Category: Dairy & Livestock

Meadow Farm has been updated for Anderson’s latest Webinar.  An increase in the lamb price since the previous update earlier in the summer means, even though the arable gross margin has declined, the returns for the current 2023/24 year have improved.  However, the farm’s margin from production remains negative and with declining subsidy payments the future for the business as it currently operates looks unsustainable.

Meadow Farm is a mixed lowland farm, typical of many livestock holdings in England, it is a notional 154 hectare (380 acre) beef and sheep farm in the Midlands.  It consists of grassland, with wheat and barley for livestock feed.  There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500 breeding ewe flock. 

The table below shows the final results for the last two years, an estimate for  2023/24 and a (tentative) forcast for 2024/25.  The 2021/22 year was exceptional as the farm made a margin from production for the first time in many years.  For 2022/23, it can be seen how ‘agflation’ impacted even when livestock and crop prices were buoyant.  In that year input prices rose substantially and feed costs were especially expensive for this type of holding.  The result being the farm made a loss of £208 per Ha from production.  A further cut to the BPS meant overall the farm made a loss.

For the current, 2023/24 year, high beef prices and an improved lamb price result in a higher estimated livestock gross margin.  Meadow Farm markets its cattle in the autumn and lambs from July through to December.  It looked likely that the beef price would have to be adjusted downwards as cattle prices had fallen throughout the summer, but over the last month they have made a strong upsurge.  The GB deadweight steer overall price has risen from a year low of 455p per kg in the week ending 12th August to 475p per kg in the w/e 16th September 2023 (see Key Farm Facts).   The lamb price has been at similar levels to last year over the summer, but is now tracking above it.  The latest GB deadweight SQQ overall figure for the w/e 23rd September 2023 was 553p per kg compared with 525p per kg a year earlier.  Whilst lower cereals prices brings down the crop gross margin, the overall gross margin figure is higher than 2022/23.  However, overhead costs are drifting upwards and the farm again makes a loss from production, although lower than the previous year.

The budget for the 2024/25 year shows a deterioration in the margin once more – mainly through lower budgeted prices.  With another drop in the BPS the farm returns to a loss-making position.  Meadow Farm is currently in the Countryside Stewardship scheme.  This agreement ends December 2023 and the proprietors are currently drawing up an SFI scheme to start when the CS finishes to see if some of the ‘lost’ BPS can be recouped from this scheme.

Defra has widened the eligibility criteria for the SFI Annual Health and Welfare Review.  Previously it was only eligible to those who had received the BPS.  But farmers who have not received the BPS before, as well as those who applied for the Lump Sum Exit Scheme payment, can now apply for the funding to pay for a vet to visit their farm and carry out of a health and welfare review.  There is just a minimum number of animals now:

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

For further details go to https://apply-for-an-annual-health-and-welfare-review.defra.gov.uk/apply/guidance-for-farmers#check-youre-eligible-to-apply  This is likely to affect more smaller farmers, but it could also affect some livestock keepers who take land on ‘grasskeeping’ only arrangements and did not claim the BPS.

The Global Dairy Trade (GDT) average index has fallen by -4.3% and -7.4% at the events held in August.  The average index now stands at $2,875 compared with $3,768 this time last year.  The last time it dropped below $3,000 was in June 2020.  WMP and SMP fell by -10.9% and -5.2% respectively at the event held on 15th August.  Butter also weakened by 3%, although cheddar experienced a +5.8% rise.  The GDT is seen as the bellwether for global markets, meaning domestic prices could well remain under pressure.

Ongoing weak demand from China is influencing world milk markets.  Chinese dairy imports started to weaken in 2022 and this trend has continued into 2023.  In the first half of 2023, China’s total imports of dairy products stood at 1.39Mt, a decrease of 15.2% year-on-year; this is at a four-year low.  The decline is due to a number of reasons including the heatwave the country has experienced, a slowdown in economic growth, zero-Covid policy and an increase in home production.  In 2023, China’s milk production is expected to increase by 4.6% compared with 2022 to 41 million tonnes, with WMP increasing by nearly 1.12 million tonnes – meaning demand from China for WMP will be limited.  With China being one of the major importers of WMP, they strongly influence global markets, hence the weakness currently being experienced.

In terms of domestic farmgate prices, the Defra UK milk price actually showed a slight increase in July’s price, which stood at 36.11p per litre compared with 36.02p per litre in June.  However, this is still over 10p per litre down compared with June 2022.  Both Meadow Foods and Barbers have held their prices for September, but Belton Farms has announced a 1ppl cut to bring its price to 36.05p per litre.

