Rapid increase in global cereal prices

He commented:“Since the start of harvest back in August barley and wheat prices have gained over £20 per tonne as global grain markets have surged in response to massive Chinese purchasing and increased buying activity from the investment funds.

“The good news for growers brings a price warning for the livestock sector however and points to more expensive feedstuffs in the coming winter.”

Robin added: “The re-emergence of Chinese demand has been the big driver in the global market.

“They are rebuilding their stocks. Having suffered a major reduction in their pig herd due to African Swine Flu in the last couple of years, livestock numbers are now recovering rapidly, with new intensive and professionally managed pig units replacing the backyard herds.

“Having effectively cleaned out the Brazilian crop, China has switched its attention to North America and has already purchased 60 million tonnes of US corn and soya beans in the current year.

“The US investment funds responded to this activity in the market by correcting their short positions; in other words buying up contracts for around 100 million tonnes of grain and proteins to go long to an extent we have not seen in several years.”

The NIGTA representative confirmed that this activity has driven up the price of maize by £35 to £40 per tonne for local buyers.

He continued: “Barley is now attracting more interest as the best value cereal for feed producers. Wheat is holding its position as the most expensive grain as the European crop has come up 20 million tonnes short of the 2019 harvest. “Sellers of feed wheat are hard to find, as our local traders have to cast their net ever wider to find available supplies.”

According to Robin, protein supplies are also under pressure as the US reports reducing soya stocks following the sales to China.

He said:“Traders are anxiously watching the growing crop in South America amid concerns about a La Nina weather event which could impact yields or delay harvest in that region.”

Argentina is the principal supplier of soya meal (as distinct from beans, which have to be crushed to produce the meal used in animal feed) and the UK and Ireland are dependent on shipments from this region.

The NIGTA chief executive continued: “The perilous state of the Argentinean economy has effectively stalled the movement of beans from the farms to the crushing plants. Punitive export taxes, complex trading and currency regulations and the plunging value of the peso combine to discourage sales and farmers are happier to hold their crop in store. The result is local soyameal prices soaring by up to £80 per tonne in recent weeks.”

He concluded: “The impact on feed prices will be felt over the coming months and will be mitigated to some extent by forward purchase contracts particularly in the first half of the winter. Unfortunately the absence of any clarity around the application of tariffs after the end on the Brexit transition period has meant that many of these contracts do not extend beyond 31st December.”