First Milk Home

Members don’t need any telling that feed prices are rising but there are a number of factors driving those increases – some are obvious and well-known while others are more obscure. StraightTalk spoke to straights trading manager for Harbro, Colin Booth, for the inside story.

“Cereals and their by-products form the bulk of a typical dairy cake, and we all know what has happened to cereals prices and why! Two years ago, wheat cost £70 to £80 a tonne, now it costs £175 to £180. The demand for biofuels created a massive new demand for cereals and poor weather in the major grain producing countries did nothing for supply. World stocks last year dipped to precariously low levels,”explained Colin.

“At the same time in America, plantings of soya dipped significantly as a result of the shift to biofuel production. Last year the US Department for Agriculture (USDA) predicted that soya plantings would total 67.2m acres. Such a drop would have reduced soya stocks to around 200 million bushels from 575 million bushels. But last June, the USDA dropped its forecasts by another 4m acres, and this sent panic through the markets. Prices spiralled. Last year compounders could buy soya for £150 tonne. Now it’s £250.

“We don’t know what next year will bring just yet and we probably won’t know until late March. Plantings need to go back to around 75m acres for stability but I think that’s unlikely.

“The bad news is that the prices of other feed ingredients are linked to both cereals and soya prices. These include by-products like rapeseed or distillery products but there are also other factors in the market that drive commodity prices.

“Power stations are burning more and more feed ingredients in their quest for green fuels, and prices for these ingredients have doubled. Rapeseed is also in demand for biofuel production. Edible oils such as soya, palm and rape seed have also nearly all doubled in price in the last eight months with increased demand from China. Biofuels and weather problems in Malaysia have also supported prices.

“Meanwhile the costs for shipping raw materials from abroad have also spiralled. China’s insatiable demand for goods means there are very few large ships available for moving materials and those that are available, have to be booked up well in advance . The Baltic Dry Index, the gauge of the world’s bulk shipping costs, has jumped almost 500% since 2000.

“Then there is the stock market effect. As traders move towards agricultural commodities as alternatives to traditional commodities, such activities can distort the market and inflate prices.

“The bad news for farmers is that prices for many feed commodities will stay high for some time and that means feed prices will be high,” Colin added.

First Milk Direct is working with a number of feed companies to try and minimise these impacts on members. For more information, please contact Fiona Fraser on 0141 847 6817.