Category: Dairy & Livestock

It is now possible to register your interest in the SFI Annual Health and Welfare Review.  This is later than expected (originally autumn), but pilots have been underway since last September testing the scheme.  According to Defra, feedback from these has been positive, with reports of how straightforward it was to sign-up, the effectiveness of the visit and promptness of payments.  The first step is to register, this can be done via https://apply-for-an-annual-health-and-welfare-review.defra.gov.uk/apply/register-your-interest.  Currently only those that claim the BPS are eligible, but it is expected to be rolled out further in the future, and they must be keeper of at least one of the following;

• 11 or more beef or dairy cattle
• 21 or more sheep
• 51 or more pigs

The Annual Health and Welfare Review, is a funded annual visit from the business’s chosen vet.  The aim is to allow businesses to receive bespoke advice concentrating on the specific health and welfare priorities of that farm.  There will be some diagnostic testing around endemic diseases that have been pre-identified with farmers and vets.  Payments will be made annually for three years and depend on the species.  The amount is shown below and is per year, not per animal.

• £684 for pigs 
• £436 for sheep 
• £522 for beef cattle 
• £372 for dairy cattle  

The full guidance can be found at https://www.gov.uk/guidance/sfi-annual-health-and-welfare-review

Many are likely to already require a health plan drawn up with their vets for farm assurance, but it seems like for many of the ‘introductory’ offers under SFI, they are trying to encourage all businesses to reach a certain level and perhaps make it part of everyday farm husbandry, whether it be via testing soil organic matter or animal health.  Whether in the future these will become mandatory measures and funding withdrawn, remains to be seen.

As from the 1^st February all free-range eggs will have to be re-branded as ‘barn eggs’.  There is a 16-week derogation allowing eggs from birds that have been housed due to avian influenza (AI) restrictions to continue to be marketed as free-range.  The first AI housing orders were imposed in East Anglia on the 12^th October 2022 so the grace period is coming to an end.  Even though an all-England order was not implemented until 7^th November (and later in Wales and Northern Ireland) the egg industry has decided that it will be simpler to switch all eggs to the ‘barn’ labelling at the same time.  It is not expected that this change will have any effect on producer prices.

Beef

The cattle trade remains buoyant, both for prime and cull animals.  Often trade eases after Christmas but this has not been the case so far this year.  Strong demand for cheaper, processing meat which is usual in the New Year has seen the cull cow trade hit some exceptional prices.  For the week ending the 22nd January the liveweight cull cow price reached 175.28p per kg, over 42p per kg higher than for the same week in 2022.  The liveweight prime steer price, after a ‘blip’ in the second week of January, has recovered and in the week ending 22nd January was at 259.22 p per kg; compared to 232.21p per kg in the same week a year earlier.  In the deadweight market, prices have risen week-on-week for the first three weeks of the year, starting the year at 449.4p per kg and rising to 455.1 p per kg for the week ending 21st January 2023; some 47.1p per kg above last year’s level.

Encouragingly, the strong prices are being achieved even with increased production for the year.  According to the AHDB, total beef and veal production for 2022 was estimated to be 906,400 tonnes; up 1.9% (17,000t) on 2021 and just 0.2% below the 5-year average.  Prime cattle slaughter numbers were 1.99m head for the year, up 1.5% compared with 2021 (although below both 2020 and 2021 which were just over the 2m head mark).  Annual average carcase weights eased by 0.3% to 345.2kg; just under the 5-year average.  With high input costs, finishers will have been marketing animals as soon as possible.  The cull cow trade has been strong throughout most of 2022, encouraging producers to cull anything old or inefficient.  Estimated throughputs for the year totalled 673,700, a year-on-year increase of 5.1% and 1.9% (12,800 head) up on the 5-year average.

Sheep

In contrast to the beef price, prime lamb values seem a little lacklustre, with vendors disappointed with prices.  Markets fell back below year-earlier levels in the autumn.  They did experience a rise in December, but never reached the highs of 2021, with GB SQQ liveweight price topping the month at 251.3p per kg in the week ending 24th December, compared with 285.5p per kg for the year earlier.  Although this may seem disappointing, the lamb price has been increasing for a few years now and although 2022 prices were lower than 2021, it still remains 33p per kg above the five-year average.  The problem is that it has fallen at a time when costs have increased.  What happens over the next few weeks will be telling.  As is often the case, prices have fallen post-Christmas with the liveweight SQQ for the week ending 21st January at 236.74p per kg compared with 263.89p per kg in 2022.

In terms of production for 2022, it is estimated to have been 275,800 tonnes.  This is a 3% increase on 2021, however this compares to 296,100 tonnes and 307,500t in 2020 and 2019 respectively and is 6% below the 5-year average.  Carcase weights have remained stable at an average of 20.2kg, meaning throughputs have increased on the year.  The number of clean sheep slaughtered is reported to have been 12.1 million head, up 3% on the year, although down 6% compared with the 5-year average.  Cull sheep slaughter numbers are also up on the year by 1.2m head (4%) but down by 19% on the five year average.

