Business confidence on the improve
May 17, 2017
The 2016/17 season has seen an improvement in the outlook for animal nutrition reflecting a rebuilding of business confidence amongst our customer base. Feed supplement demand is recovering albeit in a more cautious manner as we look to the 2017/18 season. Great to see a firmer GDT overnight with the index finishing 3.2% higher than the previous event (Global Dairy Trade; www.globaldairytrade.info).
NZ Supply & Demand
The cooler temperatures are a sure sign that winter is almost upon us. There has been a notable decline in the level of out-turns in the past few weeks as cows are dried off. From a tonnage perspective this season is expected to be normal with the low point of demand coming in June.
Supplies in NZ remain ample heading into the winter and any logistical constraints are most likely to be as a result of variances in the loading and shipment times of vessels. Grass levels for the most part remain sufficient, so a lot of the feed being used has been to put condition on cows ahead of winter. Prices were below $200 but are now increasingly heading to $210 and above with some reports of $220’s.
There has been quite a bit of inquiry relating to the Fonterra FEI, overall this measure is not expected to impact the total volume of Palm Kernel used with some reporting this now legitimises Palm Kernel as a staple of the NZ system. Nevertheless inquiry for alternative options has increased, especially Tapioca and DDG. ADM has developed a range standardised feeds blends that provide farmers with options that best suit their business needs.
Origin Supply & Demand
Origin supply recovery continues to be lack lustre at best. This is providing support to the market. Prices have lifted slightly due to the limited supply. Supply is still expected to increase but it’s likely to be during the second half of the year. Heading into spring price movement will depend on the size of new season demand vs anticipated increase in supply.
It looks like the globe maybe in for a 5th straight year of high production of grains and oilseeds. The USA is off to a good start with planting (chart below). Some talk that the high global inventory levels of grains will persist for a very long time. This is good news in terms of global food supply but not so good for those seeking higher prices. NZ domestic grain prices have appreciated but seem to be finding little demand at current prices of $330+.