Headline wheat prices of more than £150/t appear to be great news for arable growers, but inevitably mean massive cost increases for livestock farmers.
Again, the industry faces an uncomfortable prospect of welcoming the renewal of one sector’s fortunes at the painful expense of another.
Of course, £150/t, with sizeable premiums for milling wheat, is excellent news. But it would be too easy to lose sight of how uncertain the market looked just a year ago, with feed wheat struggling to better £70/t. Many farmers sensibly committed significant tonnages ahead as prices started to rise and some will be kicking themselves as the market took off in the past few weeks.
But no-one could have predicted such an aggressive bull run. And marketing strategies are based on more than just one season. While many farmers weren’t able to capture last week’s highs, values of more than £120/t for harvest 2008 and well over £100/t for 2009 are well worth considering.
Locking in even a proportion of your crop at these levels for the next two years has to be better than trying to second-guess the top of the market.
At last, arable farming is starting to deliver returns that allow some room to pay down debt and re-invest.
But livestock producers continue to struggle, facing a double blow from foot-and-mouth trade restrictions and the prospect of soaring feed costs this winter.
Traders say the cost of compound feed and straights could rise drastically this autumn, ramping up costs beef and sheep farmers can hardly afford. Pig producers alone will need an extra 10p/kg to offset the rise in cereals prices. Straw, too, looks to be in short supply, with values already significantly higher than last year.
Dairy farmers can draw some encouragement from last week’s rush by milk buyers to pay farmers meaningful returns, although they will not escape the extra cost pressure.
These increases need to be reflected by sustainable returns from the marketplace. So it’s imperative that farmers’ representatives explain their case to retailers and processors, and provide them evidence of how producers’ costs have risen.
It cannot be long before the national press starts to make more of record wheat prices, painting a false picture of wealth in the countryside again. It’s essential that this does not eclipse those producers who continue to struggle with inadequate returns and are forced to artificially support production with the single farm payment.
Comments (1)
But how are input prices and land costs in the UK? Here in the US, especially with our pitiful exchange rate, it seems to me that farmers must sustain the increased prices in grain and livestock to keep margins against rising input prices. With nitrogen at about $600 per ton and fuel on the rise, higher income is eroded by higher prices to put in a crop. That's to say nothing of the cost of land, which has, by virtue of increased commodity prices, spiked. Meanwhile, the US farm bill is under debate, and this time round, it seems that the non-agricultural pressure groups have a solid hook in the legislation. I don't think that bodes well for the general future. Here in the US Corn Belt, times seem good for the moment. Call me skeptical, but it I see it as treadmill running as usual.
Comment left on September 4, 2007 3:00 AM
Posted on September 4, 2007 03:00