With the main lambing season coming-up anecdotal evidence is suggesting that the drought last summer may have taken its toll on some ewes and shearlings.  Results from scanning indicate lambing numbers may be lower than usual.

After reaching records highs, the farmgate milk price is starting to experience some hefty declines.  According to Defra the UK average farmgate milk price for December 2022 reached 51.51p per litre (see Key Farm Facts).  But a number of price reductions have been announced for February and March (see below).  The tight supply which resulted in significant price rises has started to ease.  In the UK, milk output had began to increase on a year-on-year basis back in in the autumn and wholesale prices eased.  The downward trend in wholesale prices has continued into the New Year, with cream, butter, SMP and mild cheddar all recording month-on-month declines.  Furthermore, buyers now expect milk supplies to build into the spring and are staying out of the market, reducing demand and adding further downward pressure.  The most significant drop so far seems to be from Parkham Farms who have warned their suppliers of a 3ppl reduction from 1st February and a further 7ppl drop from 1st March resulting in a 1st March Standard litre of 40.9p per litre for Tesco aligned farmers and 38.9p per litre for non-Tesco farmers.  Other announcements include:

• 2ppl reduction from 1st February for suppliers to Graham Dairies
• Suppliers to Meadow Foods will receive 1.5ppl reduction from 1st February
• There will be a 1ppl reduction for Muller/Lidl farmers who signed up for the 3-year fixed deal, this will reduce it to 47ppl from 1st February, originally this was supposed to be fixed at 29ppl until the end of June 2024
• Suppliers to Paynes Dairies and to Sainsburys (SDDG) will both receive a 1ppl reduction from 1st February

As the farmgate milk price falls, producers will need to keep an eye on cash-flow.  With recent high prices, most dairy businesses will have had another profitable year, despite the rise in costs.  However, large profits will result in high tax bills for many over the next 12 months and will need budgeting for as the milk price drops.

Defra has announced the SFI Annual Health & Welfare Review should now be opened up more widely from ‘early’ February.  Initially it was expected to open in the autumn (see https://abcbooks.co.uk/annual-health-and-wefare-review/) and then January, but the latest communication from Defra is February.  Testing began on the first Annual Health and Welfare Reviews back in September 2022 and Defra has been steadily increasing the number of reviews by invitation, before it opens the review to all eligible farmers in early February 2023.  Further information is available via https://www.gov.uk/guidance/sfi-annual-health-and-welfare-review?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=23438de7-cbf7-4720-9e06-f8b3fc121f39&utm_content=daily

2022 was an incredibly difficult year for pig producers, but there are some positive signals as we start 2023.  The EU-Spec SPP ended the year on a record high of 201.24p per kg in the final week of 2022.  Whilst the APP recorded a marginal decline over December compared with November, prices ended the year over 60p per kg more than at the same point in 2021.  In the run up to Christmas there were signs of pigs being pulled forward to slaughter and this has resulted in reports of tightening domestic supplies which should help to support prices.  AHDB estimated slaughter numbers show an increase in pigs coming forward in the first two weeks of December, with declines in weeks 3 and 4 as the festive holidays impacted processing days.  Furthermore, carcase weights continue to fall.  Average weights at the end of December were 87.42kg, down 1.35kg compared to the previous 4 weeks.  This is 8kg below their peak at the beginning of 2022 and further corroborating the fact finishers are selling pigs earlier.  Further price support should be available from the continent as the EU reference price continues its upwards movement.  For the five weeks ending 1st January, it increased by 3.1% (5.3ppkg) compared with November’s average price, to 177.54p per kg.

However, the SPP fell by 1.04p per kg to 200.2p per kg in the week ending 7th January, eroding most of the gains made in December.  This is made more disappointing due to the points made above which should be supporting prices.  However, the post-Christmas market is always a difficult one; the next few weeks will be important, pork is competitively priced compared to beef and lamb which should help sales.  Furthermore, the cost-of-living crisis could see an increase in at-home dining, which, as seen during Covid, tends to favour domestic production as long as the supermarkets stay loyal to British product.  But even at current prices margins remain squeezed.  The AHDB estimates costs of production in November at 232p per kg, cereal prices have fallen since then, but with the SPP at around 200p per kg, producers are still operating well below the cost of production.

GB milk deliveries for September to November were 2.5% higher than for the same period last month.  The late flush of grass growth in the autumn and a good milk-to-feed price ratio saw production lift.  Previously, production has run behind previous-year figures from July 2021 until September 2022 as the rise in input costs affected margins and production.  As a result of this production boost, the AHDB has adjusted its forecast and now expects GB production to reach 12.44 bn litres for the 2022/23 season.  This will be 0.7% higher on the season and 175m litres more than its September forecast.  The Levy Board has said it expects yields to ‘remain supported’ over the next couple of months on the back of strong milk prices and a stable milk herd (see Livestock Numbers article).

