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Arable Farming
Arable Market Commentary
High prices starting to bite into feed demand?
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<blockquote data-quote="AHDB Cereals and Oilseeds" data-source="post: 7866875" data-attributes="member: 142623"><p>Margins are under pressure in several animal sectors due to higher feed, energy, fertiliser, and labour costs. It looks like this is starting to bite into demand for compound feed.</p><p></p><p>The <a href="https://ahdb.org.uk/cereals-oilseeds/cereal-use-in-gb-animal-feed-production" target="_blank">latest AHDB animal feed production data</a> shows that in October total compound feed production, including Integrated Poultry Units (IPUs), fell 4% from October 2020. This means that for the season so far (Jul-Oct) production is now down 0.5%.</p><p></p><p>The declines were led by <strong>cattle and calf feed production,</strong> which is back 2% compared to the first four months of 2020/21. In comparison to last year, production has slowed more as the season has progressed. Output was down 4% year on year in September and down 6% in October.</p><p></p><p><a href="https://ahdb.org.uk/news/dairy-profitability-challenged-by-rising-input-costs" target="_blank">Profitability in both the dairy</a> and <a href="https://ahdb.org.uk/news/cattle-prices-soften-with-no-let-up-in-feed-costs" target="_blank">beef sectors</a> is being pressured by high feed and other input costs. It seems this is now translating into lower production and use of compound feed. More forage production could also be contributing to the easing in compound production, after <a href="https://ahdb.org.uk/knowledge-library/forage-for-knowledge" target="_blank">good grass growth</a> this summer.</p><p></p><p>Meanwhile, <a href="https://ahdb.org.uk/news/net-margins-remain-negative-for-pig-producers" target="_blank">margins for<strong> pig producers </strong>remain negative</a>. As a result, there are <a href="https://ahdb.org.uk/news/what-s-going-on-with-the-pig-market-uk-pork-outlook-update" target="_blank">increasing expectations of a decline in pig availability as we progress through 2022</a>. But, so far total pig feed production is still up 2% year on year (Jul-Oct). This is due to a rise in finishing feed production (+9%), likely linked to the backlog of pigs waiting for slaughter. If pig numbers do drop as we move into 2022, pig feed production could also reduce.</p><p></p><p>Demand from the <strong>poultry </strong>sector also fell in October (-3% vs October 2020). There were declines for broiler, layer, and turkey feed. However, the season total is so far broadly static. This will be an important area to monitor going forward.</p><p></p><p>Similarly, <strong>sheep</strong> feed production was down year on year in October (-1%) but remains up 6% for the season to date (Jul-Oct).</p><p></p><p><img src="https://projectblue.blob.core.windows.net/media/Default/Market%20Intelligence/cereals-oilseeds/Grain%20Market%20Daily/2021/12.%20December/02%2012%202021/GMD%202021%2012%2002%20Chart%201.PNG" alt="Chart showing year on year change in animal feed production by species" class="fr-fic fr-dii fr-draggable " style="" /></p><p></p><p><strong>Impact on grain markets</strong></p><p></p><p>Animal feed is a key part of the demand for cereals in the UK. Weaker than expected demand could mean weaker UK prices for feed grains, while stronger demand would support prices.</p><p></p><p>Currently, <a href="https://projectblue.blob.core.windows.net/media/Default/Market%20Intelligence/cereals-oilseeds/supply-demand/uk-supply-demand/2021-22%20-%20Nov%20update.pdf" target="_blank">AHDB forecasts that total cereals demand in animal feed</a>, including on-farm usage, at 13.0Mt in 2021/22. This is 247Kt or 2% less than last season mainly due to an expected drop in compound feed production.</p><p></p><p>The outlooks for the livestock and poultry sectors are key for how animal feed demand will change into the latter part of the season. AHDB next forecasts the outlook for the livestock sectors in January, <a href="https://ahdb.org.uk/agri-market-outlook" target="_blank">and the pages will be updated here</a>. We will take this information and more into account when we make the next forecasts of UK cereal demand on 27 January.</p><p></p><p><a href="https://ahdb.org.uk/news/high-prices-starting-to-bite-into-feed-demand-grain-market-daily" target="_blank"><strong>High prices starting to bite into feed demand? Grain market daily</strong></a></p><p></p><p>For information on price direction make sure to <a href="https://ahdb.org.uk/keeping-in-touch" target="_blank">subscribe to Grain Market Daily and Market Report</a> from our team.</p></blockquote><p></p>
