Better Long Term Feed Pea Picture?

VANCOUVER - Feb 3/06 - SNS -- Feed pea markets finished the week with most change relating to currency fluctuations than fundamental shifts in demand. Markets Remain relatively quiet, with limited Spanish buying and intra-European trade noted.

The outlook for field peas could improve as long as price remain competitive with other major feed ingredient markets. Alaron Trading Corporation's Tim Hannagan notes that demand for corn is "improving and looks to keep improving into fall.

"That is why large trading funds and commercial exporters and users are slowly beginning to enter long positions long term into July and September. Here are the long term friendly fundamentals that look to begin to bring down our historically large ending inventory. One, China was a big exporter of corn in 2005 with exports up 270%. Most of the sales went to surrounding Asian neighbors that are traditional buyers of US corn. Over 70% of our exportable feed grains go to Asian markets. So, this hurt our exports.

"High Chinese prices and growers incentives to store more corn has China in position to see exports in 2006 off 25 to 40% leaving the US to fill the hole. US feed usage looks to climb as cattle on feed, hogs and chicken numbers are at or near record levels. The wild card, corn used for ethanol production. The USDA has 1.5 billion bushels of corn pegged for ethanol use in 2006. We have 95 plants currently with 30 under construction to come on line this year. By this fall traders will be talking of 2007 seeing 2.2 to 2.6 billion bushels of corn going to ethanol," Hannagan said.

"Finally, most estimates see our March planting intension report showing 2 to 4 million acres less corn to be planted this year. A 2 to 3 million acre reduction with variable yields could put carry over in 2007 under 1.5 billion bushels the primary reason for growers to plant less corn and more beans this year is the cost of corn's fertilizers. Natural gas prices doubled in 2005. Natural gas accounts for 80% of the cost of producing anhydrous ammonia, used to produce nitrogen fertilizers for corn. . . . Where does this leave us? Well, long term bullish but near term cautious."

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