Weak currency adds to import bill

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The falling value of sterling is adding millions of pounds to the UK’s import bill every day. The good news for livestock farmers dependent on the global grain markets for feed supplies is that the weakness in our currency is partly offset by the fall in some key commodity prices.

Wheat prices which had stayed firm on the strength of concerns about weather in the US and a strong demand for quality grain have weakened in recent weeks. The market has been undermined by news of the Russian crop which has enjoyed favourable growing conditions – resulting in a 20% increase in yield - and is now expected to produce a massive 80 million tonnes.

Domestic consumption will account for half of this tonnage but the other half will have to be offered on the world market. Realistically the country hasn’t the capacity or infrastructure to physically handle exports on this scale but it is likely that around 30 million tonnes will make its way to export customers.

The Russian effect will raise the world’s traded wheat tonnage to the second highest on record – second only to last year – and has seriously depressed prices. Wheat which was trading at a 20 euro per tonne premium to maize at the end of July is now almost the same price. Both grains have lost significant value – but while wheat is unsupported the low maize price has triggered an EU import levy of 10 euro/tonne which prevents any further reductions to European consumers.

The US maize crop is progressing well with no weather issues and the weakness of the dollar against the euro making it competitive on price.

The Brazilian maize crop is now safely in store and following an aggressive campaign has been largely sold and having little effect on current trade at this stage. The monthly shipments from Brazil are running at around 5 to 6 million tonnes per month and account for 50% of the world maize trade. Other origins have suffered in competition with Brazil and have not been able to persuade their farmers to sell maize at the prices on offer.

The soya crop in the US is also enjoying favourable conditions with good yield forecasts and nothing to push up prices. Again the large South American crop is safely gathered and aggressive selling has resulted in increased tonnages for shipment over the winter months.

One material which is not in plentiful supply is Soya Hulls – a fibrous by-product of the soya crush and a popular feed ingredient in ruminant rations in Ireland and parts of the EU. Argentina is the only source of this material and as new markets have emerged in New Zealand, Saudi Arabia and North Africa the available supplies have been spread thinner so availability may be tighter this winter. This has been aggravated by the introduction of a new tax on the use of Argentinian biodiesel in the United States which has reduced the demand for soya oil from the crushers and reduced the production of hulls.

The soya hulls effect together with continued firmness in the market for maize by- products which are widely used as a protein source in ruminant rations mean that these feeds will see some upward price pressure in the coming weeks.