While protein crop prices remain volatile, farmers locking into feed ingredients for winter rations can expect to see the relatively low price for energy crops, such as wheat and barley, remain stable for the medium term on the back of generally successful global harvest.
Jack Watts, lead analyst for cereals and oilseeds at AHDB, urges producers to consider the individual risk to their business as the key decision-maker when purchasing feedstuffs. “We have been looking at a prolonged period of falling prices for energy crops, in particular, but protein crops are still relatively volatile by comparison.”
That is partly down to demand from feed buyers – whether individual farmers or larger commercial manufacturers – and the relatively smaller tonnages available on the commodity market compared to energy crops.
“The key protein crops to watch are soya meal and maize gluten. Both of these are imported and will be affected by the weakening of sterling following the UK’s decision to exit the EU.”
Feed manufacturers agree. George White, of Loughborough-based GLW Feeds, highlights just how twitchy commodity markets can be.
He says: “Who would have thought the Brexit vote would have added £50/tonne to soya prices? But that is the reality.”
From a manufacturers point-of-view there is still a degree of gambling when purchasing straights, he suggests. “It just depends how much of a gambler you are.”
AHDB urge producers to look at their individual business and assess the financial impact of whether or not to lock into a given straight to secure feed stocks for this winter.
“It will be very farm specific,” says Mr Watts. “Our advice would be to plan forward rather than living hand-to-mouth particularly for protein ingredients such as soya. Do not wait until the feed bin is empty before going to the market.”
Compound feeds prices – set by the balance between cereal and protein ingredient prices – remain around an average of £206/t for cattle and calf feeds for the period between April and July 2016, reports Defra. That is around the same level achieved in late 2010 after which prices increased steadily to early 2013 before easing back.
Those producers considering shifting from buying-in compounds and blends to buying in straights to reducing overall feed costs should consider the risks involved, explains independent nutritionist Hefin Richards of Shrewsbury-based Profeed Nutrition Consultancy.
He says: “Straights offer an opportunity to lock into forward prices and without the margin for blending by a supplier. And while they offer the greatest flexibility to adjust diets on farm you must consider the pitfalls.
“These include storage requirements, the time needed to prepare feeds unless you use a pre-mix which is likely to incur wastage, and the impact on cash-flow,” he explains.
“Also, if you lock into a straight and buy forward it is very difficult to then change ingredients.”
Where sourcing blends it is advisable to consider storage arrangements, he adds.
“Manufacturers often require a high molasses content to suppress dust levels, typically up to 4 per cent, which can make bin storage an issue. Tipped loads should be unaffected.”
Compounds are the more expensive route, it is generally agreed. But it carries the benefit of having the best physical quality of most feedstuffs used in winter rations making its use ideal for in-parlour and other automated feeders.
Mr Watts says: “This is the sector of the market which has the greatest variance in price between suppliers so shop around before locking in.”
Mr Richards also advises producers to look closely at the ingredient list of individual compounds. Many are made to a least-cost formulation to meet a given specification and this may vary considerably as global commodity prices fluctuate, he says.