Category: Dairy & Livestock

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.

Arla is introducing a Sustainability Incentive to its farmers.  Two years ago, the cooperative introduced its Climate Check, which gave producers 1 Eurocent on their milk price for submitting ‘climate’ data from their farms.  From 2023, in addition to this, Arla producers will be able to receive up to 3 Eurocents per kilo of milk for carrying out ‘sustainability activities’.  Thus, future milk price will not only depend on fat, protein and quality, but will also depend on the environmental activities of the producer.

The cooperative will introduce a points-based model, in which activities on 19 different ‘levers’ are rewarded with points. 80 points will be available from the start and a further 20 points will be set aside for more levers, which means that a total of 100 points is expected to be available within a few years.  Each point that the farmer achieves, depending on the level of environmental sustainability activities engaged in, will trigger 0.03 eurocent per kilo of milk.  The cooperative is expecting the average Arla farmer to achieve 39 points or 2.17 Eurocents in the first year.  For a farm with an average annual milk production of 1.2 million kg, this equates to approximately €26,000 (around £22,500 at current exchange rates).  The levers with the biggest impact potential will achieve the most points.

The lever categories that farmers can score points on include:

• The ‘Big 5’
  • Feed efficiency
  • Fertiliser use
  • Land use
  • Protein efficiency
  • Animal robustness

• Manure handling
• Use of sustainable feed
• Use of renewable electricity (on-farm production or purchase of certificates)
• Biodiversity & carbon farming activities
• Knowledge building

From January, there will be an online tool for producers to input their data for the first six months, with the first incentive payment being received in the August 2023 milk cheque, based on deliveries made in July.

Arla which has 8,900 members based in the UK and six other European countries, has a commitment to reduce its emissions by 30% by 2030.  As it says, this is another significant step to being at the forefront of environmentally sustainable dairying.  Others are likely to be playing catch-up and it shows the direction of travel all producers can expect.

 

The first consignment of British lamb in over 20 years has been shipped to the USA.  The Small Ruminant Rule that banned British and EU lamb imports for over 20 years was rescinded by the US Government in January of this year (see https://abcbooks.co.uk/lamb-exports-to-the-us/).  Following the necessary inspections, the United States Department for Agriculture (USDA) agreed to open the market for British lamb.  The news will be a welcome boost to lamb producers, giving them access to over 300 million people and an estimated market of £37m over the next five years.

The Chief Veterinary Officers from England, Scotland and Wales have declared an Avian Influenza Prevention Zone (AIPZ) across the whole of Great Britain as of midday on 17th October.  This is to try and mitigate the risk of the disease spreading amongst poultry and captive birds following an increase in the number of detections of avian influenza (bird flu) in wild birds and other captive birds.  At the moment this just increases the biosecurity levels with no need to house, except for Norfolk, Suffolk and parts of Essex.  In these areas an AIPZ is already in place which includes mandatory housing measures for all poultry and captive birds is this zone.

Keepers with more than 500 birds will need to restrict access for non-essential people on their sites.  In addition, workers will need to change clothing and footwear before entering bird enclosures and vehicles will need to be cleansed and disinfected regularly.  Those with smaller numbers of poultry including chickens, ducks and geese must also take steps to limit the risk of the disease spreading to their animals, this includes ‘backyard owners’.  Measures include keeping birds in a fenced area, feed, water and bedding must be stored undercover, and steps taken to prevent access by wild birds.  Disinfectant footbaths should be place at strategic entry and exit points to housing.

All the latest information can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu#latest-situation

Schedule 1 of https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1111505/AIPZ_Declaration_17_October_England_excl_Norfolk_Suffolk_pt_Essex.pdf contains the minimum biosecurity measures for all keepers.  Those with over 500 birds should also abide with the measures in Schedule 2.

Information for those keepers who reside in Norfolk, Suffolk and parts of Essex and are already in an AIPZ with housing measures can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1109941/regional-AI-prevention-zone-declaration-housing-measure-suffolk-norfolk-part-essex-08102022.pdf 

The introduction of the AIPZ comes after the United Kingdom has faced its largest ever outbreak of avian flu, with more than 190 cases confirmed across the United Kingdom since late October 2021 and over 40 of these confirmed since the beginning of October this year.  The East of England has been hit particularly bad, hence the housing requirement of birds in this area.

Avian Influenza circulates naturally in wild birds and when they migrate to the UK from mainland Europe over the winter they can spread the disease to poultry and other captive birds.  This year, however, the disease has been more prominent in the summer months than previously.

 

Production

According to the AHDB, GB milk production is forecast to reach 12.26bn litres for the current season.  This will be 0.8% less than in 2021/22, but slightly up on the Levy Board’s June forecast (-1%).  The reasoning behind the revised figures is July data from BCMS shows that dairy herd numbers, although declining, are (marginally) higher than previously estimated at 1.63m head (1% decline on the year).  Historically, production has been growing on average by 1.5% per annum and growth was expected to reach 2.3% in 2022 and 2023.  However, yields have been low since June 2021 and are expected to remain subdued for the remainder of the year.  Some recovery is forecast for spring 2023, with a slight improvement on 2022 production, but still below 2021.  But if farm finances worsen, this could lead to further yield reductions and destocking.

