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New trends, here to stay?

August 21, 2019

Another year is in full swing with calving either nearing completion or well underway across NZ. The winter had been relatively mild until recent weeks, but seems to have found some bite in August.

Overall pasture levels remain adequate in most places, the concern is utilisation if the wet weather continues. This year we are seeing expediential growth in blends, as clients look to maximise peak milk and manage FEI.

Meanwhile uncertainty internationally continues to weigh on a broad range of markets, driving the currencies of commodity countries like NZ toward 10 year lows. Central banks are cutting rates to try and reduce the likelihood of a slowdown. This in turn is pushing stock markets higher as managed money gravitates toward yields that outperform bank deposit rates.

Origin:

Production in palm kernel origins are on track for a record year, which would give hope for softer PKE prices. The market is continuing to buck this expectation primarily because of PKE’s growing popularity outside of the EU and NZ. We are seeing a range bound market grappling with a lack of volume buying from traditional NZ and EU markets, versus support from non-traditional destinations.

PKE production will peak in Q4 (October – December) so it remains to be seen if more volume/liquidity will push the market to the lower end of the range.

NZ PKE Market:

Imports of PKE into NZ are forecasted to be 20% lower over 19/20 season, owing to solid grass growth and movement to other forms of imported supplementary feed. Stocks appear adequate across NZ but there is always the risk that this can change in September/October depending on the weather.

The market appears to largely uncontracted for January to May 2020, and this anticipated demand will likely support the market. Prices range at present from mid 250’s to high 260’s. The softer NZD is making the likelihood of achieving prices of March and June 2019 less likely at this stage.

Other Feedstuffs:

ADM’s Nutrition business uses modern marketing terms such as “on trend” to describe consumer sentiment and preferences for the food they eat. Well the cows are no different! If our feed consumption continues on current trends our commentaries will lean more toward the likes of Soybean Meal, Soy Hull, Golden Distillers & Corn Gluten as the herds discerning appetite evolves.

For now at least we will say that there appears to be adequate but not abundant stocks worldwide of the aforementioned products. The US-China situation has suppressed prices and the latest USDA report suggests corn production, despite the wet start, will be pretty reasonable. Soybean Meal imports look to be up 100,000 MT this year into NZ which has come at the expense of Golden Distillers. The move toward “bespoke” blends is definitely supportive of these products.

Across the ditch: 

The 2019 Australian winter crop is once again on a precipice as spring nears. Unfortunately Northern NSW and Southern QLD are in the grips of what’s been described as the worst drought since records commenced. Interstate imports into these areas will continue into 2020 providing feed support to the growing poultry sector and the reported 1.1 million (beef) cattle on feed. The bulk of which are on the East Coast. The South and Western Australian crops are surviving on passing showers although little subsoil moisture is in reserve.

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