Soaring protein prices and unprecedented volatility across a range of the key feed ingredients is presenting a grim outlook for livestock producers at a time of year when we normally expect to see prices easing back in the lead up to a new harvest, according to the Northern Ireland Grain Trade Association

Weakness in the worlds’ financial markets could be expected to produce an easing in commodity prices but instead the fundamental issues of supply and demand are driving the markets to record levels.

Demand for soya is the principal driver – with concerns about a 20 million tonne shortfall in the South American crop leading to a surge in demand for US soya beans. This comes at a time when the soya acreage in the US has lost out to an increase in maize plantings in response to high prices for this crop from the feed and biofuel industries.

The prospects for the coming soya harvest are not good with much of the crop suffering stress from hot, dry weather in the principal growing areas. This puts increased pressure on the stocks of old crop material – giving rise to a record tight soya crop balance sheet.

The impact on other protein materials such as rape meal, distillers grains and corn gluten has been a dramatic increase in prices and an increase in demand leading to technical shortages of material.  

In Europe, grain harvests have been delayed by variable weather and the markets have firmed in response to concerns about harvest and the late arrival of new crop material.

As a result the entire commodity basket has been affected by volatility at a time when feed manufacturers are looking to take forward contracts at favourable prices .

In the short term the trade will be inclined to move forward cautiously taking short term cover in the hope that harvest prospects might improve or the economic climate may change.

The implication, for the intensive sector in particular, where there is no alternative to soya as the principal protein source, is for higher priced feed and an urgent need for the food chain to respond to increased cost of production. ?