Winter forage will be challenging, particularly in the East and South West of England, where the dry weather means silage has been fed sooner than normal.  Reports on silage quality is variable, and also for maize and wholecrop.  According to anecdotal evidence, the situation is highly variable between regions and even farms.

Prices

The GDT index has risen at both the events held in September.  This, it should be remembered though, comes after declines in every GDT auction since March (except for one in June) – quite a contrast to UK farmgate prices which have risen consistently and strongly through 2022.  However, GDT values are still historically high and the latest event takes the index back over $4,000 to $4,072.  In the UK, tight supplies are being weighed against a drop in demand as consumers face increasing tougher economic conditions, even so farmgate price announcements are still positive but appear to be slowing.  Some announcements for October include:

• Freshways 50ppl liquid standard litre will remain for October.
• First Milk has announced a 0.75ppl increase from 1st October, taking its manufacturing standard litre to 49.39ppl.
• Muller Direct suppliers will receive a 1ppl rise from 1st October.  And those aligned to the Tesco Sustainable Dairy Group (TSDG), will also receive the same 48ppl, effectively ignoring the current cost of production calculation.

The deadweight pig price has reached the £2 per kg mark, but producers are still losing money.  Price increases have been slowing, but in the week ending 17th September 2022 the EU-spec SPP averaged 200.22 p per kg; up by a marginal 0.29p on the week, to break that psychological barrier.  However, the AHDB’s full economic cost of production for the second quarter of 2022 has risen to an estimated average 240p per kg deadweight.  This is an increase of 33p on the estimated cost of production (207p per kg) for the first quarter of the year.  The rise in feed costs accounts for 27p of the increase, with higher energy and fuel costs, plus interest rate rises also contributing.  A fall in cull sow prices and decreasing carcase weights also effectively increase the cost of production on a ppkg basis.

According to the AHDB, pig producers have been experiencing negative margins since October 2020 and it estimates the industry has lost over £600m between October 2020 to June 2022.  Feed prices have eased since the high in May and the Levy Board is estimating the full economic cost of production for August to have reduced to 223p per kg deadweight.  But even with pig prices at record highs, it can be seen margins remain negative.

Looking ahead, prices should remain supported as supplies are forecast to tighten in the second half of the year.  Defra figures show that the English breeding herd contracted 18% year-on-year as of June 2022, and the AHDB anticipates a 6% fall in pig meat production by the end of 2022.  It is a similar picture on the Continent, with increased costs causing a shortage of supply and supporting prices.  In the 4 weeks ending 11th September, EU deadweight pig prices increased in all key regions.  However, they remain at a discount of between 13p to 42p to UK prices.

Another factor to consider in the second half of the year, is the availability of CO2 following CF Industries announcement that they will ‘temporarily halt’ production of ammonia at their Billingham site.  This closure will have a significant negative impact on the availability of CO2 domestically, (used in the slaughter of pigs and poultry) but Defra is confident that we now have a more resilient system (see our article in August https://abcbooks.co.uk/fertiliser-and-co2-2/ ).  However, if slaughter capacity is compromised, this would put producers back into an incredibly challenging situation; readers will recall the backlogs on farm and the increase in costs this caused previously.

As we head in to the autumn and winter months, it is rather worrying that cases of Avian Influenza (AI) have continued to be detected throughout the summer.  In previous years, there has been a period over the warmer months without any cases.  While the risk of AI has reduced, cases continue to be confirmed in both poultry and other captive birds.  All bird keepers are encouraged by Defra to implement strict biosecurity measures to limit the spread of and try to eradicate the disease from captive birds.

The Avian Influenza Prevention Zone (AIPZ) for poultry and captive birds, introduced across Great Britain to help stop the spread of avian influenza, was lifted at midday on 16th August 2022.  However, a regional AIPZ was re-imposed on 31st August in Cornwall, Devon, Isles of Scilly and part of Somerset following a number of detections of AI in poultry and wild and captive birds across the southwest of England.  And there seems to be almost daily announcements in locations all over the country, the most recent;

• Highly pathogenic avian influenza H5N1 was confirmed on 19th September 2022 in chickens at a premises near Attleborough, Breckland, Norfolk
• Highly pathogenic avian influenza (HPAI) H5N1 was confirmed on 20th September 2022 in commercial ducks and other mixed poultry at a second premises near Dartington, South Hams, Devon
• Highly pathogenic avian influenza (HPAI) H5N1 was confirmed on 22nd September 2022 in birds at the following premises:
  • second premises near Honington, West Suffolk, Suffolk
  • premises near Easingwold, Hambleton, North Yorkshire

Further information can be found via https://www.gov.uk/guidance/avian-influenza-bird-flu

The AHDB is forecasting beef production to increase by 2% and consumption to fall by 4% in its latest Outlook for 2022.

