Evialis: grain prices remain high

07-07-2008 | |

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

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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