Favourable weather eases feed supply concerns: feed market report

By Megan Hesketh

Grains

In June, we saw global grain markets decline as more favourable weather started to ease new-crop supply concerns. Though as we can see, spot UK ex-farm feed wheat prices lost more ground than barley prices. The discount of barley to wheat narrowed by £3.70/t to £15.30/t. This reflects tight UK barley availability as we approach the end of the season.

Rains and cooler temperatures across the US maize belt eased supply worries in June, pressuring feed grain prices. However, hot and dry conditions on the Northern Plains meant US spring wheat crop ratings fell to the lowest level in 33 years. Despite improved maize conditions, this concern has limited falls in global wheat prices.

US maize is entering its key growth stage. Weather will be critical in the coming weeks to crop conditions and so, price direction. If the weather changes direction towards hot and dry, we could see some volatility in prices, or even price rises, in July.

In the EU too, more favourable weather boosted the supply outlook in June. The latest EU crop monitoring (MARS) report increased all winter crop, and spring barley, yield forecasts. This puts many EU grain yield forecasts ahead of 5-year averages. France and Russia have started their winter barley harvests, which may take some risk premium from prices as grains start to come in.

Globally, the International Grains Council (IGC) boosted 2021/22 grain supply by 9Mt this month to a new record. This raises global grain stocks for the first time since 2016/17. However, stocks remain low and the market is sensitive to weather news. There is a risk of further cuts to the 2020/21 Brazilian maize crop on drought stress too, which if realised, may heighten market sensitivity.

As we look to the new season in our domestic market, recent rains have been beneficial for crop prospects. Some in industry are now looking more towards a 15Mt wheat crop. This may ease tight supplies in the UK and further pressure prices in the coming months as harvest begins.

Proteins

Supply and demand across the global oilseed complex look more comfortable for the new season.

Global supply is forecasted to rise for rapeseed, soyabeans and sunflower seed in 2021/22. With total production rising faster than demand, ending stocks are forecasted to increase too. Important for the UK, EU-27 2021/22 rapeseed production forecasts rose in June to 17.0Mt, 0.5Mt higher than 2020/21.

For soyabeans, new crop supply (2021/22) looks more positive in size. Throughout June, rains have been easing concern for US soyabean crop conditions. The boost to crop prospects pressured prices. Large year on year increases are forecast for the US, Argentinian and Brazilian crops. US and Canadian acreage reports are due this week, which may confirm short-medium term price direction.

Vegetable oil prices have been feeling pressure from reduced demand prospects. In the US, a court ruling makes biofuel blending requirement exemptions easier for small refineries. However, it is not yet clear how this may impact oilseed demand or meal prices next season.

With a tight supply picture for rapeseed, prices remain at a premium to other oilseeds. Despite large falls in soyabean prices in June, rapeseed has seen some support. This is from dry and hot weather in Canada causing supply concerns.

Currency

From 24 May to 28 June, sterling marginally gained against the euro, but fell against the US dollar.

 Sterling has had the worst month since September against the US dollar. Despite the small gain against the euro this month, arguably sterling also had its worst quarter against the euro in one year. Last week, the sterling was one of the worst performing G-10 currencies due to inflation rates. Though some recent gains were made on the announcement that COVID restrictions are due to ease on 19 July.

The US dollar gained sharply mid-June against many currencies, including sterling. This was due to the US Federal Reserve signalling interest rate rises and the end to emergency bond-buying earlier than expected.

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