Production

Even though prime cattle numbers show a 1% year-on-year decline for the first half of 2022, the AHDB is expecting a 1.6% increase for the year overall, compared to 2021.  Typically more cattle are marketed during the 2nd half of the year anyway and BCMS data also suggests more cattle will be available.  Higher input costs may also lead to cattle being sold earlier to ease costs, although there has been minimal signs of this so far this year.  Cow slaughterings have already been higher than originally forecast for the first half of the year; likely due to strong cull prices and an increase in costs.  Similar to prime cattle, there is usually a seasonal uplift in cow slaughterings during the second half of the year and this expected to continue this year.  The AHDB is forecasting a 3% rise year-on-year in cull cow beef, contributing to a 2% increase in UK beef production for 2022.

Looking forward to 2023, the AHDB is expecting further ‘moderate growth’ in beef production.  Data from BCMS shows changes in dairy bull calf management and an increase in beef semen on dairy cows will mean more more beef-type cattle will be available to contribute to overall production.

Consumption

Over the last couple of years, food trends have been driven by Covid, however we are now seeing the cost-of-living crisis affecting consumers’ choices.  Responses to the AHDB/YouGov Tracker for May 2022, found that 35% of people said they were cutting back on red meat consumption because of price, this compares with 16% in 2021.  Retail volumes are down, but this was already happening before the inflationary pressures, as consumers switched to eating out more as lockdown restrictions lifted.  The eating-out market has recovered well for beef and has more than off-set the losses in takeaway, with out-of-home volumes up 32.7% on the year and 0.8% on 2019 levels.  However, in the future, out-of-home purchases are likely to be curtailed once again as money becomes tight.  Some retail purchases may be lost to cheaper proteins, but as in Covid, retail may benefit from consumers ‘treating’ themselves if they cannot afford as many out-of-home experiences.

Trade

Both imports and exports were very strong in the first quarter of the year and have continued to remain buoyant as foodservice demand in the UK and on the continent increases.  However, imports are not expected to continue to grow over the second half of the year, partly due to higher domestic production.  Ireland, the UK’s main supplier of beef, is forecast to have increased cattle availability in the second half of the year.  Over the pat few months the price difference between the UK and Ireland has been small (usually Irish beef is cheaper).  If extra production in Ireland reduces prices, this this could affect imports and crucially domestic prices.  Exports are expected to remain high.  Increased production and lower consumption will mean more supplies to export and, with EU supplies remaining tight supported by strong demand from the foodservice sector on the continent, demand is expected to remain strong.

Price

Prices, although easing recently have been at record highs for over a year now.  Increased supplies and a reduction in consumption during the second half of 2022 could see downward pressure on the farmgate price.  If demand continues to move from retail to out-of-home there could be less support for home-produced beef.  But, as alluded to earlier, we may see demand increase once again in retail, as consumers revert to cooking from home, supporting the home market.  In addition, EU and global cattle prices remain historically high and should help to mitigate any downward pressure.

The AHDB is forecasting total sheep meat production to ‘rebound’ from last year’s low and exports to increase by 20% year-on-year in its latest Market Outlook for the sector.

Production

The levy board is predicting the UK 2022 lamb crop to reach 17.9 million head after the December 2021 survey revealed a 3% increase in the breeding flock.  Defra’s slaughter statistics report 5.6 million lambs have been marketed in the first six months of 2022; 8% more than in 2021.  A further 7.3 million are forecast to be slaughtered in the second half of 2022.  Ewe kill for the first six months of the year has totaled 580,000 head; up by 60,000 on the same period in 2021, although still historically low.  The AHDB is forecasting a further 690,000 coming forward in the second half of the year, although this could be higher if culling policies alter due to strong prices and further input cost increases.  Looking to 2023 and 2024, supply is forecast to remain relatively flat, increasing by just 1%, with future farm policy likely to be the main driver.

Consumption

Due to lamb being a higher-priced protein it is expected to come under pressure as consumers face significant economic challenges.  Retail sales are expected to be significantly less than pre-pandemic.  Eating-out volumes are forecast to be higher in 2022 than in 2021, but still remain less than before Covid.  Takeaways have done well, particularly lamb kebabs.  Although this is likely to ease back in 2022, it is still expected to compensate for eating-out losses.  As a result, overall lamb consumption volumes for 2022 are expected to be down -18% and -16% compared with 2021 and 2019 respectively.

Trade

UK exports of sheep meat were by up 22% year-on-year for the first half of 2022, however, 2021 was lower than normal due to disruptions from Brexit and Covid.  Exports are expected to remain similar for the remainder of the year due to increased production and good demand from key markets such as the EU, Asia and the US.  Imports have also been up compared to year-earlier levels (25%) but in contrast, are expected to be lower during the second half of 2022 as the cost-of-living crisis impacts purchasers’ spending power.  Asia remains a key market for New Zealand and Australia due to the cost of freight.  The Australia-UK Free Trade deal is due to come into force in the Autumn.  AHDB analysis shows this could lead to an increase of lamb into the UK, although from a low base and is more likely to replace volumes from elsewhere rather than any increase in total imports.

Prices

Farmgate prices for clean sheep were below last year’s record levels for the early part of the year, but rose above them in the second quarter and remain significantly above the five year average.  Tight supplies in the EU are expected to keep prices strong, but a significant reduction in demand from export and domestic markets could impact farmgate prices.