Global disruption in the supply of feed materials is providing major challenges for local animal feed suppliers, with the late spring keeping demand very strong and severe logistical problems affecting the availability of some key ingredients. As a result feed firms are struggling to source their raw material requirements.
This inevitably keeps prices strong and the trade is facing substantially higher costs to ensure supplies for the coming weeks.
Declan Billington, President of the NI Grain Trade Association commented “ We are hopeful that these difficulties will be short term and we are aiming to absorb the extra costs and hold current feed prices as we do not wish to add to the hardship faced by farmers due to the recent severe weather conditions, especially at a time when they should be able to improve margins due to higher product prices.”
According to Declan, many companies are coming out of their cheaper winter raw material book to face the “gathering storm” of weakening sterling, strikes in Argentina, the alternative “biomass markets” and late turnout of stock, which have all kept materials stubbornly high.
The strikes in Argentina have delayed soya and soya hulls cargos while the biomass markets have put a floor in cereal replacer prices. The late turnout of stock and continued meal feeding has left feed firms chasing scarce materials up and down the length of Ireland.
Looking forward the NIGTA President noted that feed firms are now having to “bite the bullet” and lock in at high prices for the next few months, simply to ensure that material is physically available for spring turnout. With the volatility that remains in currency, commodities and weather, the next few months could remain challenging. However on a more positive note he also believed that as we move past these difficult spring positions, the intensive high soya, high cereal diets may, based on current forward prices/ exchange rates, provide some cost relief as the summer progresses.
Credit Squeeze
He went on to say that even assuming enough cover is taken to supply the market for the next few months, he still had concerns about the farmer’s ability to pay.
“With the banking squeeze on credit at farm level, the feed industry is being challenged to support customers during these difficult times and their ability to provide credit is being stretched more and more” he said. “ The feed industry banks with the same banks as our customers. Moving debt from the farmers bank facilities to our own is driving the industry in the wrong direction. What the industry needs most over the next few months is for the banks to provide sufficient support for farmers to enable them to restore the fertility, health and the potential milk yield of their herds at a time when milk prices are improving.
This spring will bring opportunities for profitable milk production for those who can invest in their cows and maximise production. The ratio of feed price to milk price is currently very favourable and extra litres will add profit to the bottom line. This can only be achieved by businesses that are adequately funded and able to meet their commitments”.
Declan continued “Through maximising use of forage alongside concentrate (which will require up front investment in fertilizer) farmers can make a real difference to their bank balances. The secured lenders can have a key part to play in this recovery and we would encourage them to support their customers efforts to improve profitability over the summer months.”
