Livestock farmers face drastic rises in concentrate feed costs this autumn as grain and oilseed prices have soared.
Coupled with this, demand for bagged feeds will be even higher this season as dry weather has forced many to dip into winter fodder reserves already.
The price of a typical 18% protein dairy diet has risen by £33/t since early April, putting November-delivered values at about £185/t – £30/t higher than the same time last year. And costs could rise even further, according to Alistair Folly, agricultural director at Countrywide Farmers.
“The significant rise in raw material costs means we are having to increase prices as we go forward,” he said. “We are likely to see a series of price increases over the next three or four months – and we’ll be breaking the £200/t mark with quite a few diets if markets remain as they are.”
With many other raw materials following wheat markets up, there was little opportunity to source significantly cheaper alternatives, he added.
Much of the rise in global commodity prices was due to speculation by fund traders. And with world wheat and coarse grain stocks pegged at a massive 382m tonnes for the end of the 2009/10 season – 23m tonnes up on 2008/09 – values could start to ease later in the autumn.
“Closer to home, most feed compounders and suppliers are running short books, so the shippers are not forward buying and the availability isn’t there,” warned Keith Ockenden, head of agriculture at Mole Valley Farmers. In addition, the dry summer meant livestock producers had 20-30% less silage in some areas, and would have to feed a lot more concentrates as a result. “We are probably going to have one of the biggest winter feed programmes we have ever seen.
“Our advice to farmers is to cover off some product now to dilute their risk. Given the lack of silage and grass we are selling a lot of moist feed, and it is going to run out very shortly. There is not a lot of cheap feed out there, and we are just going to have to get used to these prices.”
Soya and oilseed rape values had also tracked the buoyant grain markets, aided by increased Chinese demand and higher crude oil prices, said David Eudall at AHDB. “Because of the high wheat prices there is the potential for a switch in demand from wheat to soyameal.” However, America is due to harvest a record soya crop, hot on the heels of another record South American harvest, that should weigh on the markets, he added.
With so much speculation driving the markets up, it was likely that prices would drop sharply at some point, said Susan Mills, raw material manager at NWF Agriculture. “As soon as the funds liquidate their positions, the markets will tumble. The problem is, when will that happen? Everything is just too volatile to allow a sensible prediction to be made.”