Farm Ireland
Independent.ie

Friday 20 October 2017

A bombshell in pipeline for forward-sold grain

John Shirley

'In a bad weather year like this one, it can rain out of a blue sky'. This was just one of the quotes I overheard from farmers talking to the Met Eireann staff who shared the Farming Independent stand at last week's Ploughing in New Ross.

One farmer from Tipperary spoke of his expectation that this year "the stubble would get the sun". He was referring to the fact that often after a bad summer, September can come good.

September 2012 did see the sun reappear for one glorious week. During those seven days, the massive combine harvesting power that we now have in the country frantically gobbled up the bulk of the grain harvest.

However, the earlier washout took its toll on both yield and quality. It has left a potential bombshell in the system for the high numbers of growers who contracted to forward sell their 2012 grain.

Not alone have these growers missed out on the late price surge but their winter wheat has failed to meet the bushel weight target stipulated in the contract. This is a huge issue in the industry and the topic came up time and again with visitors to our stand.

Given that the wheat quality disaster is so widespread could there be a sort of force majeure waiver on contracts for this year?

Vagaries

"Not likely" said a merchant. He added, "Now maybe farmers can appreciate how merchants have to live with the market vagaries. We have three types of growers on our books. There are the runners who signed contracts but have supplied no grain. We will sue them.

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"Other growers filled the contract volume but are woefully short on bushel weight. Plus there are some who plunged into forward selling and are unable to supply either the amount or the quality stipulated in the forward contract."

The industry is in an awful bind on the issue and negotiations are ongoing between growers, merchants and users. A pig farmer who visited the stand had contracted to forward buy wheat but there was no way that he would use low kph (bushel weight) wheat. "Not at any price" he stressed.

What will happen to all this low kph wheat?

My hopes were raised by a visitor who quoted UCD research showing that kph had minimal effect on the performance of ruminants. The low kph wheat will be taken up in cattle and sheep rations for this season but the whole idea of forward selling has taken a hit.

On a global scale, I believe that the US has forward sold huge volumes of grain to China and, due to its poor harvest, this grain never materialised. The year 2012 could go down as a game changer in terms of world food supply strategy.

Another issue raised by many visitors to the Indo stand was that the weather woes from 2012 will impact on the farmers' ability to pay their income tax bills next month which, ironically, are based on the more profitable 2011.

The Single Farm Payment advance, (due in mid-October) will be needed for this and a multitude of other bills. As usual, the booths on the Department of Agriculture stand were busy with farmers checking if they had the all-clear for the 2012 payment.

Another possible source of cash mentioned in New Ross last week was the proposed spin out of the Glanbia Co-op shares. Callers to the Indo stand were anxious to discuss the proposed joint venture between the co-op and the plc. They seemed to be split 50:50 on support for the deal.

It could happen that the joint venture gets the go-ahead but that the 75pc majority needed to bring the co-op shareholding under 50pc of the plc isn't reached. This could leave the co-op committed to the investment without the cash flow to finance it.

Prior to the Ploughing, I hadn't realised the extent of the price collapse in store lambs and in plainer weanlings. I was told that in marts along the western seaboard, horny ram lambs and Holstein Friesian bull weanlings were both heading back to €1/kg liveweight. Even cross ewe lambs from the hills were back €25/hd on the autumn of 2011. Even with the high price of meals, these store lambs and weanlings represent value for feeders.

One caller spoke of strong markets for live ram lambs in Libya and North Africa. The price looked attractive. The problem is in getting the lambs out there. Irish exporters are finding it hard enough to get cattle boats functioning, not to mention sheep boats.

Regrettably, I didn't get much opportunity to get out to other stands at the Ploughing.

On our way into the show I encountered the Ecobeet stand (www.ecobeet.com).

This company, based in Derry in Northern Ireland, seeks to establish contracts with farmers in the south to supply beet (or other crops) for their biodigester plants.

For farmers in the southeast, the plan is that the washed beet could be delivered to Arklow port and shipped to Derry. Ecobeet are prepared to sign 25-year contracts (with five-year get-out clauses).

Prices range from €30-55/t depending on dry matter, etc, and farmers could get back the residue from the biodigester for use as a fertiliser.

Other titbits from New Ross:

nDemand for Angus beef exceeds supply according to the Irish Angus Cattle Society. With a new enquiry coming from the Metro supermarket group in France, this shortfall could become even more acute.

nAnother cattle society stand received a visit from the Food Safety Authority which examined their catering facility. This included a probe to test the temperature of the milk on offer. Luckily the milk was in a fridge.

nThe RDS has commissioned research into the demand for a spring or early summer farming event held under its banner.

nOn the joint Progressive Genetics (PG)/Munster AI stand I found former colleague Violet Nevin again heading for Tasmania, Australia to AI cows for their spring and summer. PG/Munster is marketing a new Oestrus Alert tape at an all-in price of €0.70 per animal.

Finally, after spending two hours waiting to exit the car park field on Thursday evening, a fellow passenger complained to a Ploughing steward.

The steward sympathised with our position but then added that he, a voluntary helper, had been in the field since 5.30am.

Indo Farming



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