Extreme weather in the US has propelled feed prices to record highs in the last days and weeks, and the effects are being felt by livestock producers on this side of the Atlantic according to Sandy Wilson, Import Manager with the International grain traders, Cargill PLC.

He said “Upwards of 50 million metric tonnes have been cut from U.S. Corn, and soyabean production estimates in the last few weeks, as the U.S. ‘corn belt’ has endured some of the worst drought conditions seen in decades.

“Below-normal precipitation and above-normal temperatures have persisted through the critical pollenation stage for corn over the last few weeks. This has caused analysts to revise their yield expectations for U.S. corn sharply lower, and has sent global prices sharply higher.”

Mr. Wilson emphasised “The benchmark No2 US Yellow Corn Futures for December 2012 has risen $220 (over 40% rise) within the last month.”

He went on to say that likewise, the condition of US soyabean crop is already declining and soyabeans are entering their own critical stage of the growing season with no significant relief in the weather forecasts yet.

These supply shocks come at a time when global supplies were already tightened after 20 million tonne of lost soyabean production in Brazil and Argentina earlier this year. The effect has been soyameal prices which have reached historical highs. Soyameal is the primary source of protein for many European animal feed diets and is vital for the intensive pig and poultry sectors.

At a time of reducing supply global demand has continued to increase. This may seem counter-intuitive when, in Europe, we sit squarely in an economic downturn. The driver of the increase in global demand continues to be China. The increasing urbanisation and rising prosperity of China’s growing population have led to a consistent rise in demand for feed ingredients in volumes which dwarf European requirements.

The steep rise in feed ingredient prices presents a huge challenge to the European livestock industry with little or no option to avoid the increases. Other feed ingredients like Rapemeal, Sunflower Meal and Distillers Grains have not been able to offer any relief as they have also risen sharply on the tide.