August 26, 2010
Prices of animal feed to become higher
As Russia''s drought continues and wheat supply becomes tighter, pressure on corn prices is up as feedmillers switch to corn as a substitute, 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, according to a Dow Jones market analysis.
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.
Producers in some key areas can plant through November, but traders are still worried about prospects for a drop in planted acreage.
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.
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.