Dairy farmers may face higher bought-in feed price

THE EU compound feed industry predicts a 10% slump in dairy feed production, as under-pressure dairy farmers try to make ends meet.

Industry figures show farmers bought less feed in 2008, and used more home-grown cereals on their farms.

Similar measures will be necessary this winter — especially if a feared explosive surge in soya bean prices occurs this summer. Market analysts warn that US soya bean stocks could be exhausted before the arrival of the new crop in the autumn.

The price of soya beans has surged 40% since the start of March, to an eight-month high — with implications for all livestock feeders.

While feeders would lose out, grain growers here have welcomed commodity price gains. IFA national grain chairman Colum McDonnell said grain prices have been on the floor for the last 12 months, but the first signs of a recovery have begun to appear, as prices for old and new crop lift.

“New crop dried wheat is currently trading at €170/tonne, a premium of €20 to €25/tonne over old crop,” he said. “Poor financial returns from the 2008/09 harvest have resulted in reduced crop sowings. Inflated input prices, particularly for fertiliser, have seen world use fall by over 22%, while Irish and EU use is down by over 30%,” according to Mr McDonnell.

The IFA grain growers spokesman warned, “Extreme price volatility has become an increasing feature of commodity markets as the EU and other main players move away from market supports. Because of the low margin nature of the business, farmers cannot afford to take the potential downside risks. The EU needs to look at how market supports can be introduced to minimise extreme price volatility.”

Meanwhile, on the demand side, voracious feed use in China, which accounts for almost half of global imports, is a key factor behind declining stocks.

Supply problems are centred in the world’s third-largest soya bean exporter, Argentina, where the crop is expected to fall 30.7% this year, due to drought.

Very difficult spring-planting conditions in parts of North America, and overly dry weather in southern and eastern Europe, have boosted forward prices of other agricultural commodities to multi-month highs.

World grains production was expected to fall short of demand in 2009/10, eroding some of the gains in stocks after bumper 2008 harvests, and recent heavy demand for remaining Black Sea region supplies of feed and milling wheats added to the more bullish market picture.

Dry weather in parts of the EU have led to some downward revisions in yield estimates, with Hungary, Bulgaria, and Spain facing 20% yield reductions.

In Britain, dry soils in the eastern counties, and 9% less wheat planting, were pointing to a smaller crop.