Increasing need for cattle and sheep feed fuels growth of compound feed market in 2024/25 season

The upcoming 2024/25 season forecasts a significant rise in demand for compound feed in Great Britain, primarily fueled by the increasing production of cattle and sheep feed, as per research conducted by the Agriculture and Horticulture Development Board (AHDB). Cattle feed production has seen a substantial increase of 112 thousand tonnes compared to the previous year, while sheep feed demand has shown a notable upsurge of 19%. These growth trends can be attributed to the stabilization of agricultural input costs, including lower feed and energy prices, resulting in improved margins within the dairy sector. However, challenges such as avian flu outbreaks and a diminishing breeding pig herd have continued to dampen demand in the poultry and pig industries.

Furthermore, there have been notable shifts in raw material utilization for feed production. The usage of cereals, especially maize, has seen a rise due to favorable pricing conditions. However, the reliance on maize may face potential declines later in the season as maize prices start to increase. In contrast, the use of oilseed rape meal has decreased by 5% primarily due to constrained oilseed supplies.

On a global scale, the feed grain market is anticipated to experience a deficit in the 2024/25 cycle, driven by reduced maize production and slower export rates from the Black Sea region. Consequently, feed grain prices are expected to increase in the medium term. Conversely, oilseed prices, particularly for rapeseed, remain high due to limited supply. Still, long-term projections are more subdued with the anticipation of ample soybean supplies from Brazil and potential tariff implications in the U.S.

AHDB Senior Economist, Jess Corsair, highlights that although cereal inclusion in feed formulations is likely to remain consistent, the bullish trends in the global grain market could lead to heightened feed prices. However, the less optimistic outlook for oilseeds and the potential influx of soybean supplies may serve as limiting factors for price hikes in the long run.

Moreover, the outlook for nitrogen fertilizer prices leans towards a stabilization in input markets over the upcoming year. Fertilizer prices, which underwent significant spikes due to the energy crisis in Europe and shifts in domestic supply, have somewhat normalized in 2024 compared to the levels observed in 2022 and 2023. Despite this, prices still persist above pre-inflationary levels.

In Great Britain, the demand for nitrogen fertilizers witnessed a 4% increase from the previous year in 2023, driven by lowered prices. The utilization of nitrogen per hectare at the field level saw a slight uptick, largely due to heightened straight nitrogen applications, while compound nitrogen application rates maintained stability. The adoption of urea and urea ammonium nitrate (UAN) increased, whereas the usage of ammonium nitrate (AN) and calcium ammonium nitrate (CAN) declined.

Additionally, the straw market confronts ongoing challenges attributed to tight supply, price fluctuations, and uncertain conditions for the approaching year of 2025. Reduced cropping areas and variable weather conditions have strained the market, resulting in an escalation of straw prices. Wheat and barley straw prices underwent fluctuations in 2024, with barley straw commanding a premium due to its limited availability and superior quality. The winter cropping prospects for 2025 are expected to decline, while spring-sown crops face vulnerabilities, especially in dry weather conditions that could impact straw yields.

Despite some respite from the 2024 forage harvest, persistent tight supply, rising contracting costs for baling and wrapping, and escalating input costs like fuel and fertilizers continue to contribute to elevated prices in the straw market. Considering the uncertainties, unless an exceptional baling season transpires, it is unlikely for straw prices to revert to previous lower levels as the market dynamics remain fluid.
Jess emphasizes the necessity for farmers to adeptly manage their production and costs to navigate these conditions effectively as the industry braces for a new price paradigm and supply challenges in the forthcoming years, with weather conditions emerging as a pivotal factor shaping market trends.