Weather and Direction of Feed Grain Prices Linked

CANADA - A Winnipeg grain market analyst says weather over the next few weeks will be critical in determining the direction of feed grain prices over the next six to nine months, writes Bruce Cochrane.
calendar icon 6 May 2008
clock icon 3 minute read

Although feed grain prices have not been as explosive as they were in 2007, prices remain strong with corn hovering near record highs and feed barley and feed wheat markets in Canada holding firm.

Informa Economics senior analyst Dave Reimann reports, because of the tight carryout situation in most feed markets, the trade is concerned with potential acreage and potential yields.

Dave Reimann-Informa Economics

We're seeing some change happening globally in some markets.

For instance wheat is starting to be harvested around the world.

That's putting a bit of pressure into the wheat markets that didn't exist in much of 2007 or over the winter.

Those markets are staring to come down and we will see more and more wheat harvest really kick into gear over the next few months.

As we get into May and June we'll start to see more harvesting going on in China and the U.S., in Europe.

As those harvests start to hit, we expect that wheat prices will drop a bit and some of that wheat will find it's way into the feed channels.

That will help to alleviate some of the upward pressure in things like corn or barley as an example.

But, until that really starts to make its way into the pipeline, it's difficult to break these markets very far.

Traders right now are probably guessing something in the area of around 154 to 155 bushels per acre average yield for corn but, if the bulk of the crop goes in really in the first week of June or something, then we probably won't be able to achieve those kinds of yields.

Reimann says, if we get a substantial amount of the crop seeded in the next two weeks in much of the U.S. corn belt, some of the stress will come out of the market and prices will tend to sag but, if planting falls well behind average, the market will want to build in more of a weather premium and we could see some explosive rallies heading into June and July... so the next four weeks will probably be key as to the long term direction of the feed complex.

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