snow cover and temperatures falling to subzero, at minus 33 degrees Celsius could see the Ukrainian winter grains harvest fall to 12-14 million tonnes from 22 million last year. The cold weather is also hampering movement of materials, slowing exports from the region and further supporting prices. Cold temperatures are expected to last towards the weekend but it is too early to tell what damage, if any, has been done in Western Europe.

The question now is - to what extent the bad news has already been reflected in current pricing and what uncertainty will remain until we get closer to the South American harvest and winter grains come out of dormancy in Europe. In the meantime we can expect prices to remain volatile as the market monitors weather and crop development for the next few months.

None of this will bring any comfort to local livestock producers with the lack of good news bound to be reflected in higher feed costs in the short term at least.