Category: Dairy & Livestock

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

Defra has launched an online reporting system for dead wild birds as part of its Avian Influenza mitigation strategy.  The service can be accessed via https://www.gov.uk/guidance/report-dead-wild-birds.  Defra is asking people to use it if they find;

• 1 or more dead birds of prey (such as an owl, hawk or buzzard)
• 3 or more dead birds that include at least 1 gull, swan, goose or duck
• 5 or more dead wild birds of any species

Outbreaks of Avian Flu continue to be reported on a daily basis, readers can find the latest information at https://www.gov.uk/government/news/bird-flu-avian-influenza-latest-situation-in-england?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=633fed00-1ba1-491a-9a5a-d691026e8928&utm_content=daily

The Welsh Government announced a housing order for all poultry and captive birds with affect from 2nd December.  It is also a legal requirement for all keepers to complete a bio-security Self-assessment check list.  This can be found at https://gov.wales/mandatory-biosecurity-self-assessment-checklist 

There have been many reports in the press that that Avian Influenza (AI) is to blame for a shortage of eggs in the UK, which is angering many producers.  Some of the main supermarkets have started rationing how many boxes of eggs customers can buy (which tends to be a self-fulfilling prophecy as any hint of a shortage leads to panic-buying).  But whilst the worry of AI is hanging over egg producers, spiralling costs is having a far greater impact on egg supplies.  According to the British Free Range Egg Producers Association (BFREPA) a third of UK farmers have cut the number of hens in their flock because they cannot cover costs of production, with producers having been calling for greater returns since March.  According to the Association, the rise in egg prices consumers are seeing on the shelves is not being passed back to producers.

The industry has warned egg shortages are now expected to last ‘beyond Christmas’.  No practical measures of help have been offered by Defra, with Therese Coffey saying she is ‘confident’ that the industry can get through supply issues in the short term.  Meanwhile, NFU poultry board chair James Mottershead has said the Union is having conversations with retailers and also asking Government to look at the supply chain, to ensure it is transparent and that farmers are receiving a fair return.

Meanwhile, Defra has updated its Guidance on Egg Marketing Standards to advise free range producers, who are in areas with housing restrictions due to AI, which includes the whole of England, that they can continue to label their eggs as free range for 16 weeks from the date the birds were housed.  

Production

Favourable weather conditions during October has resulted in record GB production for the month (see Key Farm Facts).  The AHDB is estimating production for the month to be 4% above its own monthly forecast, averaging 33.5m litres per day, some 2.5% more than in September and a 3% year-on-year uplift.  Warm weather and average rainfall resulted in above-average grass growth.  However, with the recent heavy rainfall, most herds will now be housed and moving into the winter months will be more reliant on winter feed at higher costs, meaning yields could fall again if farmgate prices also drop (see below).

Globally, the latest production figures refer to the month of September.  However, these also show a year-on-year uplift (+0.3%).  September is the first month in 2022 to report an uplift in daily deliveries compared to year-earlier levels.  EU production is reported to have grown by 0.8% compared with September 2021, whilst US production was up by 1.5% on the year.  Rabobank is forecasting production in the US to now remain above year-earlier levels for the rest of the year and into early 2023.  This is partly as it is being compared with last year’s low production, but the bank is also reporting herd restocking and an increase in yield per cow.  Argentina has seen a year-on-year growth in production for the second month running, by +0.3%.  An uplift in milk prices in August (+5%) is reported to have encouraged an increase in production.

But challenging weather conditions in Australia and New Zealand has resulted in production for September being down in these countries by 6.2% and 3.2% respectively for the year.  Australia has experienced flooding in some parts with cold, wet weather impacting grass growth in New Zealand.

Prices

We have been wondering if farmgate milk prices had peaked for a couple of months now, but they have kept on edging up.  However, with commodity and futures markets all dropping and production increasing, the outlook for the New Year could see a change, with some forecasting large declines.  The Global Dairy Trade Index, although rising by 2.4% to average $3,623 per tonne at the latest event on 15th November, has shown some big drops since June (see KFFs).  With the only other rises since then being in September, the index average has fallen from its high in March 2022 ($5,039 per t) back to January 2021 levels.  Spot milk prices were trading above 50ppl in August, but are now back to around 45ppl, due to the increase in production.  Bulk cream has also seen a decline recently.  Most buyers are expected to stand-on for December, but eyes will be on Arla, especially following their surprise (large) increase of 1.33ppl announced for November earlier in the month – see (https://abcbooks.co.uk/arla-milk-price-increase/).

Arla has announced a 1.33ppl price increase for its members as from 1st November.  The (large) rise is a bit of a surprise given the fall in global markets (see last month’s article https://abcbooks.co.uk/dairy-update-19/) and the stabilisation of domestic milk production.  The increase will take the UK manufacturing price for conventional and organic milk to 52.24ppl and 57.02ppl respectively; this is based on 4.2% butterfat and 3.4% protein.

All poultry and captive birds throughout the whole of England will now have to be housed from Monday 7th November.  This is in addition to the measures we reported on last month (see https://abcbooks.co.uk/avian-flu-4/) as a result of the introduction of an Avian Influenza Prevention Zone (AIPZ) across Great Britain,  The housing measures legally require all bird keepers to keep their birds indoors and to follow stringent biosecurity measures to help protect their flocks from the disease, regardless of type or size.

