Category: Dairy & Livestock

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.

 

Production

According to AHDB milk production is falling even further behind historic trends – due to a combination of drought affecting grass growth and high costs.

GB production in July was 1,025m litres – equal to the 5-year low seen in 2018.  Average daily deliveries for the month were 0.6% lower than in July 2021,  This is a relatively modest decline, but the drop in production accelerated during the month as temperatures rose and grass growth stopped.  Larger overall declines in output are likely to be seen for August as the hot, dry, weather continued.  According to the AHDB, figures for the first six days of the month show a daily year-on-year decline of 1.6%.

Total GB production for the season to date (Apr-Jul) is 1.5% below last year.  Although it has now rained in many areas, this will need to continue to encourage autumn grass growth.  With many farmers already having fed some of their silage stocks, forage reserves are low.  Purchased feed costs and other inputs remain high.  Production therefore looks likely to remain constrained throughout the winter.  The AHDB has forecast GB milk deliveries for the entire 2022/23 milk year dropping from 1.0% and 3.8% year-on-year, depending on various scenarios.

Prices

UK farmgate milk prices have taken a ‘pause’ in August.  Although various increases have been announced, they have the slight air of a ‘tidying-up’ exercise as buyers adjust their prices to catch-up with earlier market movements and sit competitively against other purchasers.  The market is now waiting for some direction.  Although the reduction in milk production (see above) is positive for prices, this has to be weighed against possible demand drops as UK consumers (and those around the world) face tougher economic conditions.  Whilst the GDT has posted some dramatic drops, wholesale prices in Europe have not seen the same falls.  The era of rapid price increases in farmgate prices appears to have ended.  Indeed, it is possible that the next move in prices may be downwards.

Some notable price increases announced in August include;

• First Milk will be increasing its price from the 1st September by 2.14ppl.  This takes a manufacturing litre to 48.64ppl and liquid to 47.0ppl
• Muller Direct farmers will receive an additional 1ppl from September bring the price up to 47.0ppl.  The Tesco aligned price is also 47ppl as the supermarket has temporarily abandoned its cost-of-production-tracker price (currently at 42.6ppl) and seems to be shadowing the standard Muller figure.  Sainsbury’s have also departed from its COP model.  
• Meadow Farms is also increasing its price by 1ppl from 1st September.  This puts a manufacturing litre at 47.63ppl.

Defra has opened a ‘Call for Evidence’ to help it understand more about Methane-suppressing feed products.  The Call for Evidence is UK-wide and will close on 15th November 2022.  Defra would like to know more about the awareness and perception of feed additives, their current role within our farming systems, and the potential barriers that could prevent the introduction of methane-suppressing feed products in both the near and long term future.  It is also seeking views on whether uptake could best be driven by government interventions, industry or voluntary-led solutions and what might these interventions might entail.  The agriculture sector is responsible for about 10% of UK greenhouse gas (GHG) emissions; of that livestock is responsible for about 2/3rds with ruminant livestock accounting for roughly 1/2 of all agricultural emissions.  Further information on the Call for Evidence and how to reply can be found via https://consult.defra.gov.uk/agriclimate/methane-supressing-feed-products/

There are warning signs in global dairy markets as prices continue to fall.  At the benchmark Global Dairy Trade (GDT) auction in New Zealand on the 16th August prices fell by 2.9%.  Whilst this may not look like much of a fall, it is the fifth consecutive fortnightly auction where prices have fallen.  The price index for all products now stands at $3,768 per tonne.  The index has fallen by over 25% compared to its recent high-point in early March 2022.

Whilst global milk production continues to fall, demand has softened as well.  China has been purchasing less due to its Covid lockdowns, but economic problems are now starting to impact on demand from other nations too.  Prices in Europe have, so far, remained at high levels.  There is concern, however, that as consumer incomes come under pressure over the next few months, demand may weaken to the extent that even reduced supply levels cannot prevent a downwards movement in prices.  With a high-cost winter in prospect for most dairy farmers the last thing that is needed is a milk prices reducing.    

