October 2012
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FARMINGUK OCTOBER 2012 In this edition: BACK ISSUES • Europes pork and bacon stocks declining scan the code • Calls to scrap EU biofuel plans • Hundreds march to Brussles • Plus much, much more! NEWS MARKET REPORTS PROPERTIES CLASSIFIEDS JOBS RURAL ACCOMMODATION A layer of distincti n 4 2 www.hy-line.co.uk CALLS TO SCRAP 11 EU BIOFUEL PLANS RABOBANK REPORT: AGFLATION TO HIT ANIMAL 4 PROTEIN AND DAIRY INDUSTRIES 24 GREATER 4JOH7 N DEERE SELLS TRANSPARANCY 1000TH SPRAYER Also inside: p7 Europe’s pork and bacon p13 EWT in turbine licensing deal p21 Hundreds march to Brussles calling for farming reforms supply declining for Brazil S T p9 Dairy coalition calls for cuts p17 Surge in seed potato p35 EColi poultry vaccine to N E be launched cash to be given back export figures T N FarmingUK advertising and editorial enquiries O PO Box 75, Brighouse, West Yorkshire HD6 3SD Tel: 01484 400666 Email: [email protected] C OCTOBER 2012 FARMINGUK 3 Very high (-.50 to -0.65) High (-.45 to -0.50) Medium (-.40 to -0.45) Mode rate (-.25 to -0.40) Low (-.25 to -0.35) No in formation av ailable RABOBANK REPORT: AGFLATION TO HIT ANIMAL PROTEIN AND DAIRY INDUSTRIES Skyrocketing agricultural and wheat. These commodities are so the current period of agflation commodity prices are causing the currently 30% cheaper than their should not lead to the unrest world to re-enter a period of 2008 peaks. Nonetheless, price rises witnessed in response to the "agflation", with food prices are likely to stall the long-term trend shortage in 2008. forecast to reach record highs in towards higher protein diets in Asia, 2013 and to continue to rise well the Middle East and North Africa. In Rabobank estimates that the Food into Q3 2013. Unlike the staple developed economies - especially and Agricultural Organisation (FAO) grain shortage of 2008, this year's the US and Europe - where meat Food Price Index will rise by 15% by scarcity will affect feed intensive and corn price elasticity is low, the the end of June 2013. In order for crops with serious repercussions for knock-on effect of high grain prices demand rationing to take place, in the animal protein and dairy will be felt for some time to come.” turn encouraging a supply response, industries. prices will need to stay high. As such Due to the long production cycles of Rabobank expects prices - Luke Chandler Global Head of Agri the animal protein and dairy particularly for grains and oilseeds - Commodity Markets Research at industries, the affects of grains to remain at elevated levels for at Rabobank commented, “The impact shortages will be more sustained as least the next 12 months. on the poorest consumers should be herds (especially cattle) take longer reduced this time around, as to rebuild, maintaining upward Government intervention purchasers are able to switch pressure on food prices. However, Whilst the impact of higher food consumption from animal protein food makes up a smaller proportion prices should be reduced by back towards staple grains like rice of budget spend in such countries, favorable macroeconomic 3ECTION The price of food will increase further | | Rabobank Re-entering Agflation Our analysis indicates that world stocks of in five of the thirteen marketing years since Figure 2.1: Wheat, corn and soybean prices are experiencing soybeans in the 2012/13 season will fall to the turn of the millennium (see Figure 1.4). their third major price rally in five years—setting records for just 73 days of use (-6 YOY) while corn stocks soybeans and corn In fact, world wheat stocks are expected to 18 will fall to just 51 days of use (-4 YOY). These end this season with 90 days of use (-14 YOY) 16 numbers compare to 83 days and 62 days, and should remain considerably higher than 14 respectively, for the 2007/08 season. As this the 76 days of use reached in 2007/08 l 12 e season’s decline in stocks is concentrated in h s 10 (see Figure 1.5). Rice stocks are also significantly u b corn and soybeans (used largely in animal / more plentiful this time around with 81 days D 8 S feeds), stock tightness can be alleviated U of use (-2 YOY) compared with just 69 days in 6 through reduced meat and dairy consumption. 2007/08. Export bans in major rice exporting 4 These effects will be masked in the shorter countries, including India and Vietnam, were 2 term as higher slaughter rates temporarily a key component of the 2008 record rally in 0 1 3 4 5 6 7 8 9 0 2 increase meat supply. The longer term effect 1 0 0 0 0 0 0 0 1 1 0 rice prices, with August 2012 rice prices of 0 0 0 0 0 0 0 0 0 Re-entering Agflation 2 will be reduced animal herd sizes, which will 2 2 2 2 2 2 2 2 2 USD 15.6 per cwt still 34 percent below the drive down production and increase prices. 