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Far East boom means higher feed costs 'are here to stay'

Published on 4 September, 2007, Last updated at 14:04 GMT
 
By Dan Buglass
SCOTSMAN
04/09/2007

Higher feed costs are here to stay and farmers must adjust their businesses to meet this new challenge, according to Billy Davidson whose Shotts-based company is the largest manufacturer of ruminant feeds in Scotland.

He said: "We are looking not just at China, but all eastern economises developing at a fast pace. A more affluent population wants to eat better. This is driving the huge global increases in demand for dairy products and meat.

"There have been more changes in the past five years than in the previous 40, but producers should not view this time of unprecedented change as a threat.


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"There will be huge opportunities for producers to strengthen their position in the food supply chain through closer co-operation with both their customers and their suppliers."

The futures market is currently very buoyant on commodities as varied as timber and scrap metal. This, said Davidson, has been triggered by the massive industrial revolution in China and many Far East countries.

The growing demand for biofuels has also reduced the tonnage of animal feed available on the world market with major new plants in the US and Brazil now consuming large quantities of maize and other basic feed stocks.

This year it is estimated that more than a quarter of all the cereals grown in the US will be for biofuels.

Davidson added: "There is now major competition between producing for fuel and feed and the political push in the US has definitely been towards generating more biofuel."

The temptation for many farmers will undoubtedly be to seek out the cheapest feed options. But Davidson argues that value for money, and not price alone, should be the priority. He said: "It is easy to focus on cost per tonne, but the important figure is the cost of production of one litre of milk or 1kg of meat. You cannot run a Formula One cow on two-star feed."

Farmers, led by NFU Scotland, have recently been making the case that returns will have to rise substantially to cover increased costs. It is claimed that if this does not happen quickly, there will be a major downturn in output.

However, Davidson believes that is unduly pessimistic. He said: "Much of the cost inflation is being driven by Far Eastern economies. Although the effect of this is painful, given the impact on prices producers pay for their inputs, the positive side to this is that they are driving output prices up very quickly."

As an example of recent trends, Davidson pointed out that the Chinese government had recently said it wanted to increase the country's dairy herd by seven million.


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