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RUMINATIONS By Rob Daykin of Daykin Partnership


Dark Clouds Gather for 2023 It would be nice to start the year with an optimistic tone, and to say that everything in the garden is rosy. Right now, that’s difficult as far as dairying is concerned, although the outlook is not completely devoid of positivity – not least because energy prices have fallen sharply and are now back to mid-2022 levels. Feed compounders and milk processors will certainly breathe a sigh of relief over that! Freight rates have also fallen, and ships and containers are back in the right places. Another sigh of relief there! Sterling is also currently down against the dollar (which has


dropped below $1.20 for the first time since October) and against the euro (dropping below €1.13 having been above €1.16 for much of late November and early December). They both mean that feed prices will be higher, but experts on the cost of producing milk aren’t saying it is going to be significantly lower than the current 45p level. At least not yet. Meanwhile milk prices look set to be a lot lower than that threshold, but more about that later. As far as raw materials are concerned prices should continue to


ease in 2023, although that’s on the assumption that the Ukraine situation will stabilise and not deteriorate further. One thing we can learn from 2022 is that the world is more unpredictable than ever, so who knows! What we do know is that sustainability criteria will be extremely high


on the agenda, which will affect raw materials like soya. It is almost certain that 2023 will see more pressure from buyers to eliminate it from rations in favour of other protein sources. More and more milk processors are now paying a premium for not using soya, and feed companies increasingly have alternatives, so I can see both of these increasing. Rape, sunflowers, peas and beans will be the main benefactors of


soya’s demise, of course, and I’m pleased to see that there has been a notable increase in enquiries for the use of beans as a result of the high soya prices and issues associated with it, particularly on organic. A lot of those which turned into purchases have been filled by UK sourced product, which is a positive. An increasing number of farms are looking at how to fit beans into


on-farm rotations, and at the end of the year news broke of an interesting trial to grow maize with beans. The idea is that the beans grow up the maize and the end result is a forage that is high in both energy and protein. The results of the first crop are currently being assessed. Feed compounders had a pretty turbulent year in 2022, and it was


difficult to get the decision making right given the volatility. Manufacturers had to balance not only expensive raw materials and second guess the timing of when to buy, but also had to juggle those increased fuel and energy costs while keeping their drivers happy. I hope 2023 will be easier! Alas, though, I’m not sure it will be! While the back-end of the year


brought increasing sales of feed due to a very favourable Milk Price:Feed Price Ratio, the prospects for the milk price currently aren’t great.


PAGE 24 JANUARY/FEBRUARY 2023 FEED COMPOUNDER


January saw some significant milk price drops of 3ppl from some liquid milk processors, and two cheesemakers are already down by the same degree for February. But others like Arla and Muller haven’t dropped by as much as was expected – Arla is down 1.13p for January and Muller is down 1p for February (both for conventional and organic prices). They could have been a lot worse! To give an indication, one Polish processor is apparently down 6 cents for January! More price drops are likely to follow because dairy commodity prices are currently much lower than the milk prices being paid. Never before has there been a gap as wide as this (see graph).


While farmers and feed compounders make hay while the sun


shines on the back of high milk prices and good feed demand, there are dark clouds gathering, for sure. How dark they will become will depend on numerous factors, the principal one being how quickly dairy commodity prices turn up. At the moment, though, there aren’t many signs of that happening!


WHO WE ARE Daykin Partnership has over 30 years of experience in agriculture, expertise in estate management, product development and logistics. We work hard to provide up to the minute news and information as well as the latest and most innovative products from across the industry. Our extensive network covers every aspect of modern dairy farming from supply chains, market information and raw material sourcing to budgeting, staff training and ration formulation.


www.daykinpartnership.co.uk


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