UK milk production has eased over the month to record 1,247 million litres in July; 2.2% lower than in June, although 1% more than July 2022 when production was affected by the heatwave. Milk prices and production figures can be found in Key Farm Facts.

OMSCO (Organic Milk Suppliers Cooperative) has changed its trading name to Organic Herd.  OMSCO is the UK’s largest organic dairy co-op and the rebrand is accompanied by the launch of a premium range of products including cheeses, butter, chocolate and drinking chocolate.  CEO Martyn Anthony said the aim is to communicate its values as ‘a producer of the highest quality organic milk and milk products, as well as being a leader in championing the intrinsic benefits of organic dairy’.

Beef

The latest prime cattle prices have recently shown a week-on-week increase after falling for most of the summer.  Although prices have been comfortably above year-earlier levels for the whole of 2023, the rises throughout the spring have almost been eroded.  Since the end of May, the GB deadweight All-steer price has fallen from 494p per kg for the week ending 20th May to 455p per kg on 12th August.  In the week ending 19th August, the price rose by 1.7p per kg on the week, the first rise in 12 weeks.  It is too early to say if prices have now stabilised, but why have we seen such a decline?

Domestic demand has fallen due to the cost of living crisis.  According to Kantar retail data, volumes of beef sold through GB retail has been below 2022 levels since the start of the year.  The unpredictable summer weather as further impacted sales of burgers and grills.  Although beef volumes in the food service sector has been positive, this has been more than off set by the decline retail.  This picture is similar on the Continent, with consumers reducing spending and this is expected to continue for the rest of the year, according to European Commission forecasts.

The pressure on prices has been further exacerbated by an increase in supply.  Not only have UK slaughterings inceased, but imports of Irish beef started to rise in May, following several months of lower volumes.  Furthermore Bord Bia is forecasting Irish cattle slaughter to increase in the final quarter of the year.  However, overall supplies will be less than in 2022, when the kill was particularly high.  But not only have volumes increased, the price of Irish cattle has also fallen, placing downward pressure on UK prices.  Irish cattle prices are reliant on the export market and with reduced demand on the Continent (see above) prices have fallen.  British cattle usually trade at a premium, but this drop in the Irish price is pulling down GB prices as well.  This could affect a recovery in markets into the autumn.

Lamb

The new season lamb trade appears to be stabilising just ahead of last year’s levels, following its seasonal decline.  The GB liveweight SQQ for the week ending 19th August was 261p per kg compared with 239p per kg for the year earlier.  Similar to beef, domestic demand has weakened as consumers switch to cheaper proteins, but so far this year prices have been supported by export demand.  Shipments in the first quarter of 2023 grew by 22% year-on-year.  Supplies have tightened on the Continent due to declining production and product from Australia and New Zealand being diverted to the Chinese market.  If this continues, domestic prices should remain supported.

A new industry-led bovine TB project has commenced in Wales.  The Pembrokeshire Project is part of the five-year bovine TB Delivery Plan in Wales, announced back in March.  The project aims to facilitate collaborative working between vets and farmers and empowers ‘local informed decision making’ and leadership in diseased control.  The project will work with a small sample of farms in Pembrokeshire, where the bovine TB incidence and prevalence has worsened against the overall improving national backdrop.

Defra has released the guidance for the new Animal Health and Welfare Infrastructure Grant to give applicants time to prepare ahead of the scheme opening later in the summer.  Grants of between £15,000 and £500,000 will be available for infrastructure projects which improve the health and welfare of animals.  This first round of grants will be for improving or building new calf housing; in the future funding will extend to adult cattle, pig and poultry housing.

In this round, the grant can pay for capital costs to build new, or upgrade existing, calf housing buildings such as:

• A-frame buildings with 4 walls
• mono-pitch buildings with 3 walls and one open side
• permanent open-sided structures with igloos or hutches

The buildings must be a permanent non-movable building, intended for use for a minimum of 5 years.  Other types of building that do not fit the above categories may be eligible but the grant offers funding to help deliver higher standards for health and welfare and is not intended to help meet the minimum standards.  Where the building allows (size, aspect, etc), the roof must be designed to support solar PV panels, for use as part of the project or potential use in the future.  These are eligible for funding and do not form part of the minimum grant.

Grants cover a maximum rate of 40% of the eligible costs (25% of the rooftop solar PV).  The grant is competitive and will be scored against funding priorities (improve calf health and welfare, enhance environmental sustainability, introduce innovation).  The application is a 3-stage process;

• Stage 1 – Online Checker – an initial eligibility check and to see how the project fits with the funding priorities
• Stage 2 – Ambient Environment Assessment (AEA) – if a project scores well at Stage 1, applicants will be asked to send in details of the design and specifications of the proposed project
• Stage 3 – Full Application – those that supply a satisfactory AEA will be invited to make a full application.

