Prices set to slide as insiders forecast plentiful supply of feed grains

By Jane Byrne

- Last updated on GMT

A significant amount of EU wheat is expected to come onto the feed market
A significant amount of EU wheat is expected to come onto the feed market

Related tags Maize Wheat Cereal

Livestock producers can expect abundant feed grains and subsequent downward pressure on prices as bumper maize harvests are predicted in the EU and the US, and a greater proportion of the EU wheat crop is diverted to feed use.

“The EU maize crop in terms of yield and condition is looking very positive – possibly the largest in a number of years.

Expectations for the US crop are tremendously high, even with only 4% harvested, so it is looking like there will be plenty to go around, and feed grain prices should respond accordingly,”​ said Helen Plant, senior analyst, cereals and oilseeds, with Agriculture and Horticulture Development Board (AHDB) Market Intelligence.

EU corn production prospects are up 1.3 million tons to 68.3m, as abundant rains and moderate temperatures across most countries support yield prospects, especially for France, Hungary, and Romania, reported the US Department of Agriculture (USDA) yesterday.

EU wheat diverted to feed use

In July, it was reported that rain damage was set to divert a significant amount of EU wheat onto the feed market.

“We now have more clarity on the impact of weather conditions on French wheat quality, with the authorities there revealing last week that, in 2013, about 95% of production was suitable for bread-making but, this year, they predict only 59% will be. So we would expect to see a significant amount of wheat redirected to feed use,”​ Plant told FeedNavigator.

Similar weather conditions in other parts of Europe should also see a plentiful quantity of wheat siphoned off for livestock usage, said the AHDB analyst.

This development, speculates the AHDB, could prompt some European feed producers to replace imported corn with home-grown wheat in their formulations. "But wheat will have to compete on price,"​ said Plant.

Abundant UK wheat crop to support feed use

In terms of UK wheat production outlook, the quality of the crop this year is “above average”​ even if there have been some question marks over the level of protein in some types, she said.

"Yield reports are good and due to a hike in the planted area, the UK wheat crop is likely to be the largest for a number of years.  The UK feed wheat futures (nearby price) reflects that,”​ added the cereal and oilseeds analyst.

She said an increase in the amount of Grade 4 wheat available has also been observed, which translates as a plentiful supply of feed suitable crop.

July 2013 to June this year saw unprecedented usage of oats in feed rations in the UK with the Department for Environment, Food and Rural Affairs (DEFRA) reporting 120,000 tons of oat supplementation in compound feed during the period.

However, there is uncertainty about whether that trend will continue into next year, given the lack of visibility at the moment about the size of the crop. “We are awaiting data from Scotland which accounts for 20% of total UK oat production”​ said Plant.

Expectations high for bumper US corn harvest  

Released yesterday, the USDA’s survey based feed outlook report raises its forecast from August for the 2014/15 US corn crop yield by 4.3 bushels per acre to a record 171.7 bushels.

The agency said excellent growing conditions in most areas are expected to help production reach 14,395 million bushels, which would be 470 million higher than the previous record in 2013/14.

It reports that 75% of the crop was rated ‘good to excellent’ in early September, up 18 percentage points from last year and the highest late-summer rating since 2004.

And the USDA notes: “the lower price outlook encourages increased feed use [of corn].”

It also expects higher US feed use of barley but a drop in sorghum usage by that sector. Oats and wheat feed use will “remain steady,” ​it added.

USDA International Outlook

In its international outlook, the US agency forecasts that the largest reduction in expected production is for China’s corn, down 5m tons to 217.0m. “Rainfall across nearly all important corn-producing regions in China is less abundant than the previous year when record yields were achieved.”

Argentina’s projected 2014/15 coarse grain production is cut 4.1m tons to 31.1m. “Winter crop planting was delayed by excessive rains, and the drop in barley area is reported to be stronger than earlier forecast. As summer crop plantings commence, it is clear that relative returns and risk favor a switch to soybeans,”​ notes the agency.

Reduced corn production prospects in Russia and Ukraine cut their projected coarse grain ending stocks 0.5m tons and 0.3m tons, respectively. Smaller reductions this month are forecast for Algeria, Australia, Serbia, India, Ethiopia, and Saudi Arabia, said the USDA.

The full USDA feed outlook report for September 2014 can be read here​.

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