The Annual Health and Welfare Review is due to open this autumn. Defra is asking for farmers and vets to help them test aspects of the review before it is launched.  The testing will be rolled out in phases over the summer until autumn 2022 and Defra say it should fit alongside daily farming activities.  By helping to test the review, keepers will gain early access to the service. Farmers will be paid at the standard payment rate of:

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

To register an interest and to find out more both vets and farmers should email [email protected]   For more information, refer to Defra’s blog at https://defrafarming.blog.gov.uk/2022/07/21/farm-animal-health-and-welfare-help-us-test-the-yearly-review/

 

Lamb

New Season Lamb (NSL) prices remain strong.  Even though the GB liveweight NSL dropped by 6p on the week to average 288.1p per kg this is still 27p/kg above year earlier levels and 54p above the five year average.  Deadweight prices tell a similar story, the NSL SQQ was down 7p on the week ending 16th July to average 639.1p per kg.  Finished lamb prices never quite made the highs of 2021 in the first quarter of the year, but the seasonal decline has been slower and they are now above last year’s levels.  Perhaps supporting prices, liveweight throughputs were 14% down compared with the same week last year and deadweight numbers were estimated to be 33% below.

Beef

The picture is similar in the beef market.  Although prime cattle prices have fallen over the last couple of weeks they are comfortably above last year’s and the 5-year average.  For the week ending 16th July the GB deadweight overall steer prices stood at 441.2p per kg, some 39p above last year and 77p higher than the five year average.

Pig meat

The finished pig price continues its upward trend.  In the week ending the 16th July, the GB EU-spec Standard Pig Price (SPP) rose by a further 1.98p to 193.09p/kg.  But, this is still considerably below the estimated costs of production, where  feed costs have had the biggest impact.  Feed costs now account for about 71-74% of the full economic costs of production, historically they would have been around 60-65%.  The AHDB is estimating the full cost of production to be at 231p per kg deadweight in July.  With current carcase weights at 88kgs, even at an SPP of 193.0p/kg, farmers are losing £33 per slaughter pig.

In all the meat sectors, prices are at record highs, but worryingly, input costs have risen more and continue to erode margins.  Considering the current cost of living crisis, families cannot continue to keep paying more for their weekly shop.

Production

GB milk production for June was already 2% lower than year earlier levels even before the heatwave in mid-July which will have impacted production further.  According to AHDB data, GB deliveries fell by 8% between May and June, but are still in line with its (updated) seasonally forecasted drop in production.  Cumulative production for the season so far (April to June) stands at 3,283m litres, also 2% less than at the same point in 2021.  Daily deliveries for the week ending 16th July show a 1.7% decline on the week, but this is expected to get larger due to the extreme weather conditions during mid-July.  Not only will heat stress have impacted production, but going forward, grass growth and quality has been affected. Despite the strong milk price, high input costs are not encouraging producers to increase their yields.

Furthermore, the AHDB reports the global picture to be very similar.  Deliveries for May record a year-on-year decline with little change expected for the rest of 2022.  Latest forecasts for the key producing countries show a 0.5% decline in production for the year.  The EU is forecast to experience the largest decline, in terms of volume, down by 838m litres compared to 2021 levels.  Similar to GB, the hot, dry weather on the continent and increased feed costs are impeding production.

In Australia and New Zealand, even though they haven’t reached their seasonal peaks in production, they are forecasting year-on-year declines of -2.4% and -0.7% respectively after such poor starts to the year.  The US is forecast to see a small decline.  Bucking the trend is Argentina, which is the only country to be forecasting year-on-year growth, although at a slower rate than last year, as rising costs start to have an impact.

Prices

The tight supply situation continues to support dairy prices and further UK farmgate price increases have been announced including confirmation from Freshways that it will be paying its suppliers 50ppl from 1st September.  However, Promar’s monthly review of the cost of production (COP) for the Müller-Tesco Sustainable Dairy Group (TSDG) has shown a 0.32ppl reduction. In somewhat of a surprise, reports suggest the cut is mainly due to a reduction in feed costs.  However the understanding is producers will still receive 46ppl, the same as the Müller Direct price for August.

Interestingly, the Global Dairy Trade (GDT) index has seen big falls at the last two events, by -4.1% and a further -5% at the latest event held on 19th July.  The average index now stands at $4,166/t.  The index has fallen in 8 of the last 9 events. There appears to be downward pressure on most commodities, but with the supply situation so tight and spot milk in the UK at 55p – 60ppl, farmgate prices continue to be supported.