Grain and feed prices rise in Brexit countdown

Another month closer to 1st January and there is still no clarity as to how trade in feed materials will be regulated at the end of the Brexit transition period.
Time is running out on the negotiations to secure an agreement on trade beyond the end of the year.Time is running out on the negotiations to secure an agreement on trade beyond the end of the year.
Time is running out on the negotiations to secure an agreement on trade beyond the end of the year.

This uncertainty around the potential for tariffs to be levied on imported grains and proteins in the New Year makes it impossible to forecast feed prices for this winter.

There is already significant volatility in the market with local traders facing stiff competition and stronger prices in recent weeks. The effect of the falling value of sterling, strong Chinese buying and fund buyers active in the market has pushed up prices of all feed materials. Maize has gained £15 to £20 per tonne in a month as the Chinese have stepped in to replace around 10 million tonnes of home production lost in the recent typhoons while soya and other proteins have also made significant gains.

For grain traders, speculation based on known parameters and previous history is very much the name of the game. In the current landscape however, there are no signposts to guide decisions or anything to help businesses in the supply chain understand what the future holds.

Over two million tonnes of imported feed materials will be required to sustain the province’s livestock sector over the next 12 months. We are reliant on global sourcing from regions such as South America, Ukraine, Canada and the USA. Our importers sign purchase contracts many months in advance, sea freight is secured and shipping programs are organised to deliver a regular weekly supply of material to the ports at Belfast, Warrenpoint and Lisahally.

This international trade in these materials is based on agreements, tariffs and quotas negotiated between countries - with individual trading companies bidding for an allocation to purchase from the quota tonnage. Tariff Rate Quotas (TRQ’s) apply to some materials and origins where agreement is made to trade a specific tonnage at a tariff significantly below the standard World Trade Organisation (WTO) terms. The EU TRQ’s play a big part in the trade in a number of key commodities and the split of the tonnage quota between EU and UK has already been agreed. Question marks remain however, around where Northern Ireland will sit in these agreements. Despite remaining within the EU for the purposes of trade, there is a real danger that Northern Ireland will be excluded from access to EU TRQs. This has the potential to cause a distortion of trade on the island by allowing Republic of Ireland businesses to import materials on more favourable terms than the North.

Much remains to be resolved in the coming weeks - will there be an EU/UK deal where the Northern Ireland Protocol pathway is followed? - or will it be an amended version as per the Internal Market Bill if no deal is struck?

While the deal is by far the better outcome neither will be totally frictionless and both will add significant cost to businesses in the food and feed chain.