The housing order follows a ‘package of support’ for the industry announced by Defra on Friday 28th October.  Under the new plans, the Government will alter the existing bird flu compensation scheme allowing compensation to be paid to farmers from the outset of planned culling rather than at the end. This should provide swifter payments to help cash flow pressures and give earlier certainty about entitlement to compensation.  Important to note, compensation is only paid for healthy birds that are culled to control the spread of the disease.  Compensation is not received for birds affected by the disease.

The support package also includes an easing of the marketing rules in England which will allow farmers who breed turkeys, geese or ducks for their meat to have the option to slaughter their flocks early and to freeze them.  These can then be defrosted and sold to consumers between the period of 28th November and 31st December 2022.

Beef

Deadweight cattle prices remain strong and have been creeping slowly upwards since August.  For the week ending 15th October the deadweight all steer price was 1.1p per kg up on the week at 440.9p per kg.  Although not as high as in July, it is 31.3p per kg above the same week in 2021.  According to latest Defra figures, total UK production of beef and veal for the period January to September is marginally down on the year at 665,200 tonnes.  Production in September was -1.3% less than August but +0.5% higher than in 2021.  Looking at the slaughter numbers, prime cattled totalled 160,000 in September, up 1% year-on-year, whilst cow throughtput was 6% (3,500 head) higher.  For the period January to September, prime cattle slaughter numbers are similar to last year, whereas cow numbers, on the back of elevated prices are up 3%.  However, total throughput remains below pre-pandemic levels and the 5-year average.  An easing of carcase weights in September means total production for the month remains similar on the year.  Carcase weights have been generally lower throughout the year, not surprising with the rise in costs; producers will want cattle to spend as little time on farm as possible.

Sheep

The deadweight SQQ NSL price has just ‘ticked’ up during the most recent week in October.  This follows a downward trend since mid-August.  For the week ending 18th October the SQQ NSL deadweight price stood at 524.1p per kg, some 4p per kg less that last year when prices started to increase sharply towards Christmas.  Sheep producers will be hoping for the same this year.  According to latest Defra figures, UK sheep meat production in September was 11% lower year-on-year and with similar carcase weights, the decline is due to a reduction in slaughter numbers.  However, production for the year January to September, is 4% higher compared to the same period in 2021.  Slaughter numbers were higher in the months February to May, which will have been influenced by the carryover from the previous year and probably added to the dip in prices in the spring.  But it is noticable how much lower UK clean sheep slaughter numbers have been through July, August and September for the last two years compared to the five year average.  In September thoughtputs of clean lambs stood at 961,000 head, 99,400 lower than last year and compares to the 5-year average for the month of just under 1.1m head.

Production

According to the latest forecast from the Global Dairy Market Outlook, global production for 2022 is expected to be 0.5% below year-earlier levels.  This is the same ‘overall’ forecast as reported in July (see https://abcbooks.co.uk/dairy-markets-update/) although there has been a change to the estimates from individual countries since then.  The global production is calculated from the six key exporting nations of the EU, USA, NZ, UK, Argentina and Australia.  The southern hemisphere countries of NZ, Australia and Argentina are all now forecast to do worse than previously estimated after poor weather resulted in a challenging start to their seasons.  Coupled with rising costs and labour shortages, NZ and Australia are forecasting production to decline by -3% and -4.4% respectively compared with 2021.  Argentina is still estimating growth compared to year-earlier levels, but marginally, at 0.7%.  Previously combined production for the three countries was forecast to decline year-on-year by -0.7%, this has been revised to -2.2% fall.  In contrast, the USDA is forecasting production to now increase by +3.0% in the USA, compared to previous estimates of -0.1% decline, citing herd expansion and an increase in yield during the second half of the year.

Meanwhile the EU and UK are forecasting declines of -0.5% and -1.1% respectively on the year; these are similar to previous production estimates.  However, UK production has started to improve.  For September, the AHDB estimates UK production to be 1,155 million litres; if correct this would be the same as in 2021.  Previously production had been running behind last year, but with the mild weather and rain, grass growth has improved after the dry summer.  The AHDB is also reporting deliveries for the first three weeks of October to be up on 2021, with the latest week (w/e 15th October) running 2.5% (0.8m litres) above the same week last year.

Prices

After seeing an increase at both events in September, the Global Dairy Trade (GDT) Index has been in decline in October.  At the latest event on 18th October, the index fell by -4.6% to average $3,723.  This follows a -3.5% drop earlier in the month.  But September’s increases were not the norm.  The index has now fallen in 12 out of the last 15 events.  In contrast, EU and UK wholesale prices have remained buoyant; why?  The decline in the GDT is mainly due to lack of demand from China due to strict Covid restrictions still in place and an increase in self-sufficiency.  The UK and EU are less reliant on China and currently supply in Europe is lower than demand, supporting prices.  Even so, prices may come under pressure if current high prices relative to other regions results in export demand falling.

Meanwhile UK farmgate prices remain strong, with many processors continuing to announce increases or ‘standing-on’ for November.