Market volatility set to continue
Market volatility in farm inputs looks set to continue as pressure persists on global supply chains, according to Gill Gallagher, CEO of the Northern Ireland Grain Trade Association.
Feed prices have remained firm over the last 12 months driven by steady demand and tight supplies.
Weather - the universal bane of farming life - will largely dictate how this situation progresses into the new year and beyond. A complex weather phenomenon known as La niña, which occurs every few years, is currently underway, and is impacting growing conditions in the Southern Hemisphere.
Gallagher explained:“As an industry which produces close to 3 million tonnes of compound feed annually, we are reliant on a global supply chain and vulnerable to many factors beyond our control, most notably weather, which is a key watchpoint right now.
“La niña is continuing to build and is likely to peak in mid-January, which means it could last into April.”
She added:“It has caused drier than normal conditions in key regions in South America, where the soya harvest is due to get underway in the next few weeks, followed immediately by planting of the second maize crop.
“If dry conditions persist, this could negatively affect the establishment and potential of that maize crop - with the potential to bring further pressure on soya and maize markets.”
Meanwhile, the dry conditions are also affecting transport from Argentina.
Gallagher continued:“The Argentinian Port situation is still acute, driven by low water levels, which have plagued the region for months. This has hampered the loading capacity of vessels leading to a reduction in the volume of cargo loaded and adding to an already challenging logistical situation and spiralling freight costs. Argentina is the main supplier of Soya Hulls to the UK and Europe so the fibre market has really borne the brunt of this.”
Freight has made the headlines throughout this year, with supply challenges and unprecedented prices being reported as a result of the post-lockdown flurry of economic activity, which caused untold supply chain disruptions worldwide.
“Thankfully, some of the pressure on bulk vessels has eased in certain parts of the globe. However, smaller vessels remain expensive and difficult to procure. This is having a pronounced impact on grain markets for barley and wheat in particular,” said Gallagher.
It would be remiss not to mention the other f-word – fertiliser. Availability anxiety due to production curtailment on the back of skyrocketing energy prices has led to surging fertiliser prices and driven farmers to consider alternative methods to ensure crop requirements can be met efficiently and cost-effectively, such as more targeted use of organic manures.
Lingering in the background of all of this is the covid pandemic and its direct impact on currency markets. The new Omicron variant has added to the nervousness in the market with fears over further lockdowns, resulting in another downturn in economic activity.
When asked about the impact of the Northern Ireland Protocol, Gallagher replied:“It is by no means perfect, but amongst other things it does leave the European market open to NI exports in a way not available to any other part of the UK. We must therefore continue efforts to safeguard and improve it where possible.
“Foresight is also needed to future proof the Protocol and ensure Northern Ireland does not face a competitive disadvantage compared to our neighbours in the south and to the east.
“For that reason, NIGTA through the Northern Ireland Brexit Business Working Group is asking both the UK government and the EU to improve access to Quota for cereal imports for Northern Ireland businesses as an insurance policy against those rare occasions were origins subject to quota become the cheapest origin into NI.”
Careful management is also needed with immediate effect in relation to the local poultry industry, which has suffered from avian influenza (AI) outbreaks over the past fortnight. From a feed industry standpoint, Gallagher commented: “The AI season can be expected to last until the end of March so extra vigilance is needed now to keep the situation under control. This is a highly infectious disease and it only takes a miniscule amount of infected material to be transferred via clothing, water or vermin to cause a devastating impact on the local industry.
“NIGTA has disseminated biosecurity guidance in relation to essential visits and deliveries to poultry farms- this is also available on the NIGTA website and I would strongly encourage everyone to familiarise themselves with the guidance and to act now to stop the spread.”
Reflecting on the past year, Gallagher concluded: “It is difficult to think of a time when we were confronted with so many major challenges to tackle at once, but our world-leading agri-food industry has a proven track record of resilience and together we will weather this perfect storm.”