[QUOTE="AHDB Cereals and Oilseeds, post: 7866875, member: 142623"] Margins are under pressure in several animal sectors due to higher feed, energy, fertiliser, and labour costs. It looks like this is starting to bite into demand for compound feed. The [URL='https://ahdb.org.uk/cereals-oilseeds/cereal-use-in-gb-animal-feed-production']latest AHDB animal feed production data[/URL] shows that in October total compound feed production, including Integrated Poultry Units (IPUs), fell 4% from October 2020. This means that for the season so far (Jul-Oct) production is now down 0.5%. The declines were led by [B]cattle and calf feed production,[/B] which is back 2% compared to the first four months of 2020/21. In comparison to last year, production has slowed more as the season has progressed. Output was down 4% year on year in September and down 6% in October. [URL='https://ahdb.org.uk/news/dairy-profitability-challenged-by-rising-input-costs']Profitability in both the dairy[/URL] and [URL='https://ahdb.org.uk/news/cattle-prices-soften-with-no-let-up-in-feed-costs']beef sectors[/URL] is being pressured by high feed and other input costs. It seems this is now translating into lower production and use of compound feed. More forage production could also be contributing to the easing in compound production, after [URL='https://ahdb.org.uk/knowledge-library/forage-for-knowledge']good grass growth[/URL] this summer. Meanwhile, [URL='https://ahdb.org.uk/news/net-margins-remain-negative-for-pig-producers']margins for[B] pig producers [/B]remain negative[/URL]. As a result, there are [URL='https://ahdb.org.uk/news/what-s-going-on-with-the-pig-market-uk-pork-outlook-update']increasing expectations of a decline in pig availability as we progress through 2022[/URL]. But, so far total pig feed production is still up 2% year on year (Jul-Oct). This is due to a rise in finishing feed production (+9%), likely linked to the backlog of pigs waiting for slaughter. If pig numbers do drop as we move into 2022, pig feed production could also reduce. Demand from the [B]poultry [/B]sector also fell in October (-3% vs October 2020). There were declines for broiler, layer, and turkey feed. However, the season total is so far broadly static. This will be an important area to monitor going forward. Similarly, [B]sheep[/B] feed production was down year on year in October (-1%) but remains up 6% for the season to date (Jul-Oct). [IMG alt="Chart showing year on year change in animal feed production by species"]https://projectblue.blob.core.windows.net/media/Default/Market%20Intelligence/cereals-oilseeds/Grain%20Market%20Daily/2021/12.%20December/02%2012%202021/GMD%202021%2012%2002%20Chart%201.PNG[/IMG] [B]Impact on grain markets[/B] Animal feed is a key part of the demand for cereals in the UK. Weaker than expected demand could mean weaker UK prices for feed grains, while stronger demand would support prices. Currently, [URL='https://projectblue.blob.core.windows.net/media/Default/Market%20Intelligence/cereals-oilseeds/supply-demand/uk-supply-demand/2021-22%20-%20Nov%20update.pdf']AHDB forecasts that total cereals demand in animal feed[/URL], including on-farm usage, at 13.0Mt in 2021/22. This is 247Kt or 2% less than last season mainly due to an expected drop in compound feed production. The outlooks for the livestock and poultry sectors are key for how animal feed demand will change into the latter part of the season. AHDB next forecasts the outlook for the livestock sectors in January, [URL='https://ahdb.org.uk/agri-market-outlook']and the pages will be updated here[/URL]. We will take this information and more into account when we make the next forecasts of UK cereal demand on 27 January. [URL='https://ahdb.org.uk/news/high-prices-starting-to-bite-into-feed-demand-grain-market-daily'][B]High prices starting to bite into feed demand? Grain market daily[/B][/URL] For information on price direction make sure to [URL='https://ahdb.org.uk/keeping-in-touch']subscribe to Grain Market Daily and Market Report[/URL] from our team. [/QUOTE]
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High prices starting to bite into feed demand?
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