Raw Material Update Winter 2008
The raw material market continues to experience great volatility with the last 4 months showing a downward movement in many raw materials.The causes in these movements are numerous but the main factors are:
Global credit crisis leading to the onset of recession in many countries with the associated slow down in spending.
Near record cereal harvest in Europe with stocks starting to build from 30 year lows.
Huge falls in crude oil prices.
Exchange rate volatility supporting wheat exports from the UK but adding to the cost of imported raw materials.
Financial funds liquidating positions.
Energies
The above graph highlights the vast spread in wheat prices over the last 18 months with December 07 & January 08 peaks being driven by world demand for cereals outstripping supply & stocks. With a record European harvest in late summer 2008 cereal prices started to tumble.
Current UK wheat prices are attracting some export demand but at these levels sellers are reluctant as these prices are well below the cost of production.
Forward prices currently for wheat show only small increases into 1st half 2009 with wheat stocks starting to build again.
Proteins
Soya values continue to show great volatility. In recent months the exchange rate ($ against £) has lifted the spot price with one cent drop in value adding £1.50 to a tonne of soya despite optimistic views on the supply of soya.
The GM issue continues to cloud the availability of US maize derived mid proteins leaving EU origin gluten & distillers expensive.
Rapemeal has fallen significantly in price recently due to a ready supply of rapemeal across Europe.Rapemeal currently offers good value in the protein market.
Fibre
The general downturn in prices has followed through to fibre sources especially soya hulls & citrus pulp. Sugar beet pulp, despite bumper crops of beet, looks expensive.
The forward outlook does look more stable than of late. We have thought that before and seen prices fluctuate wildly on sometimes thin rational. Should raw materials remain weaker this will be good news for all our customers as we would look to reflect this in lower feed prices.
Andrew Galling
Raw materials
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