Is ‘credit’ due to merchants on grain prices?

Grain prices across the country have been settled by many merchants over the past week.

AgriLand is not going to attempt to list prices paid by individual merchants, but the majority have settled on, or near, €200/t for green feed barley (20% moisture content).

Terms and conditions may also go with these prices as regards to input purchases and transport.

Merchants giving support

Tillage farmers and lobby groups have been continuously asking for support for the sector. Merchants – the smaller players in particular – have now given that support, so it is important to give credit where it is due.

Paying out €200/t is a difficult task, particularly where grain is being dried and traded further.

A common figure bandied about for drying and handling costs on grain with a moisture content of 20% is €25-30/t. Bearing in mind that if a farmer supplies barley at a moisture content of 16% or 17% for example, they will be paid a moisture bonus.

Doing the sums on a tonne of barley:
  • Dried barley (last week) was trading between €215/t and €222/t;
  • €218/t will be used for this example;
  • Many farmers were paid a base price of €200/t;
  • Merchants may have a drying and handling fee of up to €30/t;
  • The total cost of a tonne of barley to the merchant is €230/t;
  • This means that the merchant is potentially at a loss of €12/t.

Merchants are paying out at this price in the hope that grain markets will strengthen. In the meantime, they have to be able to pay out at these prices and carry the cost until the price increases – if it increases.

While some may have sold ahead during the summer when prices were higher, there is still a can being carried and a large amount of risk involved.

Merchants with feed mills

Merchants who are producing their own feed should not be affected as severely. While they may have high fixed costs, there is a possibility of reducing drying costs; for example, grain might be kept at higher moisture contents.

Merchants who are trading grain must trade at a moisture content <15% and so have potentially higher drying costs than merchants using grain in their own mill.

Big players

At present, Glanbia and Dairygold are the only grain buyers to officially release grain prices to AgriLand.

The price of €193/t by Glanbia for non-members and €195/t for members – at last week’s dried barley prices – means that the co-op will be at a loss of €5/t for non-members and €7/t for members. €205/t will be paid for green barley where members have spent €60/t on inputs.

It is taking the bigger hit for its loyal customers. Non-members or farmers, who did not buy inputs from the company, will not receive a support payment.

Dairygold is paying €200/t where no trading bonus comes into play and €205/t where inputs of over €25/t have been purchased.

Positive move

The move by grain merchants is a very positive one. They have listened to farmers in the tillage sector who are asking for support and have chosen to give that support and credit where it is due.