Recent months have seen significant reductions in compound feed prices in line with weakening grain markets and in spite of the upturn in cereal prices since harvest it looks like feed bills in 2015 will stay below the levels paid in 2014, according to Northern Ireland Grain Trade Association (NIGTA) chief executive Robin Irvine.
“But how the market plays out on a weekly, or even daily, basis will depend on a range of issues including market volatility, political decisions involving the world’s major trading blocks and currency fluctuations,” he added.
“And we are seeing all three factors coming into play at the present time. Volatility is an issue which agriculture as a whole will have to get to grips with during the period ahead. For example, the result of Fonterra’s fortnightly global trading auction will have an immediate impact on the world’s dairy markets.
“And the same principle holds when international political decisions impact on the world of agri food. For example, Russia decision to ban EU pork imports had an immediate, and downward, impact on the fortunes of the pig sector here in Northern Ireland.”
But it is the recent decision by the Russian government to impose a €35 per tonne tariff on grain exports from February 1st onward that is giving the NIGTA representative plenty of food for thought at the present time.
“This is already having an upward impact on wheat prices,” he explained.
“Russia is moving to preserve its grain stocks as their weakening currency attracts aggressive purchasers from abroad. This is quickly reflected in global markets and indeed on farmgate prices here in Northern Ireland.”
The world’s protein markets are equally turbulent at the present time.
“Yes there has been a bumper soya harvest in most parts of the world,” Irvine commented.
“But again currency movements are a factor and have largely offset any weakening in the markets for sterling buyers. The dollar has gained strength on the back of a recovery in the US economy driven by cheaper energy from large scale “fracking” operations. Logistical issues also come into play within the United States in terms of the increased costs of rail, barge and road freight for all commodities within that country.
“Meanwhile, in South America farmers are reluctant to sell their soya stocks, believing this to be the most effective way of countering the devaluation of their own national currencies.”
The NIGTA chief executive concluded:“These factors aside the prospect of livestock farmers in Northern Ireland benefitting from lower grain and feed prices over the coming months is a very real one. Wheat prices, for example, are now nearly £30 per tonne lower year-on-year and while this cereal has been largely substituted with maize in ruminant rations it is still a vital ingredient in pig and poultry feeds.
“But the one factor that can never be ruled out is the impact of some unforeseen development that can change the tenor of all the world’s commodity markets in an instant.”