News last update:6 Aug 2012

Animal feed to become dearer

While drought in Russia is continuing and wheat is becoming relatively scarce pressure on corn prices is up as feedmillers switch to corn as a substitute ultimately leading to higher feed prices.

Wheat prices are set to bounce on expectations drought-ravaged Russia will import grain and worries a persistent lack of rain will reduce the size of that country's next crop, a Dow Jones market analysis said.
Market participants continue to worry severe dryness in Russia hurt the spring wheat crop, which is currently being harvested, more than previously expected.
They are projecting Russia will need to increase grain imports to meet domestic needs, despite a government denial that imports are necessary.
 Forecasts for dryness in main growing areas of former Soviet states add support because farmers need rain to plant the next crop, analysts said.
Producers in some key areas can plant through November, but traders are still worried about prospects for a drop in planted acreage.
Major exporters
Drought in Russia and other former Soviet states is important to prices because countries in the region are major exporters on the world market.
Prices neared two-year highs earlier this month after Russia said it was banning exports, but they have since pulled back sharply.
Stress to crops in the region "has eased considerably" since last week because of cooler temperatures and rain, particularly in northern areas, according to Telvent DTN, a private weather firm.
Corn as substitute
High prices are expected to push livestock producers to use more corn for animal feed than previously planned and less wheat.
However, Asian importers are reluctant to accept offers for corn and still trying to get the original deals executed because of the low prices at which they contracted imports of feed wheat two months ago, a trading executive said.
Smaller US corn crop
Corn prices are poised to rise Monday on projections the US crop may be smaller than previously expected.
Market participants are predicting the US Department of Agriculture will have to cut its yield forecast because of heat and excessive rain in certain areas.
The market should find additional support from strong demand as livestock producers have increasingly been turning to corn for use as animal feed following a surge in wheat prices, traders said.
Spillover support from gains in wheat should help lift corn prices Monday, traders said.

Dick Ziggers

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