Full details on how the grant works, the specifications and how to apply can be found via https://www.gov.uk/government/publications/calf-housing-for-health-and-welfare-2023.  The precise opening date for the scheme is not yet known.  We will keep readers informed.

Production

The AHDB’s latest forecast is for GB milk production to reach 12.38bn litres for the 2023/24 season.  This is fairly flat compared to 2022/23; just 0.01% less than year-earlier levels.  However, this latest estimate is 71m litres less than its forecast made in March.  Production for the first three months of the milk year has been 0.5% above last year but, for the remainder of the year, the Levy Board is expecting production to be slightly above last year’s levels until August and then declining gradually until the end of the season.  The high levels of production seen since last autumn are now slowing, not just because of the seasonal decline but also driven by the fall in milk price.  It has been a ‘difficult’ weather year so far; grass is now growing well, but earlier, turnout was late, then there was a dry spell and now very wet.  Time will tell if silage quality and quantity is good for the winter months.  The next update to AHDB’s forecast will be in September.

Prices

Commodity markets are struggling as global milk volumes remain high.  The Global Dairy Trade (GDT) average index fell by -1% at the latest event held on 18th July, this follows a -3.3% decline at the auction earlier in the month.  The index now stands at $3,289 per tonne compare with $4,166 per tonne in July 2022.

Closer to home, farmgate announcements have been mixed.  These include;

• Saputo Dairy UK have announced a 0.5ppl increase for their Davidstow farmers for August.  Having fallen by 13ppl since March, this takes their manufacturing standard litre to 35.3ppl
• Barbers have announced a 0.75ppl increase for those farmers who are compliant with their Nature Positive scheme.  This includes animal health and welfare, environmental stewardship, antimicrobal usage, biodiversity and renewables
• Both Muller UK and South Caernarfon Creameries (SCC) have announced a 1ppl cut to their August milk prices.  The former is for its direct suppliers and takes the price paid down to 37ppl.  SCC members will receive 35.5ppl for its standard manufacturing litre.

Beef

Prime cattle prices have been declining throughout June and July although still remain above year-earlier levels.  The GB deadweight All Steer price peaked at 493.9p per kg for the w/e 20th May 2023.  Since then it has fallen by 26.2p to 467.7p per kg for the w/e 22nd July 2023.  Although still 27.3p per kg higher than the same week in 2022, the steady week-on-week decline is concerning, particularly for those who bought ‘expensive’ stores in the spring.  It is a similar picture for heifers, with the GB deadweight All Heifer price at 465.9p per kg for the w/e 22nd July 2023.  Deadweight cow prices have also declined over the past couple of months, the difference being, these levels are now below the price at this time last year.

Higher slaughter levels are likely to be driving the decline in prices.  For June, UK prime cattle (steers, heifers and young bulls) slaughterings were 171,000 head; up 3.7%.  In addition, cow and bull (adult) slaughterings were 6.3% higher than in June 2022.  According to Defra statistics, UK beef and veal production was 75,000 tonnes in June 2023; 3.2%above year earlier levels.

Sheep

New season lamb prices started well, probably helped by early throughputs being down on the year.  The deadweight SQQ overall price peaked at 742.9p per kg for the w/e 20th May 2023; this compares with 2022 prices, when prices peaked at 692.9p per kg for the w/e 11th June 2022.  Since mid-May, as throughput increased, prices have followed the usual seasonal decline.  However, prices dipped below year-earlier levels for most of June and July and remain below 2022.  For the w/e 22nd June 2023 the GB SQQ stood at 592.2p per kg, some 30.3p per kg lower than the same point last year.  However, considering the increase in slaughter numbers, prices have remained robust.  Defra statistics show clean sheep slaughterings (which will include any old season lambs) for June 2023 were 21% higher than 2022 at 1,059,000 head with ewes and rams 20% up on year earlier levels at 144,000 head.  Mutton and lamb production was recorded at 25,000t in 2023, some 20% higher than in 2023.

Defra is seeking feedback on the latest round of the Animal Health and Welfare Equipment and Technology Grant.  In particular, it wants to hear whether any aspects of the specifications for items on the list should be changed and also if there should be any changes to which sectors are eligible for items on the list.  Responses should be made via the survey which can be found at https://defragroup.eu.qualtrics.com/jfe/form/SV_5unlnLqBYtlxxeS .  Views need to be submitted by 7th August 2023.

Defra has also announced that over £19 million has been awarded to more than 3,000 cattle, sheep, pig and poultry farmers through this first round of grants.  The RPA is currently writing to the successful applicants.