However, for the last quarter of the season, production is not expected to continue at the same level of growth recently experienced.  Forage stocks are tight following the summer drought and a question mark remains over demand and whether milk prices can be maintained due to the cost-of-living-crisis.  Some price reductions have already been announced  for the New Year;

• Suppliers to Meadow Foods will receive a 1ppl cut as from 1st January
• Freshways has announced it will be cutting its milk price to suppliers by 3ppl from the New Year.  This reduces the liquid standard price to 47ppl
• There will be a 1.5ppl drop for South Caernarfon Creameries suppliers from 1st January, taking its manufacturing standard litre down to 48.5ppl and liquid standard litre to 46.83ppl

However, there have been a number of buyers confirming a hold for January 2023 including Saputo, First Milk and Barbers.

Beef

Prime cattle prices have remained strong throughout the year (see Key Farm Facts).  Since rising through March and April, the GB overall average deadweight steer price has remained around the 440p per kg mark.  AHDB reports, in the five weeks to 3rd December, deadweight GB steers averaged 444p per kg overall, this is 32p (8%) higher than for the same period last year.  It is also some 77p above the 5-year average.  A similar situation is seen for prime heifers.  They are 31p ahead of the same period in 2021 and 74p on the equivalent 5-year average.  Although farmgate prices are at record highs, they haven’t seen the same increases throughout the year as costs have (see Agflation article https://abcbooks.co.uk/agflation-update/) meaning farming margins are under pressure.  Prime cattle slaughter numbers for the five weeks to 3rd December are estimated to be 156,000 head, this is 1.6% up on the same period in 2021.  It suggests that some farmers are choosing to market cattle rather than sustain the costs of rearing them further.  Even with this extra supply, prices have remained high – implying strong demand.  Taking the year as a whole, domestic cattle supplies have been tight; for the year to 3rd December, the GB prime cattle kill is estimated to be 1.5 million head, down 1% compared with 2021 and 4% below the 5-year average.

Lamb

GB lamb prices have recovered slightly from their seasonal decline.  But, despite being well above five-year average levels, they remain below last year’s (see Key Farm Facts).  Prices have been increasing through November, with the liveweight NSL SQQ for the period 5th November to 3rd December averaging 242.68p per kg; some 14.7p up on October’s price.  However, the price for the same period last year was 25.7p (9.6%) per kg higher.  During November, throughputs at auctions were 6.4% lower than year-earlier levels.  But for the year to 3rd December auction throughputs for both old and new season lamb have totalled 5.15 million head – up by 1.6% on 2021.

Deadweight prices have followed a similar pattern, rising through November but not as sharply as last year and subsequently remain below 2021 levels.  However, the monthly average was almost 20% higher than the 5-year average.  Weekly slaughter numbers were estimated to average 249,000 head per week for the 5 weeks to 3rd December.  This is 2,000 head per week lower than October.  Year-to-date estimates show deadweight slaughter numbers at 10.6 million head 2.2% higher compared with the same period last year.

Defra has released the UK livestock numbers from the June 2022 Survey; the table below summarises the figures.  As can be seen, for the second year in a row, both the cattle and pig breeding herds have declined but the sheep breeding flock has recorded an increase.

The total number of cattle and calves has actually increased from its record-low level last year (since the basis of data collection changed in 2009).  However, both the dairy and the beef breeding herds have recorded a year-on-year decline.  For dairy, the decline is marginal at 0.4% and there is the prospect of a rise in the future.  For dairy cattle aged between 1 and 2 years the Survey shows a 6.1% year-on-year increase in numbers.  This suggests more replacements coming through.  For the beef herd, even though the finished beef price has been at record highs again this year, it looks like increasing costs and falling support payments have made some decide it is time to exit the industry.  It is notable that the number of male cattle aged between 1 and 2 years is up by 2.1% on the year, meaning an increase in supplies will be coming through next year and could put downward pressure on prices.

The estimates show a further increase in the sheep breeding flock and notably ewes intended for first time breeding are up by 5.2% on the year.   The sheep sector has received good prices for a few years now, bringing some confidence into the sector.  However there is anecdotal evidence that some are disappointed with the current price, particularly with the situation of high costs, so it remains to be seen if the current ‘buoyant’ outlook in the sector remains.

The economic climate for pig producers is currently hugely challenging and this is shown in the large reduction in the breeding herd.  Total pig numbers, although down by 2.5% on last year, are still high.  This is due to the figures including pigs which were having to remain on farm due to problems in the processing sector.  We could see even further contraction of the pig breeding herd unless circumstances improve.  The full Survey results can be found at https://www.gov.uk/government/statistics/livestock-populations-in-the-united-kingdom/livestock-populations-in-the-united-kingdom