Few Changes in Feed Peas

VANCOUVER - Sep 26/08 - SNS -- European feed pea markets registered a mixed performance on the week, with markets in the United Kingdom finally converting to a new crop pricing basis, while markets on the continent were little changed in local currency terms, but firmer in U.S. dollar terms.

Data from the Canadian Grain Commission (CGC) indicate direct sales of fed peas to livestock producers and compound feed manufacturers in western Canada remains well ahead of last year. Since the August 1 start of the current marketing year, primary and terminal elevators report selling 22,600 metric tons (MT) of peas directly to domestic users, compared to 8,800 MT last year.

Looking at major feed ingredient markets, Alaron Trading Corporation's Tim Hannagan said market participants need to prepare for the market rally which has become more common in the January through March period.

"This past January through March for corn, beans and wheat was a battle of upward prices as each market pushed higher to ensure that they would not lose badly needed acres of production in the spring to another market, as wheat ending stocks were projected at 60 year lows in the U.S. and bean ending stocks were projected about 140 million bushels versus 550 million bushels in 2007. Corn ending stocks were not as frightening at 1.6 billion bushels after a sharp increase in acres in 2007 but projected demand and usage was called to cut that appreciably going into 2009 and much more if too many acres were lost.

"The new crop December 2008 corn contract started January 1st at 4.75 per bushel, moving to 5.75 on March 31st. New crop November 2008 soybeans on January 1st sat at 11.25 and a March high of 14.75 before retreating ahead of planting. Using December CBOT wheat as a medium to K.C. Exchange hard red winter futures and the Minneapolis Exchange spring wheat future. The CBOT wheat saw a January 1st 8.00 price soar to a March 12.84 high.

"Of course this was more than buying acres it was dealing with a market demand so strong we went to historic highs as world importers with 40 year low inventories scramble to get their share of what we seemed to be running out of," Hannagan said.

"The first quarter, January to March rally to buy acres as domestic and world demand for feed grains exceeded production was not just this year. 2007 saw December corn rally 80 cents from January to March, beans basis new crop November rallied 1.40. This sets up the thought process in trader's minds 'Are we going to do this again in the 2009 January to March period?' The answer 'most probably is yes!'

"Reason for another year of 'battle for acres' come as ending stocks for corn and beans, as of today are projected lower next year over this year and 2006. As per corn, current ending stocks this year are about 1.5 billion bushels and USDA projections for next year's ending stocks are 1.033 million bushels If this year's projected 1.5 billion bushels brought us a $1.00, January to March rally, what would 1.033 million bushels bring this coming January to March?

"Now look at beans, with the January to March $3.50 cent gain to buy acres this year, off ending stocks of 140 million bushels back then to next year's estimate of 135 million bushels currently, suggesting another similar or certainly measurable rally. One thing is certain- the battle between corn, wheat and beans to buy acres will be greatly more important than the two proceeding years as world demand again will be at or greater than our ability to meet it and build inventories to safe levels, and by that, meaning safe levels. We mean enough grain left over to insure a summer drought does not leave us with empty bins.

"It is this period between January 1st and March 31st that growers make their decision as to how many acres they intend to plant come April and May of corn, beans, and spring wheat. Price is the major ingredient, while fertilizers and seed salesmen pound them with early product discounts."

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