Category: Dairy & Livestock

The finished pig price has experienced a steady increase since the turn of the year.  The latest GB EU spec SPP for the week ending 18th March rose by 1.12p per kg on the week to 212.53p per kg, some 70p higher than year-earlier levels.  History shows that the deadweight pig price usually has a seasonal uplift through the spring into autumn, which producers will be hoping happens again this year, as whilst prices are at record highs, they are still not covering the costs of production.

The AHDB quarterly full economic cost of production for Q4 2022 is estimated at 224p per kg deadweight.  This means the average producer will still have negative margins.  However, the estimated cost of production has fallen by 3p per kg since Q3, mainly due to a decline in feed costs, which fell by 5p per kg over the same period.  With arable prices continuing to fall, feed costs are likely to decline further.  In addition, pig prices should remain supported by the uplift in the EU pig price and reports of production tightening both at home and on the continent.

The EU-27 reference pig price experienced an 18p per kg increase between mid January and mid February following reports of tight supply in slaughter-ready pigs.  It is usual for the price to increase in the spring, but this year it is a few weeks earlier as processors try and secure supplies.  Prices for the selected key nations of Germany, Spain, France and the Netherlands are now at their highest on record and saw significant increases since the start of the year.  It is only Denmark which experienced a 4p per kg decline, over the same four weeks, although it has seen small gains recently.  At home, Defra reports in February, just 762,000 clean pigs were slaughtered.  This is the first time monthly slaughterings have fallen below 800,000 head since May 2020.  Furthermore, it is the lowest recorded monthly figure since May 2014.  Throughputs are down 11% on the month, 17% compared with 2022 and 13% below the 5-year average for February.

Whilst supply is constrained, demand looks weak too.  The latest retail data from Kantar shows in the 12 weeks ending 19th February, the volume of pork purchased fell by 2.6% compared with the same period last year.  The actual spend on pig meat rose by 8.8% year-on year but that is because of an 11.7% price increase due to inflation.

Milk Production

GB milk deliveries look set to end the (milk) year strongly.  February has shown a 3% year-on-year increase to 952m litres; also marginally up on the 5-year average.  The high milk price has driven production, but this is now faltering and could impact on yields going forward.  The current milk year (finishing end of March) is expected to record production up marginally on the year, by 0.2% at 12.39bn litres.  Prior to September, production was running behind 1-2% behind the previous year, but the increase in milk price has had the effect of boost output during the second half of the season.

Production for 2023/24 is forecast by AHDB to increase by 0.5% to reach 12.46bn litres.  Current high yields are expected to continue through the spring, but with production then slowing through the second half of the year, as the effect of lower milk prices hitting margins feeds through.

Globally, milk deliveries in January grew by 1.1% on the year.  Increased deliveries were recorded in all of the key regions except for Australia.  For the calendar year 2023, Rabobank is forecasting a 0.7% increase, with most of the growth expected in the first half of the season.

Prices

The Global Dairy Trade (GDT) average price index has fallen at both the events held in March.  At the latest auction, on 21st March, the index declined by -2.6% to average $3,361, this compares with $5,039 in March 2022, when the index peaked.  All products on offer recorded falls, most notable;

• Cheddar: -10.2% to $4,052
• SMP: -3.5% to $2,648
• Butter: -3.0% to $4,748
• WMP: -1.5% to $3,228

In terms of farmgate prices, increased deliveries and reduced market returns are inevitably having a downward impact.  Large cuts have already been announced over the first three months of the year and April is not going to be any different.  Some key prices include;

• Cheese manufacturers Glanbia has announced a -4.5ppl cut for its suppliers
• Barbers is reducing its price by -3.92ppl from 1st April
• Both Saputo and South Caernarfon Creameries have announced a -4ppl cut for their suppliers
• Suppliers to First Milk will receive a -3ppl drop
• Suppliers on the Muller non-aligned liquid contract will receive a -1.5ppl fall
• Those on the aligned Tesco contract and the Co-op Dairy Group will see their milk price cut by 1.5ppl and 1.18ppl respectively.

Growth in global and domestic milk supplies is affecting prices.  Compared with early 2022, when supply was tight, the tables have turned, with supply now ahead of demand.  GB deliveries are continuing to increase week-on-week and will continue to do so as we start the spring flush.  For the week ending 18th February, the AHDB reported daily deliveries running 3.8% above the same week last year.  Global deliveries in December averaged 808m litres per day; an increase of 0.4% on December 2021.  All of this growth has been recorded in the northern hemisphere of the UK, EU-27 and the US.  In contrast, the southern hemisphere recorded lower deliveries.  Poor weather conditions have affected production in New Zealand and Australia and higher costs are beginning to have an affect on production in Argentina.

In terms of prices, the Global Dairy Trade (GDT) index fell by 1.5% at the latest event to average $3,414, this compares with $4,840 a year ago.  Both SMP and WMP declined by -2.4% and -2.0% respectively, bucking the trend is butter, increasing by +3.8%.  An increase in supplies and lower commodity prices is putting strong downward pressure on farmgate prices; there has been another round of big cuts announced by processors.  Below is just a few, to give readers an flavour;

• Suppliers to Belton Cheese, Yew Tree Dairy, Tesco TSDG aligned and Lidl’s fixed price contract will all receive a 3ppl price cut as from 1st March
• Meadow Foods has announced a 4.5ppl cut for its suppliers from 1st March
• Wyke Farms and Joeseph Heler will be cutting the amount they pay to suppliers by 5ppl from the beginning of March.

