|Since the CAP reform process started with McSharry in the 1990’s one of the most consistent messages by various commentators, whether consultants or journalists, has been to expect uncertainty and thus volatility in the market place. |
The two areas which have probably demonstrated this the most are the grain and fertilizer markets with the former showing a 300% variation in value over the last 5 years and the latter moving from the very low urea values in June 2006 to the record values in June 2007.
Whilst being different products the fundamental driver is the same – that of scarcity of an important resource. Such price variation on two key commodities makes decision making extremely difficult. An example of this being the use of the two values (pence per kg Nitrogen and pence per kg Grain) to adjust and fine-tune your fertiliser rate in the season of use.
In the spring of this year this ratio was at between 5 and 6: 1 and advise came from some sources that the fertilizer rate should be dropped by 20-30 kgN/ha. In fact some of this grain that was not sold, has actual been grown on a ratio potentially of 2.5:1 whereby no adjustments should be made to maximise the return on investment.
When an input such as fertilizer has a large return – currently over £5 for every £1 spent (on feed wheat) – knee jerk reactions can be very harmful to the profitability of an enterprise.