KW Feedcast - 26 September 2022

Today’s Feedcast is brought to you by Chris Davidson, discussing the unprecedented currency changes and how they are affecting the raw materials markets. Overall it feels like a wait and see before investing at today’s levels.

Fundamentally the markets are performing well and looking bearish if anything. However we are not seeing this reflected in the pricing due to the risk associated with the UK’s failing economy. So while we should be seeing falling commodity prices, this is not trickling through and instead we are seeing price hikes.

On the soya front the US harvest is about to get underway. However in the last week or so the USDA have announced a reduction in the size of the crop which has surprised the market. While this potentially affects US supply, they are not seeing the demand increase due to Argentina already selling in to the market. Looking at today’s prices it feels like this lack of demand is not yet featured and ultimately the price will need to fall for the US to be competitive in the world markets. As the demand picture becomes clear this should result in a lowering of this price.

The South American crops are being watched carefully at the moment with very dry conditions having the potential to affect crops from wheat to second planting maize. At the moment large crops are being forecasted but this could change if the rain does not fall. 

In the mid-proteins the picture around rape looks uncertain, this is due to market speculation on gas prices and how seed will be moved around, resulting in a very high price and respectively very low demand. Distillers from Vivergo, Ensus and imported wheat have also taken a downturn in demand, this is following questions on site and production numbers.

Cereals are also experience high price volatility with the Russia and Ukraine situation adding risk in to the price. With the amount of grain we are seeing coming out of both Russia and Ukraine at the moment the price should be lower, but the risk of this stopping suddenly has been captured in the price.

The risk of global recession and concern around the demand is therefore weighing on a lot of things, while we are seeing the downside in commodity markets the currency issue here in the UK means we are not seeing the lower prices currently. The best advice is to wait and see what happens next, with a safe bet at the moment to cover on UK based products such as Novapro.