Wynnstay flagged changing dynamics in the UK feed market, and warned farmers over "pricing pressures", even as it unveiled record full-year profits, lifted by acquisitions and fertilizer stockpiling by growers.

The UK-based farm retail-to-grain trading group said that its feed operations, which suffered volume "slippage" in the autumn when benign weather allowed farmers to extend the livestock grazing season, faced fresh hurdles.

The slide in grain values, which has taken London feed wheat futures from a record £222 a tonne last April to some £164 a tonne on Wednesday, on a spot contract basis, is being reflecting in group sales.

"We expect group revenues to show the effect of deflation in the coming year," John Davies, the Wynnstay chairman, said.

'Pricing pressure for farmers'

Notably, despite the dip in prices, demand for feed in the important dairy market "has been slow to recover".

This reluctance comes despite higher milk prices being paid to dairy farmers, with payouts reaching a record 29.3p a litre in November, a rise of 12.0% year on year, according to DairyCo, which reports imported soymeal and domestic barley as leading a fall in industry feed prices.

Wynnstay warned against ideas of strong growth in milk payments, and takings in many other agriculture sectors too, in the short-term, saying that "pricing pressure for farmers is likely to remain unchanged, as supermarkets position consumer staples such as milk and bread as competitively as possible".

'Very positive outlook'

However, the group sounded a more optimistic note on the UK poultry industry which was seeing a rebound in egg prices, "an encouraging sign that the sector will generate more acceptable levels of return for producers".

And, longer-term, the outlook for UK agriculture in general was "very positive, especially for efficient producers", underpinned by the world need to feed an improved diet to a growing population.

"Long-term global macro-economic trends play in favour of UK agriculture," Wynnstay said, adding that it was "well positioned" to exploit these dynamics.

Profits rise

The comments came as the company unveiled pre-tax profits up 16.7% at £7.51m for the year to the end of October, on revenues up 42% at £346.2m.

The performance was boosted by the acquisitions Woodheads Seeds and Wrekin Grain, the grain trading business merged with Wynnstay's existing operations to form GrainLink, which "made a good contribution in its first few months".

Fertilizer sales had enjoyed a strong summer, "as farmers bought stocks ahead of likely price increases".

Market reaction

The statement was welcomed as "strong" by analysts at WH Ireland, adding that it "evidences management quality and versatility, the group's broad offering across the agricultural sector and a well-founded acquisition strategy".

The broker restated a "buy" rating on Wynnstay shares, with a price target of 405p.

The stock gained 2.3% to 357.5p in morning trade in London.