Feed Peas Gain Ahead of Corn

VANCOUVER - Feb 14/09 - SNS -- European feed pea markets ended the week on a strong note, with values posting general increases on the continent both in terms of the Euro and the U.S. dollar.

Grower bids in France managed significant week over week gains, helped by concern domestic production is falling behind the market potential for the crop. This helped push inter-dealer markets higher in Belgium and Netherlands.

The improved mood on European feed pea markets contrasted with other major feed ingredient markets, with marketing finding it hard to stay above support levels.

Alaron Trading Corporation's Tim Hannagan notes that price weakness is finally translating into improved end user demand for corn and other products. The USDA reported its fourth increase in weekly export sales commitments for corn, with Asian buyers booking another 685,000 metric tons (MT) of corn.

"This report is much more meaningful than appears on the surface. The last four weeks have seen an extraordinary increase in Asian importers turning to the U.S. Ports to buy corn. At first, the trade thought surrounding Asian neighbors of China were filling near term needs ahead of and during China’s Lunar New Year Holiday closing. However they have continued and actually increased since the holiday ended.

"What this report is suggesting is that one of the world’s largest producer, consumer and exporter of corn may have stopped exporting corn leaving the U.S. to fill the export hole. Here are the possible reasons for their action. China has a goal to double hog and chicken populations by 2011. This requires enormous feed corn tonnage. They also have a mandate to sharply increase ethanol production from corn through 2017 with yearly increases.

"This all comes as the world’s third largest exporter of corn, Argentina, suffered a growing season drought cutting production by 25% or more. Additionally, China is in the grips of a drought the worst in fifty years. On top of this they are under taking an aggressive program to build a 30 million MT strategic corn reserve to insure production shortfalls do not stall their ethanol and feed lot expansion programs. The corn reserve program is accompanied by their continued building of a soy bean reserve to insure their mandate of more protein in their diet goes unabated. To what extent or length China will suspend or slow exports are unknown but weather and a continuation of their drought will play a big factor.

"The trade here now ponders how much will our U.S. Exports increase cutting our ending stocks once thought at a safe level of 1.7 billion bushels. Until this week traders have thought that we might plant 4 to 5 million acres less corn this year as safe corn stocks levels would allow those acres to go to beans were low ending stocks leave beans in need of more acres this year to insure a summer drought does not leave our stocks too dangerously low. Now traders may say the change in world weather in key corn producing regions leave us in need of getting corn prices high enough to entice farmers to plant more acres and not lose any to beans before planting begins in May."