Perfect storm pushes supplementary feed prices to record highs

Photo / Michael Cunningham

Poor harvests, droughts and high demand, together with low supply and delayed stock killing options, have created a "perfect storm" pushing animal supplement feed prices to record highs.

Southland grain farmer Mike Wilkins said grain and fertiliser prices were being further affected by the Russian-Ukraine war, which was putting pressure on the animal feed supply.

Commodity import prices had been affected by wars before, but not at the same time the market was coping with its own internal shortages, Wilkins said.

Additionally, the Government's decision to keep the borders closed had helped to create the present labour shortages, including in primary industries.

Southland needed a better growing season beyond the next harvest to lighten the pressure on the feed market and prevent the situation from deteriorating.

Federated Farmers Southland Arable chairwoman Sonia Dillon said despite Southland farmers growing more wheat for stock, there was still a shortage of wheat, driving stock food prices much higher than usual.

"We've got quite a shortage in Southland overall because of the drought we had, so the cupboards were pretty much empty at harvest last year," she said.

Wheat shortages were having a significant impact on both milled wheat for human food products and on stock food prices in New Zealand.

Dillon said Southland wheat was mainly used for stock feed. But if port or rail options were made available, transport costs would be reduced and Southland could potentially become a milling wheat producer reducing reliability on overseas wheat.

Dillon thought it would be advantageous for farmers and the region if a milling solution was provided locally.

"Food-security-wise it would be a great idea for Southland to get into the milling market and have more in-house and less exports."

North Island millers had turned to the Australian grain market for supplies as it was cheaper to buy grain from Australia than ship it from the South Island.

Dillon said she struggled to understand how it was more economical to import grain from Australia than ship nationally.

At present grain transport between Southland and Canterbury costs about $100 a tonne.

"The mills just aren't paying enough to justify the transport price."

Farmers are feeling the impact of increased fertiliser and stock food prices and will try to ride the storm and tighten spending wherever possible.

"There's not a cent spent where there doesn't need to be.

"Everything has gone up so, so much. The chemicals have started taking big jumps as well. There's an actual risk farmers will be worse off this coming season than the season before, with all these price rises - which is frightening," Dillon said.

Champion Flour acting chief executive Steve Morgan said the company's wheat supply had been hit by a triple-pronged problem of war, high import costs and poor weather.

"It's been an absolute nightmare this year ... roughly 30 per cent of the world's wheat supply comes from the Black Sea region, but Champion Flour imports about 70 per cent of its grain from Australia."

Constraints on getting grain out of Ukraine had put strains on world supplies and increased prices.

Compounding that, Australia had had a poor crop season so its commodity exchange wheat price "has blown out of the water at the moment".

"Crazy" freight increases by more than $85 a tonne, alongside 70 -80 per cent of the South Island's harvest being rejected because of the poor quality caused by the drought, had further impacted wheat prices.

"It's only now the customer is starting to see this hit them at the shop front."