Farmers see value in new season PKE!
March 21, 2019
Welcome rain has fallen across many parts of the country over the past few weeks following the dry, late summer. Stockfeed demand has picked up as a result, albeit from a very low base following the exceptionally good start to the season. Dairy customers remain wary of FEI challenges, however good reserves of on-farm supplementary feed (secured prior to the dry) will assist in buffering the impact.
The price premium for PKE SPOT contracts is being sustained by hand to mouth, or nearby needs basis purchasing. This trend will likely continue through into May as importers work through their inventory. New season (2019/2020) markets experienced an uplift in demand recently on the back of PKE prices falling below $230/mt. ADM dairy customers have commenced taking price cover for their new season feed program by securing significant volume in the mid $220’s/mt. Taking a high-level view of 18/19 season, PKE prices ranged from $220-$350/mt across the season, therefore it will interesting to see if 19/20 purchases at the lows of the 18/19 price range are good value. The law of averages would suggest it’s probably not a bad place to start!
Emerging as an alternative for PKE, Corn Gluten Feed Pellets (CGFP), are relieving the pressure on FEI limits as have farm based fodder and hay supplies. It will be crucial for farmers to closely monitor on-farm feed reserves and calculate draw-down over the season to ensure they are not caught in a price and supply squeeze for PKE alternatives prior to drying off.
Tapioca prices are firming on the back of the annual dip in supply.
Looking forward, on-farm margins versus feed costs for the NZ farmer are looking the brightest they have for a few years, which is welcome news for all involved in the industry.
The NZ Dollar appears range bound between 0.65 and 0.70 US cents. Barring any new news globally this seems unlikely to change.
PKE pricing at the origin is nearing lows of the last two years. Softer prices may allow the market to find new demand, and subsequent price support, however with record PKE production a possibility in 2019, it remains to be seen how the market will react in Q3 and Q4. Crushing facilities for one will be reluctant to push the PKE market lower.
Source: ADM New Zealand
In terms of “outside” influences, the International Maritime Organisation’s (IMO) impending reduction of sulphur emissions from ocean going vessels is likely to have upward pricing pressure on freight. As the global shipping industry transitions to the implementation date of January 2020, industry experts are divided on what costs will be passed onto shipping customers.
Despite US posturing that China “needs” the US more than the US “needs” China, the US feed market is once again standing to attention until news is received on China demand. Hence, as both sides continue to play ducks and drakes, the NZ Corn Co-Product market appears stable yet well supported for time being. We don’t expect market volatility to kick in until July onwards, or once US crop production is known. Therefore it is recommended that during this period of price stability customers continually rework ration budgets and if current prices calculate, then consider locking in supply for the second half of the year.
The Value Max range is proving popular and a great way for customers to keep costs down. With pasture and on-farm feed supply varying greatly across the country ADM’s Value Max Range provides cost-effective, high quality feed options designed to meet the requirements of cows at different times of the year. To find out more <click here>.
South Island Agricultural Field Days
ADM is back at SIAFD for 2019. Come and see Brenda and Ross and enter your name into our Chilly Bin comp. Jam-packed full of awesome NZ produce….and some ADM merch…..we’re giving away one each day! See us at site C13-C14.