Severe drought in major wheat producing Russia, where more than 20% of the crop has been decimated, has served to drive wheat prices on an unprecedented 50% increase over a six week period. This is undoubtedly going to hit dairy and livestock farmers with serious increases in feed prices predicted over the coming months.
However there are other factors influencing the price of animal feed including hedge fund managers and biofuel plants and the combined result is that some feed prices increased by between £5 and £8 per tonne this week, having already increased by £4 /t in some areas last month.
The raw materials manager of NWF Agriculture, Susan Mills, has said that while weather was having a major effect on raw material prices, the acitivities of hedge funds were also influencing the global situation. "Hedge fund managers have seen the commodity markets as an investment opportunity and this has also resulted in greater price movements and increased volatility" she reported. "Take soya, for example. There are preceived to be good crops in the ground indicating good supply, yet prices are rising, largely because of the activities of fund managers who are investing in soft commodity futures".