May animal feed usage declines: Grain Market Daily

• The pound firmed against the euro yesterday by 0.5% putting pressure on the Nov-20 London wheat futures contract, which closed £1.10/t down, at £165.85/t. The pound is likely to remain volatile in the coming weeks due to Brexit negotiation uncertainty.
• Chicago futures have rallied this week off the back of the USDA June acreage report with maize (Dec-20) closing yesterday at $141.92/t up $13.88/t (£9.99/t) from Friday’s close. CBOT wheat (Dec-20) closed yesterday up $8.08 (£4.90/t) from Friday’s close at $185.92/t.
• Bioethanol stocks continue to decline in the US and stood at 20.16 million barrels in the week ending 26 June 2020. This is the lowest level since January 2017 and may lend further support to the rallying US markets.
• The AHDB Planting and Variety Survey results, detailing the area and variety of UK crops for harvest 2020 will be released at 2pm on Wednesday 8 July.

The release of the latest AHDB usage data has shown animal feed production down across all sectors in May. The main driver of this is the knock-on effects of coronavirus.

It has been reported that some livestock farmers had stockpiled animal feed in much the same way as the general public did food in the supermarket. We saw higher than usual demand for animal feed in March and April, which left some farmers with ample stocks and needing to purchase a lower tonnage in May. It is also likely that less tonnage of feed was used due to reduced demand for meat, dairy and eggs for food service following the closure of restaurants and fast food outlets.

Unsurprisingly, this led to low tonnages being recorded for most raw material usage when compared to May 2019. The exception was feed barley which, due to its current relative price to feed wheat, makes it an attractive component of the ration. Usage of barley by compounders and Integrated Poultry Units was up 15.1% year-on-year.

However, despite this large discount to wheat, wheat has still maintained its position in the ration, only down 1.0% year-on-year while season-to-date (Jul- May) usage is 1.8% higher year-on-year.

Wheat is still the favoured cereal in some rations due to its higher nutritional value when compared to barley.

The UK is expecting a large barley crop in 2020/21 and there will be added pressure on feed grains from the arrival of cheap maize imports. As such, it will be interesting to see to what extent producers end up swapping wheat out of the ration, in favour of a cheaper ingredient in the season to come.

Looking at AHDB’s Forage for Knowledge, following a very dry couple of months, grass growth began a steep decline in mid-May. Because of this, it may be that we see some increased demand in June’s usage figures, however, thanks to heavy rains during the middle of June, this growth has now recovered to levels higher than the previous two years for this time of the year.

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