Agri commodity bull run continues

The impact of the war in Ukraine has led to rise in agri commodity prices and expect further supply chain disruption, writes Bank of Ireland head of Agri Sector Eoin Lowry.

The price of the majority of agricultural commodities continues to soar. The FAO (Food & Agriculture Organisation of the UN) Food Price Index was up 21% in February compared to one year earlier. However, the Ukraine war has strengthened prices even further across key agri commodities such as wheat and barley.

The main driver is supply disruptions in the short term however there is also a likelihood that some crop plantings will decrease across Ukraine.

Prices remain strong but are highly volatile. Dried wheat and barley are currently trading at levels of around €400/t. Harvest 2022 prices for green grain are currently running at €263/t for barley and €273/t for wheat- a €60/t increase on Harvest 2021 prices. Global dairy markets are also continuing to rise as a result of strong demand and weaker supply. Base prices for February milk are in the range 43-45c/l including VAT. Beef prices continue to edge closer to €5/kg with some processors offering €4.90/kg with the general run of quotes in the range of €4.65/kg to €4.85/kg.

EU pig prices turn but pressure remains on margins

While Irish pig prices remain unchanged at €1.40/kg-€1.46/ kg, in Europe, pig prices have turned a corner and are up 10% in the last week alone and 23% in the month. That has seen the average EU price rise by 32c/kg on average since the start of the year to 164c/kg on average. This is a positive development and indicates the market is now reflecting increasing costs of production (feed and energy) along with a reduction in supply. However, exceptionally high feed prices continue to deplete pig farmer margins. It is expected that further feed price rises will arrive in April putting additional pressure in the short term on margins.

A €7m support scheme is in place from the Department of Agriculture in response to the crisis with a maximum payment of €20,000 under the scheme. The European Commission is also currently exploring options to ease the pressure on pig meat markets and support pig farmers in the months ahead.

Fertiliser prices soar to unprecedented levels

Recent figures from the CSO (Central Statistics Office) indicate that the price of fertiliser more than doubled over the course of 12 months. The index shows that the price of fertiliser in January was up 127% compared to a year earlier.

Fertiliser has been trading at record levels of between €700/t and €1000/t (depending on the product) since the start of the year and it is expected that prices will increase further in the coming months, as a result of the war in Ukraine.

There are also fears around the availability of fertiliser in the months ahead due to limited availability as a result of sanctions on Russia.

Land prices rise 16% in 2021

The average farmland price across the country increased 16% or €1,650 to €11,906 per acre in 2021 according to the Irish Farmers Journal Land Price report. The increase was driven by continuing strong demand coupled with lower supply of land for sale. The number of farms put up for sale fell by 15% compared to 2020 while the number of acres on offer was down 11% compared to 2020. The report found that the dominant buyers of land last year were dairy farmers and buyers with non-farming income.

Sector Developments & Insights March 2022
Eoin Lowry
Eoin Lowry is head of Agriculture at Bank of Ireland.