September 30, 2004

Global Feed Grain Prices Projected To Face Continued Pressure

Abundant global supplies have created a bearish feed grain market, according to the Canadian Wheat Board.

The Canadian Wheat Board's September Pool Return Outlook projects a feed wheat price of 122 dollars per ton, seven dollars per ton lower than the August PRO. Feed barley price is seen at 113 dollars per ton, which is a fall of three dollars.

Market Analyst David Boyes said there is a lot of feed grain available this year. "Two things are combining to really take the wind out of the sails of the feed grain complex."

The first and probably the most important factor is the record corn crop in the United States.

According to Boyes, the latest USDA report projected 10.96 billion bushels for the corn crop, but most analysts now agree that it is going to be over 11 billion bushels.

The figure is a record for the US for the corn crop, and it follows on the heels of last year's record corn crop. Corn supplies are increasing in the United States, and the corn stalks are going up.

He said, "That's a very bearish factor because it affects the Chicago corn futures, on which a lot of the feed prices are based, and the Winnipeg Commodities Exchange for feed wheat, and feed barley looks to the corn market for price direction.

Boyes attributed the second major factor to bigger feed grain supplies in Canada. With every ton of additional feed wheat and feed barley that is added to the Canadian harvest, additional pressure is given to the feed complex.

The closed border for cattle does not help the situation because the demand side of the equation in terms of feed grains is considered here. All those things are combining to take the demand for feed grains lower and that is why feed wheat PRO is seen seven dollars down this month and feed barley PRO that is down three dollars, he said.

With the big supplies of feed wheat and feed barley from western Canada, big supplies of corn in the US and other parts of the world as well as more feed barley in Europe, Boyes said it is a bearish scenario for feed grains.