War dominates the grain markets
The conflict in Ukraine continues to dominate world markets, sparking volatility across the board in currency, oil and grain commodities.
Gill Gallagher, CEO of the Northern Ireland Grain Trade Association (NIGTA), said the markets are watching the political situation closely.
She added: “There was a degree of correction in grain markets this week with the promise of peace talks but it soon dissipated with the lack of progress.”
From a Northern Irish perspective, Ukraine is typically the origin of choice for corn in the first quarter of the year, from January through to March. Last year Ukraine had a bumper harvest but accessing the remaining stocks has been severely impeded by the invasion. Damage to ports in the Black Sea and nervousness from ships and insurers has inhibited the operation of traditional sea freight routes, although some grain is now starting to flow by rail.
Gallagher continued:“There is uncertainty around how long the war will last, but the legacy of logistical problems will remain even after it is over. For now, the main concern relates to the new crop; what will be available for next year and then if it will be accessible.
“The Ukrainian Agriculture Minister has already stated that farmers could sow 60% less corn than last year, which will further pressurise already tight supply chains well into next year.”
Wheat prices have also been climbing in recent weeks due to tighter supplies.
“Taken together, Ukraine and Russia are responsible for almost 30% of global wheat exports, which is concerning given that Ukraine is largely unable to export and various countries are sanctioning Russia, thus placing even more pressure on global supply chains,” explained Gallagher.
Meanwhile, widespread fertiliser scarcity is threatening global yields, caused by soaring energy costs and sanctions on Russian vessels and commodities.
According to Gallagher, weather is also a key watchpoint right now as we can’t afford any more yield impediments.
She added:“Thankfully, Brazil appears to be progressing well with its corn plantings,but the next six weeks will be critical.
“As such, it is imperative that we have access to as many origins as possible to ensure local demand for feed can be met.
“Origins such as Argentina have not ordinarily been part of our supply chain due to certain regulations, but NIGTA is working to ensure a pragmatic approach is taken that will enable access to all available sources.”
As input costs continue to rise, the real concern is at farm level and the ability of businesses to withstand the squeeze on margins.
According to the NIGTA chief executive, the pig sector has been struggling with this for the past 18 months and is still awaiting a much-needed lift in farmgate price to cover current outlays.
Milk and beef prices have helped buffer recent cost increases but no doubt more will be needed to safeguard against what lies ahead.
Gallagher concluded:“The market must recognise the unavoidable nature of these rising costs and deliver a price that is reflective of them.
“We are living in a very uncertain world and food security is a very real issue. Therefore we need to do all that we can to help our farmers continue to produce high quality and nutritious food.”