News last update:6 Aug 2012

Evialis: grain prices remain high

French animal feed maker Evialis sees no reason for booming grain prices to fall because the main bullish factors are unlikely to disappear, its CEO said July 3rd.

Pierre Lefebvre said a main element was rising demand from fast-developing countries where a growing middle class eats more meat produced from cattle fattened with grain-based feed.

Prices would also continue to be buoyed by historically low grain stocks, strong demand to make grain-based biofuels and a likely continuation of the massive inflow of funds into commodities when other markets slump.

"As long as financial markets will be in the state they are now, the phenomenon will not change, and there will be in any case continuous upwards pressure," Lefebvre told Reuters in an interview. Animal feed is made from grains whose prices have mostly surged over the past year.

Although wheat prices fell in recent months, corn (maize) and soybean futures hit all-time highs on U.S. markets in the last few days on worries over U.S. crops.

"I can't see what objective factor could lead us to think that prices could relax and come back to levels that we have seen a few years ago," he said. "We are in a structural situation of high prices." He stressed, however, that volatility would prevail and that even if large crops could ease prices in some years, extremely low stocks would keep bullish pressure on markets. "We are in an alert zone (on stocks)," he said.

Lefebvre said the impact of high prices would be high on breeders and that many could go bankrupt due to that. Evialis had to raise prices of some of its key feed products by 40 to 50 percent in sympathy with grain markets. "We have the obligation, it's vital, to reflect the rises of the products we buy in our sale prices, which of course pushed much higher the prices of products sold to breeders and this could speed up a change in the sector," he said. "It's clear that many will not be able to take it," he said, stressing that grains account for a large part of meat prices.

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[source: Reuters]

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