NZ Market Update
Welcome rain has fallen over much of the country since our last update. As a result substantial pasture growth over the spring has allowed for excellent silage & bailage production. From a supplementary feed perspective some farmers started to cover their summer requirements in October, however our customer straw poll suggests majority of farmers have less summer supplementary feed cover compared to previous years.
The NZ market continues to show a steep inverse which is reflective of pipeline stock costs. This trend of higher nearby prices versus lower forward contracts is likely to continue through the summer. Despite the clear incentive to contract forward NZ farmers remain cautious due to FEI implications. While solutions to manage FEI do exist they do require a level of active management to ensure farm profitability is maintained. The most popular feed management tool this season has been Corn Gluten Feed Pellets (CGFP) followed by Distillers Dried Grain (DDG).
PKE prices have softened below $300 per tonne in the spot market with forward contracts for February onwards approximately $30 per tonne lower. The market has levelled out over the past week, as it approaches 18 months lows at the origin. The reason we are not experiencing similar market/price lows locally is simply due to the NZD trading some 5 to 7 US cents lower today versus May-July 2017.
Production volume at the origin is reaching seasonal lows limiting new product availability to February arrival in NZ, or essentially March on-farm delivery. The market has moved lower on light trade volume with majority of crush facilities choosing to maintain pricing levels. A technical squeeze in February driven by various origin-based public holidays and associated logistical issues are some of the red flags on the horizon.
Looking to 2019/2020, PKE production is expected to be similar to 18/19 levels if not slightly higher.
CGFP & GDDG
The US market which supplies majority of NZ’s CGFP & DDG has rallied over the past couple of weeks as the market moves on from peak harvest pressure. It is not uncommon for the US market to firm post-harvest until more (production) data is available on South American crops.
US/Sino trade relations is the key market wild card partly due to China’s large but inconsistent buying patterns. We believe, because of this potential volatility coupled with long CGFP and GDDG transit times ex the US (versus PKE from SE Asia), farmers should at least be considering or discussing their summer feeding plans early.
Tapioca supply remains limited due to the traditional SE Asian wet season. Generally speaking ADM has experienced an increase in overall demand for Tapioca which is consistent with greater demand for nutritional blends this season.
ADM’s in-house nutrition manager Gerard Fellowes has created four new standardised blends called the Value Max range which are specifically formulated to cover your annual nutritional requirements while keeping farm budgets in mind.
ADM’s internal analysis identified that with limited tweaking and adjustments over 80% of our customised blends comprised of the same core products and ratios. By producing a range of standardised blends ADM is able to derive operational efficiencies via larger batch volumes and better storage utilisation. These cost savings are passed directly onto the customer enabling ADM to deliver an excellent nutritional outcome for your herd at a competitive price that helps your bottom line.
It goes without saying ADM will continue to offer blends customised blends tailored to specific customer requirements.
For more information on ADM’s Value Max range click on the below image or alternatively contact your local ADM sales manager.