The current sheep price is under pressure and concerning flock owners.  The latest deadweight GB SQQ (old season lamb) price for the week ending 18th February did increase by 14.4p per kg on the week to 511.3p per kg.  However, this is 74.7p lower than at the same time last year.  Both deadweight and liveweight prices are now hovering around the 5-year average.  Looking ahead the AHDB has released its first forecasts for 2023.

Production

The AHDB is forecasting a rise in production for 2023 of about 8-9%, due to a high carry-over from the previous year and a lamb crop similar to 2022.  The breeding flock has seen relatively strong expansion over the last couple of years due to good prices and confidence in the sector.  However, in 2023 this expansion is expected to slow to 0.5% due to high input costs, an increase in cullings in 2022 and a reduction in the BPS.  Early scanning reports were poorer than year earlier levels, however this was variable and the later flush of grass in the autumn has helped those lambing later and also improved ewe condition.  Overall the AHDB is expecting the lamb crop to be similar to 2022.  Using Defra’s kill figures, the carry-over of old season lamb (OSL) from 2022 to 2023 could be as high as 4.6 million head; 16% higher than the previous year.  The AHDB does express some uncertainty over Defra’s figures and is saying the carry-over could be more in the region of 4.4 million head, 11% higher than 2022.  The high carry-over is mainly due to a lower kill in the 2nd half of the year, when pressure on feed due to costs and the drought slowed the finishing of lambs.  Depending on whether you use Defra’s reported slaughter and production data or AHDB’s estimates, total UK sheep meat production is forecast to be just under 302,000 tonnes or 315,000 tonnes an increase of 9% or 8% respectively on the year.

Consumption

Demand is continuing to be impacted by the cost-of-living crisis.  Similar to beef, lamb consumption through retail may benefit from moving from out-of-home to in-home.  But it is likely there will also be a switch to cheaper proteins and cuts of lamb.  Lamb consumption is expected to fall by 8% compared with 2022 and down to 21% of 2019 volumes.

Trade

UK exports of sheep meat grew by 9% in the year to November compared with 2021, although this remains below the longer-term average.  Recent growth is mainly due to increased shipments to the EU and in particular Ireland.  For the coming year exports will be pivotal to retain domestic market balance and could increase by as much as 15%.  There is potential for increased demand from Europe due to a contraction in the flock and a strong recovery in demand in 2022 on the Continent, but this may come under pressure in 2023 as, similar to the UK, consumer budgets are under pressure.  The competitiveness of UK product remains key.

Imports to the UK for the period January to November 2022 grew by 22%; back to 2020 levels.  However the long-term trend has been downwards driven by lower quantities of fresh sheep legs from New Zealand.  For 2023, imports are expected to fall by 5% on the year, due to weaker domestic demand and an assumption that shipments of NZ meat continues to flow to China.  There has been recent industry concern over the increase, in particular, of frozen leg imports, from New Zealand and also regarding Aldi’s decision to abandon its longstanding commitment to only stock British meat.

In terms of farmgate prices, with production forecast to increase and consumption decrease, prices look set to remain under pressure compared with the last couple of seasons.

The prime beef price has continued to rise week-on-week since the turn of the year.  For the week ending 18th February 2023 the GB deadweight all steer price reached 474p per kg, up 4.4p on the week and some 68p higher than year-earlier levels.  Looking ahead, the AHDB has published its first sector Outlook for the year.

Production

Domestic beef production is forecast to grow marginally, by 0.6% in 2023, due to higher cattle availability.  Using BCMS data, prime cattle slaughter is expected to increase by 1.2%, with a higher proportion available in the first half of the year.  In contrast, cow slaughter is expected to ease by 1.5% on the year, although last year saw a particularly high level of culling, so relatively speaking cow slaughter is still expected to remain high due to the pressure expected on milk prices and the loss of BPS hitting suckler herds.  Despite the breeding herds continuing to decline, production has remained steady; this is probably due to the increase of beef semen used on dairy cattle, resulting in better beef carcasses and also milk buyers’ policies on dairy bull calves, meaning more dairy bull calves are now entering the supply chain.

Consumption

The Levy Board is forecasting consumption to decline by 2% as the cost-of-living crisis continues.  Beef may benefit from the switch from out-of-home consumption to in-home as a treat, similar to during Covid.  This will also depend on retailers continuing to support British product.  The food service sector tends to use more imported product.  Even so, AHDB are forecasting more shoppers will trade down to cheaper meats such as chicken or pork.  There could also be a carcase balance issue as shoppers switch to cheaper cuts of beef and mince.  In 2022, beef volumes via retail were actually down every month compared with 2019, except for December.

Trade

UK beef imports, according to HMRC data, were down by 3% in the year to November.  This was mainly due to lower shipments from Ireland.  For 2023 this is expected to fall by a further 2% in volume terms, to balance the slight increase in production and lower domestic consumption.  Board Bia is expecting a 3-4% decline in Irish cattle supplies, particularly in the first half of the year.  This should support Irish prices and in turn UK prices.

UK beef exports have shown strong growth compared with 2021 and the disruptions following Brexit appear to be calming down.  Exports to November 2022 were up 23% on the year, 10% on the 5-year average (although still below 2019 by 9%).  Strong growth has mainly been driven by shipments to France.  For 2023, AHDB is forecasting a further 3% growth in exports.  EU production is expected to decline but inflation and the cost-of-living on the Continent could impact consumption there too; the competitiveness of UK product will remain key.  However, global beef supplies are expected to remain tight in 2023, which should offer price support to exports and the beef price in general.

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