Animal feed and fertiliser markets set to remain volatile

Contributing to this situation are a number of key factors: the war in Ukraine, the impact of the weather on international crop yields, rising energy costs and fast changing currency exchange rates.

She addressed members of the Northern Ireland Institute of Agricultural Science (NIIAS) earlier this week.

According to Gallagher, Ukraine traditionally represents an important source of maize for local feed compounders during the first four months of a normal calendar year.

“But sourcing this product during 2023 depends on the Black Sea Grain Initiative, signed by Ukraine and Russia on 22July this year, being extended beyond 19 November,” Gallagher explained.

“And there is no guarantee of this happening. Russia walked away from the current arrangements on 29 October and then agreed to come back in again, a couple of days later.

"But this action did have a destabilising impact on world grain markets for that very short period of time.

“The island of Ireland has limited storage capacity, where grains are concerned. So buying forward and putting it in store now, for use early next year, is not an option.

“Many countries produce maize. But the growing practises followed in many regions greatly restricts the purchasing options that are available to local importers and feed mills.”

Gallagher confirmed that Ukraine has redoubled its efforts to get grains and oilseeds out of the country using road and rail options. One of the problems here though is the fact that rail gauges in the country differ from those used in neighbouring countries.

“This means that grain shipments have to be unloaded and physically transferred to other containers once they get to Ukraine’s borders,” she explained.

“The limitations these procedures impose on the actual tonnages of grain that can be taken out of Ukraine by rail are obvious.

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“The Black Sea route will remain the most effective means of exporting produce from the country. And time will tell how agreements arrived at between Russia and Ukraine will evolve over the coming months.”

The NIGTA representative also confirmed that drought conditions impacting in many parts of the world had led to significant reductions in crops yields this year. North America, South America and many parts of Europe had all been affected in this regard.

“But it’s not just a case of the drought impacting on actual crop yields,” said Gallagher.

“Falling river levels in places like Argentina and the Mississippi River basin in the United States have physically prevented cargo boats from accessing harbours, causing delays and increasing shipping costs.”

Northern Ireland’s feed mills source most of its cereals from the UK and Ireland. However, soya comes from North and South America.

“Northern Ireland’s animal feed compounders are reliant on international markets throughout the year,” Gallagher confirmed.

“As a result, currency fluctuations can make such a big difference to the prices paid in Sterling for a large number of the raw materials used in compound feed specifications.”

NIIAS members were told that currency fluctuations had added almost £74/t to the price paid for soya coming into Northern Ireland from the United States over the past 12 months.

“In fact, currency issues alone have added £13/t on to the price paid in Sterling for soya over the past week,” she stressed.

Europe’s animal feed sector is still striving to work through the many trading issues caused by Brexit. However, where the Northern Ireland protocol is concerned NIGTA members are confirming that the measure is largely working in their favour.

“We are an all-island feed sector. The free flow of feed and raw materials across the island is vitally important,” Gallagher commented.

“However, NIGTA members fully recognise that the protocol is causing difficulties for some sectors in Northern Ireland that are very dependent on the import of products and materials from the rest of the UK.

“It is vitally important that all problems in this regard are resolved as quickly as possible, but in doing so care must be taken to ensure that measures intended to resolve East-West trade do not end up compromising North-South trade freedoms as a result.”

Where fertiliser is concerned, the NIGTA representative indicated that merchants in Northern Ireland are reluctant to bring in large quantities of product unless and until they get strong market signals from farmers.

“The financial risks associated with committing to large quantities of fertiliser right now without some form of customer security are too great,” she explained.

The production of nitrogen-based fertilisers is very much dependent on natural gas availability and the price of this energy source.

NIGTA’s chief executive told NIIAS members that gas prices had started to fall over recent weeks with a number of European fertiliser manufacturing plants coming back on stream. However, it is important to note that gas prices remain significantly higher than historical levels.

She concluded: “This year was a relatively good year for growing grass and whilst yield hasn’t been an issue for most, silage quality has suffered with a knock-on impact on performance. In particular, some of the low ME and protein levels were observed on poorly fertilised swards.

“As such, it is a good time to be thinking ahead for next year with every effort being made to maximise the nutrient use efficiency of purchased inputs.

“This starts with soil analysis and now is the opportune time to get a soil test done, correct any pH issues and work out the overall farm nutrient requirement.

“Farmers will, no doubt, find the prospect of paying for fertiliser at current prices a daunting one compared to historic levels.

“However, recent AFBI research confirms that, even at these elevated prices, fertiliser still delivers an excellent return in terms of the extra grass that it can produce.”