Weather Expected to Determine Direction of Feed Ingredient Prices in 2008

by 5m Editor
2 February 2008, at 11:20am

CANADA - Informa Economics expects weather during the 2008 growing season to be a key factor in determining the direction of feed ingredient prices during the coming year, writes Bruce Cochrane.

Canadian hog producers have been losing been losing money since late summer due to a combination of low hog prices brought on by a large supply situation, feed ingredient costs that have gone up by 15 to 20 percent over the past year and the rising value of the Canadian dollar.

Informa Economics vice president Dave Reimann notes weather conditions during the 2007 growing season resulted in one of the tightest Canadian feedgrain supplies in several years.

Dave Reimann-Informa Economics

Some of the increase in feed costs is because of a shortage of production globally.

We has several weather issues around the plant, Australia, Asia, Argentina, Europe, North Africa as well as North America last year that all cut off production to some degree and started this whole rally off.

Other factors of course are biofuel consuming more corn for ethanol, other acreage going into oilseeds for biodiesel production and such.

As ethanol, as an example, has developed in through the upper mid-west in the United States, areas that used to export corn from their local regions either down the river to export out of the U.S., they're now importing corn to satisfy some of this ethanol demand.

China used to be a net exporter of corn and they still are selling a little but it's anticipated that they'll become net importers of corn in the next couple of years.

As a result we're seeing these expanding demand factors taking place and it's impacting other markets.

As the corn vanishes into other areas it drives up values of feed barley as an example or feed wheat, oats, peas, so really this thing reaches into many many markets.

Reimann says it's too early to know if we've recovered from last year's tightness.

He believes if the weather cooperates resulting in at least average yields, we could see some relief on the feedgrain side in 2008 but, if there are problems with production, especially if they happen in more than one pocket, we'll still have very firm feed values in the coming year.

5m Editor