Time to capitalise on low grain prices?

Published 18 June 15

Non-aligned farm gate milk prices continue to be a major cause for concern and any signs of a recovery are not likely until after the autumn. Against this backdrop it is difficult to think positively about the future but early action on winter feed planning could shave input costs,  so now is an important time to think about feed pricing and managing the risk of change in feed prices. With first cut silage in the clamp and second cuts approaching now is the right time to consider winter ration formulation and hence what bought in feed might be required. At present feed raw material prices are low, but not guaranteed to stay low.

Grain prices this season have been at their lowest since 2009/10. Crops for harvest 2015 currently look on course for average yield around the world, but the threats of El Nino and Russian export tariffs as well as the usual potential for weather events (good or bad) between now and harvest are potential risks that will affect  feed raw material costs. For the new crop, November feed wheat futures prices are currently £14/t below where the equivalent price was a year ago, down £40/t on two years ago and at their lowest June level since 2010.

On the protein side, the USDA is projecting a further surplus of 10Mt in the world soya bean market in 2015/16. On the back of strong supplies, domestic soyabean meal spot prices are at their lowest since early 2012. Smaller plantings of oilseed rape crops are expected in Europe and further afield in 2015 which will reduce the supply of rape meal. With this in mind, the protein element of feed rations is likely to become more reliant on soyabean meal this coming winter.

So, should you go and buy feed for the winter now?

When planning for winter feeding it is important to know the current and expected quantity and quality of forage on farm (see Worksheet 1 and Worksheet 6 in Feeding+ for more information if needed). Once the quantity and quality of the on farm feed available has been determined then farmers can look at the various purchasing options to balance their feed requirements.

The graph below looks at four feed buying strategies. The first strategy looks at simply doing nothing now and buying feed as and when it is needed. As the black bar shows, this approach will deliver the lowest feed cost if feed prices fall. However in the event of the market rising, this strategy gives the highest feed cost. We can refer to this as a boom-bust approach.

By buying an amount of feed now (for delivery in the future) the average feed cost is protected from rises in the market, but does not benefit if prices fall. In the third strategy, for every £1/t rise or fall in the market – the average price rises or falls by just £0.50/t.

When you buy feed it is of course an individual business decision, but with lower prices at present it is probably worth speaking to your nutritionist and feed suppliers about your current options (see our factsheet on buying-in).

Dairy Feed 18.06.15