Feed giant clears way to continue growth

Published on Monday 11 May 2009 18:56

BUSINESS credit is tight, but farmers who are supported by the high asset value of their land, appear to be weathering the storm better than most sectors.

However, it is becoming increasingly obvious that the ancillary trades are finding life rather more difficult in the current era, where commodity prices are subject to a degree of volatility never before experienced by the majority of traders.

BOCM Pauls, one of the leading feed suppliers in the UK with an annual turnover in excess of 500 million, yesterday announced a deal with its bankers – Lloyds TSB Commercial Finance – which will see an additional facility of 77m made available that will allow the company to continue with its current expansion programme.

The company, which is based in Suffolk, has a staff of 1,000 with facilities north of the Border near Lockerbie and in Turriff, producing more than two million tonnes of feed each year for cattle, pigs and poultry.

BOCM Pauls, along with all the major players in the animal feed trade, has seen the price of wheat on the futures markets fluctuate from a high of almost 180 per tonne to little more than 90 per tonne during the past 18 months.

Chicago is where much of the action takes place. Some speculators made short-term fortunes, but others who were operating on borrowed money lost out heavily. Futures trading across much of the world now appears to be more positive, especially with world stocks of grain remaining on a knife-edge.

China is now back in the market, following several months when the traders in Shanghai sat back and waited for events to move on.

However, James Powell, the finance director with BOCM Pauls, is more than happy that his company is now fit to meet any market challenge.

He said: "This improved funding package gives us the facility we need to support our growth strategy. Completing a refinance in this difficult climate is a major achievement and demonstrates the confidence that our bankers have in our business."

Peter Anderson, the business development director at Lloyds TSB, said: "BOCM Pauls is a dynamic business with a forward-thinking management team. We as bankers are pleased to have committed to support the business over the next three years with an innovative financing solution that will enable it to continue to invest in its mills throughout the UK."

Speaking to The Scotsman yesterday, Powell said: "We have seen very few credit problems with either farmers or merchants in recent months. Most are paying their bills on time. However, as a feed supplier, we are concerned about the dairy sector.

"The mass exodus of producers which we have seen over the past year has now slowed to little more than a dribble. But if milk prices continue to fall, it seems clear that more dairy farmers will opt to sell their cows and move on to something else.

"But trying to predict feed prices over the next few months is very difficult."

Some good deals are currently on offer and a sizeable number of farmers have locked into what look like favourable transactions for next winter: the same holds true for fertilisers. However, much will depend on how sterling performs against the euro and the US dollar as well as the prospects for the cereal harvest in all of the major production areas throughout the world.