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Weekly Overview: Weather: the Great Unknown for the Livestock Industry

18 February 2013

ANALYSIS - 'Weather events' seem to be becoming more common in recent years and unusual climatic patterns are a root cause of the challenges faced by the livestock industry lately. Not only can storms and drought wipe out businesses locally, the volatility in feed prices as a result of poor harvests, for example, may be felt right across the world. That said, the latest crop predictions offer a more positive prospect for pig producers than we have seen for several years. But as the traditional English saying goes, "You shouldn't count your chickens until they've hatched."

Three consecutive years of bad weather events around the world, together with volatile markets that have been seen since 2007, have created uncertainty in the grain and protein meal market, writes Chris Harris, reporting from the 'Outlook 2013' conference in London last week.

While there were flat wheat markets around the world until 2007, an extreme drought in Australia started the period of volatility, the UK's Agriculture and Horticultural Development Board senior analyst, Jack Watts told the audience.

Indeed, he highlighted that a succession of adverse weather conditions has affected the maize and soybean markets globally as well as wheat and these weather-induced production issues - and not demand - have driven feed costs higher.

Mr Watts said that with already low stocks as well, global demand might need to be rationed through high prices.

Last year, in particular, the global crop was influenced by disastrous drought in the US from the middle of the year as well as drought in South East Europe.

Looking ahead, Mr Watts said that in the coming year strong wheat plantings around the world offer good prospects, provided there are no disastrous weather conditions again.

However, there has been a better winter this year and there have been encouraging signs for a good maize planting.

For the soybean market, demand from China is one of the key market drivers because it takes one-quarter of the total global soyabean production.

In this current, 2012/2013 crop year, while the crop in the US is expected to be down, this will be compensated for by a rise in production in South America - provided there is not a similar drought that the region experienced last year.

Also relating to feed price prospects, Darrel Good of the University of Illinois reports that USDA has released new projections for marketing year consumption of US corn and soybeans. Prices will now be at least partially influenced by how closely the rate of consumption tracks these projections, he says. Whilst not specifically referring to weather conditions, they are among the main reasons why USDA produces regular updates.

Though the estimates in USDA’s February 'World Agricultural Supply and Demand Estimates' represented relatively small changes versus previous releases and did not differ dramatically from analysts’ pre-report estimates, sensitive grain markets reacted quite negatively late last week — and some of the changes were actually bullish, according to Steve Meyer and Len Steiner.

A significant step has been taken towards the development of global Life Cycle Analysis (LCA) guidelines for feed. The European Feed Manufacturer's Association (FEFAC) and the American Feed Industry Association (AFIA) have joined forces to harmonise the methodology for environmental footprinting of compound feed and to publish the first Feed LCA recommendations.

Finally, while the prospects for the UK and EU pig industries are looking better for 2013 - they could hardly be worse after a very difficult year last year - producers will have a look further than 12 months ahead for truly good times to return, according to Stephen Howarth of the AHDB. He was also addressing the Outlook 2013 conference

Jackie Linden

Jackie Linden

Top image via Shutterstock



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