Retailers Must Recognise Dramatic Increase in Production Costs

NIGTA meet the UFU
NIGTA meet the UFU

Since last summer increased feed costs alone could wipe out 66% of net farm income on Northern Ireland  farms  - “The food chain must respond with increased prices if our livestock industry is to survive.” This was the stark message from NI Grain Trade  Association President, Declan Billington when he met the Ulster Farmers Union this week .

He pointed out that feed material costs have risen by £80 per tonne since last spring -, an increase of 60% or more on most materials and while forward contracts have shielded the farmer to some extent the full impact of these high prices will be felt  before turn out in March/ April.

Factors driving the feed price increase include the growing demand for food from global population growth, particularly in the developing countries. 

India and China are commanding more of the worlds resources, as is the global energy industry – consuming vast quantities of grain and potential feed materials for fuel and for ethanol production. The weakness of sterling against both the euro and US dollar and the activity of financial institutions which see food production as a safe home for their investment funds. 

NIGTA meet the UFU
NIGTA meet the UFU

Against this background the failure of the grain harvest in any part of the world can send the markets into a spin. Drought and a poor crop in Eastern Europe caused some countries to suspend wheat exports and triggered the current price surge. Concerns about the harvest in the Southern Hemisphere and the floods in Australia will mean that any reduction in grain prices is unlikely for some time.

NIGTA meet the UFU
NIGTA meet the UFU

“The degree of volatility we are seeing is unprecedented” said Declan. “ In December it looked as if an increase of £15 per tonne in January and another £18 at turnout would be necessary. The market has changed so much over the Christmas break that the increase of £15 in January needs to be followed by an increase of £30 before turnout. This shows how quickly these markets are moving and they are showing no signs that we are at the peak.

“The impact on production costs at farm level is dramatic - by April we would predict that the cost of producing a pig will have increased by 40 pence per kg since last summer - while poultry will have 40 to 50 pence per bird added cost on broilers and 20 pence per dozen on eggs. For the beef farmer the impact is 40 pence per kg on an intensive beef animal while the dairy farmer will have an added cost of 3 pence per litre on milk.”

NIGTA meet the UFU
NIGTA meet the UFU

Declan concluded “If retailers wish to maintain a production base of locally grown, fresh, quality assured food they must respond with a realistic price which reflects  the cost of production. Reliance on imports is dangerous in a world where the major food producing countries are retaining more of their output and the developing countries are so aggressive in building their food stocks.”

NIGTA pledged their support for the producer organisations in the campaign for an urgent and effective response from the entire food chain to the current escalation in production costs.