2008 peak. While there have been some Unlike in 2007/08, higher prices will linger this CBOT Wheat CBOT Corn CBOT Soybeans concerns with the sub-par Indian monsoon, time, even if increased production alleviates at this stage production has not been as Source: Bloomberg, Rabobank, 2012 pressure on underlying grain fundamentals World Food Prices to Hit Record High adversely affected as in 2008. Additionally, as herds take time to rebuild. non-grain and oilseed prices have remained The crisis of 2008 was many years in the more subdued, with sugar—a large food- decline YOY for the first time in 17 years. However, we still expect prices to remain making, with stocks-to-use declining across price component—falling 16 percent YTD. However, total global grain use is likely to above long-run average levels, unless there the grains and oilseeds complex beginning However, with the reference #11 sugar price exceed production for the seventh time is a major demand shock in the market, such in 2000 as emerging market and biofuel trading at USc 20 per lb, prices remain well in 14 years. as a major policy change (e.g. biofuels) or a demand accelerated. The 2008 crisis was above the 2008 average price of USc 12 per lb, global recession. a signal that there was not enough growth with prices declining from their peak of USc !GRICULTUR ALCOMMODITYPRICES in production or investment in agriculture 35 per lb in February 2010. The scale of the production setbacks this TOREMAINHIGHF ORSOMETIMEY ET to meet the accelerated growth rate in season will underscore the need for an almost Meat consumption will be significantly more Record high agricultural commodity consumption. The subsequent price response unprecedented amount of demand rationing. affected than the consumption of grain prices will be required over the next 12 to incentivised the largest grain and oilseed We believe that this will be a much more (e.g. bread) as demand rationing will be 24 months in order to cut demand and harvest ever in 2008/09. However, the record difficult task than current livestock and focused in the feed grains complex. One encourage a production response from crop was not sufficient to rebuild depleted ethanol production margins would suggest. direct consequence of this, due to the long the world’s farmers next season. We expect inventory levels as consumption growth Entrenched demand, feedback effects from animal protein and dairy production cycles, agricultural commodity prices will peak kept pace with production increases. animal protein price increases, hedged will be that price effects will linger longer as somewhere between Q4 2012 and Q1 2013 Ultimately, prices dropped and output production margins within the hog and herds (especially cattle) take longer to rebuild. as new crop prospects in Brazil and Argentina faltered in 2010/11, prompting another cattle sectors and the US ethanol mandate As herds are liquidated this will increase are showing signs of trend line yields being agricultural commodity rally. The coming (Renewable Fuel Standard-RFS) will likely supplies in the short term and depress prices. achieved for corn and soybeans. Beyond this decline in world grain and oilseed stocks mean that elevated agricultural commodity In the medium/longer term this will maintain period, we anticipate an easing in prices if reinforces the longer term trend of prices will be required for the entire upward pressure on food prices as meat seasonal conditions normalise and world consumption surpassing production, marketing year and beyond in order to and dairy supplies contract. inventory levels can recover (see Figure 2.2). with production only outpacing supply sufficiently limit both US and global use. Figure 1.4: Combined world stocks-to-use for wheat, rice, corn Figure 1.5: Combined world stocks-to-use for wheat, rice, corn &IGUR E 2ABOBANKQUAR TERLYAVERAGEGR AINANDOILSEEDPR ICEFORECASTS and soybeans began to decline in 1999/2000 and soybeans improved following 2007/08, but are forecast to decline for the third consecutive year in 2012/13 1m 1m 1m 1m 1m 1m 1m 1m 1m 1m 1m 1m 1m 1m 1m 34 2,400 120 32 2,300 110 7HEAT#"/4 USc/bu 522 496 467 653 707 786 745 690 615 643 642 860 880 900 920 ) s k 30 2,200 c 100 o t s s 7HEAT-ATIF EUR/tonne 129 125 132 200 225 252 233 199 186 210 212 255 261 267 273 e d n 28 2,100 l 90 t r n n o o e t w c ( r 26 80 2,000 n #ORN USc/bu 386 370 355 422 562 670 731 696 620 641 617 790 800 810 820 e e o i s p l l u i 24 1,900 f 70 m o s 3OYBEANS USc/bu 1,002 955 957 1,035 1,245 1,379 1,361 1,356 1,175 1,272 1,426 1,725 1,685 1,600 1,450 22 y 60 1,800 a d 50 20 1,700 3OYOIL USc/lb 38.1 38.6 38.1 40.2 51.0 57.0 57.2 55.7 50.6 52.9 52.2 53.0 52.5 52.0 51.0 18 1,600 40 f f 1 1 0 2 3 4 5 6 7 8 9 0 2 8 9 0 1 2 3 3 0 1 0 0 0 0 0 0 0 0 0 1 1 0 0 1 1 1 / / 3OYMEAL USD/ton 306 278 281 305 338 367 353 352 302 339 413 510 490 420 375 1 / / / / / / / / / / / 1 / / / / / / / 0 0 9 1 2 3 4 5 6 7 8 9 1 7 8 9 0 1 2 2 0 1 9 0 0 0 0 0 0 0 0 0 1 0 0 0 1 1 1 1 0ALMOIL MYR/tonne 2,309 2,577 2,527 2,650 3,293 3,675 3,362 3,097 3,016 3,219 3,245 2,850 2,900 3,000 3,100 Stocks/use Consumption (RHS) Production (RHS) Corn Soybeans Rice Wheat Combined Source: FAO, Rabobank, 2012 Source: USDA, Rabobank, 2012 Source: Bloomberg, Rabobank, 2012 3ECTION Global agricultural prices spike, again | | Rabobank Re-entering Agflation prices falling 47 percent over the same evident in reduced ethanol production in even with the near doubling of corn prices in 6ALUE ADDEDPR OCESSING period.