Feed Peas Firm Despite Weakness in Complex

VANCOUVER - Dec 2/05 - SNS -- International feed pea markets finished the week on a slightly firmer note against optimism about pending demand from Spain and an improvement in U.S. dollar parity levels for European feed peas.

European markets ended the week on a firmer note in U.S. dollar terms, while North American were little changed. France was the exception, finishing the week with lower average grower bid levels, potentially making it easier for shippers there to compete with third country imports.

However, market participants do not believe a bull market can develop for the commodity because of growing concerns about the spread of avian influenza. Each newly infected chicken or duck is attracting more attention than an A-List Hollywood celebrity, resulting in an immediate, if temporary, impact on retail sales patterns.

Of greatest concern to feed ingredient markets is the fact there are now 31 cases in China. The country produces a fifth of the world's chickens, but the outbreaks are in isolated parts of the country, making it hard for officials to control the spread of the disease.

"It is surely to get worse before it gets better," laments Alaron Trading Corporation's Tim Hannagan. "Most believe they are only telling us the tip of the problem for fear of chicken consumption collapsing, especially after three related human deaths after eating diseased chicken."

Soybean and corn markets are also expected to suffer from profit taking by fund and large traders holding large short positions. "Whether it is the first half or last half of December they take their profits is to be seen," Hannagan said, "but the overall supply demand fundamentals look to remain bearish. Other than a year end profit taking, beans only other hope for an appreciable rally will come if South America turns dry and hot threatening seeded bean acres."

The problem for feed peas is that while they are mainly fed to hogs, which should benefit from swings away from poultry consumption in response to bird flu announcements, birds eat massive amounts of feed. Flocks are destroyed in an effort to prevent spread of the disease, resulting in a powerful and immediate reduction in livestock feed consumption rates in affected regions.

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