After a tense year 2022 for the markets of raw materials used for animal feed, the trend today seems to be rather downward in prices. And for the coming months? If harvest forecasts are reassuring for the moment on a global scale, drought and geopolitics are worrying.
Falling for several weeks after historically high levels in 2022, how could the prices of the main commodities of theanimal feed – wheat, corn, soy ? This was one of the topics discussed during the “meat market” day organized by Idele on 8 June.
Mathilde Le Boulch, economic studies engineer for Idele, Ifip and Itavi, previously recalled what led to such a complicated situation on these markets in recent months. First, tense fundamentals with a « very fragile balance » between production and consumption worldwide.
This is accompanied by a downward trend in stocks, with in particular a marked drop in the stocks/consumption ratio for wheat, which is lighter for corn. A dynamic that is confirmed if we remove from the equation the chinese stocks.
Not having enough arable land to achieve its goal of food self-sufficiency, the Middle Kingdom actually imports a lot of agricultural raw materials and holds 50% of world stocks, which « creates a real imbalance » because these products do not are not available for the global market.
Another major element: climate change induces extreme weather phenomena which add up and affect availability. Europe thus experienced its worst drought in 2022 and saw part of its spring crops burnt, La Niña caused Argentina’s worst corn and soybean harvest in 20 years, the winter of 2022 was very harsh for US winter wheat.
And as a climax, the war between Ukraine and Russiatwo major producers of wheat, corn and meal (especially rapeseed and sunflower), has greatly destabilized the commodity markets.
A fall in prices “with big quotation marks”
These factors led to record high prices for wheat, maize and meal shortly after the invasion of Ukraine, an upward trend that continued for soybean meal, particularly impacted by poor harvests. .
Today is the time for falling prices, but a drop with « big quotes », nuance Mathilde Le Boulch: “we are not going back to the standard courses of five years ago either”. In cereals, price levels are explained by still tight fundamentals.
For meals, the price gap is widening between rapeseed and soybeans, again due to the fundamentals: in 2021, poor rapeseed harvests, particularly in Canada, had driven prices up. Today, « the good reserve in rapeseed operates the crushing plants and allows enough meal to be produced », hence a more marked decline in prices.
At the same time, several elements remain « historically high » and continue to create a climate of uncertainty, underlines the economist. The high and volatile energy prices have thus impacted all the links in the sector: corn drying and therefore food manufacturing, slaughterhouses, processing… As for the euro weakness against the dollar, it makes our imports of soybean mealnotably.
Good harvest forecasts
And tomorrow ? If it is always impossible to predict precisely the evolution of prices, some elements look bullish, others bearish.
Among those arguing for an easing of the markets: the first crop estimates for the 2023/24 marketing year. The USDA currently expects corn and soybean production to exceed consumption, which should « allow international stocks to rise again ».
Growing conditions are still good in Northern Europe and the prognoses are good for French wheat yields and Europeans. They are “excellent” in rapeseed and sunflower: coupled with an increase in surface areas, they predict good production in Europe. Same in Canada. Added to this is the excellent soybean harvest in Brazil.
“The prognosis is more mixed for fodder « : if the grass is good for the moment, « what impact will the dry weather have, will we be able to harvest everything, knowing that we had already hit the stocks last year? « .
Watch out for drought
Adverse weather is indeed likely to strain the markets: « watch out for the drought and the lack of water in Northern Europe, which could harm spring crops! « . There is also great concern in Spain, a major barley producing country, very dependent on water and hit hard by drought.
The Maghreb countries are also suffering from a severe drought and could increase their imports in the coming months. A drop in winter wheat production is also to be feared in the USA, a major producer, because of the dry climate. Not to mention a “catastrophic” soybean harvest in Argentina.
Another bullish element: the uncertainty linked to the war in Ukraine. Even if the markets have finally integrated this risk, the production and export capacity of this country in the coming months raises questions, and could affect availability.
As « Russia strengthens its leadership position on the world stage », the USDA today forecasts a 2023 harvest of Ukrainian wheat in 40% drop compared to the pre-war three-year average, and estimates the drop in exports at -44% over 2023/24… And even then, if the cereal corridor is maintained.
Set up in early August 2022, this corridor has made it possible to export more than 32 Mt of cereal products via the Black Sea, but is regularly threatened by Vladimir Putin’s announcements. It has been extended until July 17, but will it be extended beyond that, and will it allow the Ukrainian harvest to be exported?