Feed Peas End on Good Note

VANCOUVER - Mar 31/06 - SNS -- International feed pea markets ended the week on a somewhat firmer note, with prices in Europe stronger in both spot and new crop shipping positions.

Week ending markets were helped by the USDA seeding intentions report, which caught virtually all industry participants by surprise. The numbers were outside the pre-report guesses by all major trading forms, with corn and wheat significantly lower than expected and soybeans significantly higher.

Alaron Trading Corporation's Tim Hannagan put it succinctly, "Friday's planted acreage report was quite a shocker showing 78 million acres of corn will be planted this spring, well under a year ago by 3.7 million acres and under the average pre-report trade guess by 2.5 million acres.

"The old saying is it is not what you plant but what you grow that counts but clearly corn will be challenged to find a perfect growing season or ending stocks will decline in 2007 appreciably. The quarterly stocks on hand as of March 1st was 6.987 billion bushels, up from a year ago of 6.756.

"We have near term inventory of record proportions and though we remain long term bullish corn may find a soft spot in prices the first half of April as soybeans push seasonally lower, the market feels the weight of heavy inventory and what appears to be a wet start to spring building up soil moisture conditions."

For soybeans, Hannagan said, "Friday's quarterly stocks report put beans on hand as of March 1st are 1.669 billion bushels well over a year ago of 1.381. Inventory looks to get even bigger if you believe the planted acreage report that showed 76.8 million acres of beans will be planted before June 10th up 4.7 million acres over a year ago and 2.8 million acres over our average pre-report trade guess.

"And even with some dry areas this summer in some areas were heading to our second consecutive record crop and soaring ending stocks. Beans remain in a seasonal down turn into late April when South America's harvest starts winding down. Bean lows ahead of planting should be in by April 20th."

While the increase in soybean plantings points to improved availability of soybean meal in the coming season, this thought needs to be tempered by the fact European crushers are more interested in processing canola or rapeseed than soybeans. They need to oil for bio-diesel production and do not wanty to be stuck with the meal.

Demand for corn, by contrast, is expected to grow as additional ethanol capacity comes on stream in the United States. These are fundamental changes in how these commodities are used and it is hard to properly assess the impact on feed pea demand and the pricing structure in feed ingredient markets.

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