August 6, 2010

EU livestock farmers face soaring grain prices

Livestock farmers in the EU face drastic rises in concentrate feed costs this autumn as grain and oilseed prices have soared.

Coupled with this, demand for bagged feeds will be even higher this season as dry weather has forced many to dip into winter fodder reserves already.

The price of a typical 18% protein dairy diet has risen by GBP33 per tonne since early April, putting November-delivered values at about GBP185 per tonne-higher by GBP30 per tonne as against the same time last year. Costs could rise even further, according to Alistair Folly, agricultural director at Countrywide Farmers.

Folly expects a series of price increases over the next three or four months-and breaking the GBP200 per tonne mark with quite a few diets if markets remain as they are.

With many other raw materials following wheat markets up, there was little opportunity to source significantly cheaper alternatives, he added.

Much of the rise in global commodity prices was due to speculation by fund traders. And with world wheat and coarse grain stocks pegged at a massive 382 million tonnes for the end of the 2009-10 season-23 million tonnes up on 2008-09-values could start to ease later in the autumn.

Keith Ockenden, head of agriculture at Mole Valley Farmers, added that the dry summer meant livestock producers had 20-30% less silage in some areas, and would have to feed a lot more concentrates as a result.

Soy and rapeseed values have also tracked the buoyant grain markets, aided by increased Chinese demand and higher crude oil prices, said David Eudall at AHDB.

Eudall noted that because of the high wheat prices there is the potential for a switch in demand from wheat to soymeal. However, US is due to harvest a record soy crop, hot on the heels of another record South American harvest, that should weigh on the markets, he added.

With so much speculation driving the markets up, it was likely that prices would drop sharply at some point, said Susan Mills, raw material manager at NWF Agriculture.