Commodity Analysis

Much to chew on

G Chandrashekhar | Updated on December 21, 2014 Published on December 21, 2014

Outlook for animal feed is bearish, with a large harvest of feed grains

Record production of wheat, corn (maize) and soyabean in the northern hemisphere has kept the world animal feed market well supplied over the last two months.

Despite robust demand, the feed market has remained quiet and prices ruled flat. Other factors leading to soft prices are the steep decline in crude oil prices (reducing the incentive to divert grains for biofuel), normalisation of the US monetary policy and a stronger dollar. On current reckoning, the outlook for animal feed is bearish, with a large harvest of feed grains.

The world corn crop in 2014-15 is projected at a high 982 million tonnes with the US alone harvesting 365 million tonnes. Following heavy arrivals in the US, corn prices have been ruling soft. Funds too have been quick to exit their long positions. In wheat, while production volume will be at a new high of 717 million tonnes, quality may take a beating. Thus, more wheat will be feed-grade, exacerbating the surplus. The winter wheat crop in the US faces the risk of winterkill, on top of somewhat unfriendly weather in Canada and Australia during the growing period earlier this year.

Speculation about an export ban in Russia and military conflict in the Black Sea region are also looming threats.

World soyabean production is also at a new high of 307 million tonnes. Recently, soyameal prices edged slightly higher due to strong demand, offsetting the pressure of record US soyabean crop. But Brazil and Argentina are set to harvest large volumes of soyabean early next year. Hence the global feed market is likely to be well supplied over the next two quarters and prices at consumer-friendly levels.

Indian market

The Indian feed market is hardly an exception to the global trend. Export demand has weakened because of softer world prices. In India, it is mainly oilmeals or extractions that are used as animal feed. Oilmeal exports from April to November 2014 aggregated 14.2 lakh tonnes, down a whopping 45 per cent from 26 lakh tonnes shipped out during the corresponding period last year.

Of these, soyameal is the worst performer with export estimated at a paltry 2.5 lakh tonnes versus 15.6 lakh tonnes last year. The domestic livestock industry has rarely seen such abundance of feed material. On top of large domestic availability is the threat of bird flu disease, seen driving end-consumers away. Overall, unless there are supply shocks due to bad weather, the outlook for animal feed appears quite muted in the months ahead.

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