Category: Dairy & Livestock

The British Standard Pig Price (SPP) has seen some stabilisation over the last month and has started to see a much-needed increase.  The latest SPP for the week ending 19th March has actually experienced quite a strong gain, up by 3.2p per kg to 141.71p per kg.  This is the highest price for 2022 and is now above levels received this time last year.  But as we have written about extensively, input costs have risen exponentially and will have more than offset any output gains in the pig sector.  However, over the last couple of weeks there are reports that retailers and processors have been increasing their contribution price by 10-15p per kg, with Morrisons (Woodheads) putting their price up by 30p to 180p per kg; leaving some questioning whether there should be an alternative pricing mechanism to the SPP which can respond more quickly to the market signals.

With very few pigs traded on the spot market, it only makes up a limited share of the SPP in comparison to contract prices.  If contract prices are heavily based on the previous week’s SPP, the effect of other factors that can move the market is ‘dampened’, explaining why the SPP is ‘slow’ to move.

However this does mean producers should continue to receive some much needed price increases over the coming weeks as these feed through to contracts.  Furthermore, the National Pig Association (NPA) has said it has written to all the major retailers asking them to increase their pig price to at least £2 per pig – so producers at least have a chance of breaking even.  It estimates most UK producers are now facing costs of production in excess of £2 per kg.

There is some better news regarding the numbers of pigs overdue movement or slaughter.  Results from the February 2022 survey report 22% of pig farms in England reported having a backlog of pigs on farms as at 1st February 2022, down from 25% on 1st December.  When raised to a national level, this equates to 47,000 weaners over due movement and 155,000 fatteners overdue for slaughtered compared with 73,000 and 168,000 respectively in December.  Still a concern to producers, but at least heading the right direction.

Defra has opened a questionnaire for farmers, asking for suggestions as to what items should be available though the new Animal Health and Welfare Grants.  As part of the Animal Health and Welfare Pathway the grants will fund the purchase of equipment, technology and infrastructure which support health and welfare issues seen as applicable to most farms.  Smaller grants for items valued from around £50 to £10,000 will be available, as well as larger grants for bespoke infrastructure investments.  As part of its ongoing co-design of schemes, Defra wants to make sure it provides grants suitable for all types of farmers that cover the latest innovations, so has created sector specific questionnaires for those interested to share their ideas.  Our article of 11th March set out the health and welfare priorities that had been agreed for the six livestock sectors (pigs, sheep, dairy, beef, meat chickens and laying hens).  Defra is now looking to collect suggestions that would be most effective in helping stock keepers to achieve these welfare priorities.   More information and a link to the questionnaires can be found via https://defrafarming.blog.gov.uk/2022/03/24/animal-health-and-welfare-grants-your-chance-to-suggest-items/  although Defra is not giving respondees much time, as the deadline for suggestions is 31st March 2022.

As of Monday 21st March, free range eggs are no longer available in the UK.  Due to Avian Influenza, the Government introduced housing measures back in November 2021 to minimise the disease spreading .  Meaning that keepers of all chickens, plus ducks, geese or any other birds are legally required to keep them indoors and to follow strict biosecurity measures.  For the first 16 weeks there was a derogation to allow free range eggs (and poultry) to continue to be labelled as free range (even though hens were housed) but this has now come to an end and eggs must now be labelled ‘barn eggs’.  The British Retail Consortium has said most supermarkets are putting up signs to explain this to consumers and once the risk levels have reduced and Defra lifts the housing ban, the birds will then be able to go outside and eggs and poultry will be able to go back to being labelled free range.

It had been hoped that the Government would lift the housing ban soon, but new outbreaks mean this has not happened.  In fact, the Chief Veterinary Officer, on 23rd March, urged poultry keepers in Suffolk to ‘step up their efforts’ in the fight against bird flu following a recent spike in cases in the county.  According to Christine Middlemiss, there have been 5 new infected premises in Suffolk in the last month alone.  The warning comes as the UK faces its largest ever outbreak of bird flu with over 100 cases confirmed since the start of November.

Defra has set out its initial priorities for the Animal Health and Welfare Pathway across each livestock sector.  These have been drawn up alongside industry vets, non-governmental organisations and welfare scientists, and will be the basis for future support for each of the sectors.  A summary is included in the table below;

Through the Pathway farmers will be able to receive financial support to address these priorities.  Funding will be available via:

• An Annual Health and Welfare Review with their chosen vet
• Animal Health and Welfare Grants for investments in equipment, technology and infrastructure
• Disease eradication and control programmes
• Payment by results for ongoing costs

We have written previously about the Annual Health & Welfare Review which will be launched this year as part of SFI 2022.  In addition the Animal Health and Welfare grants are also planned to be available this year and Defra has said it will shortly be sending out a questionnaire asking for ideas for what should be included within these grants.

The GDT average price index continues to make significant gains.  At the latest auction the index rose by 4.2% to average $4,840.  This rise follows 4.1% and 4.6% increases held at events on 1st February and 18th January respectively.  The last time the index was this high was at the end of 2013/beginning of 2014.  All products recorded a rise; butter and cheddar are now at an all time high;

• SMP up 6% to $4,295
• WMP up 4.2% to $4,503
• Butter up 5.1% to $6,686
• Cheddar up 3.5% to $5,881

UK farmgate prices also continue to increase;

• Muller has already announced a 1ppl increase from 1st March resulting in a standard liquid litre prices of 35ppl, with Muller Direct Organic suppliers receiving 45ppl.
• Saputo has announced a smaller increase of 0.25ppl from 1st March which means its manufacturing standard litre is now 36ppl
• Suppliers to Barbers (cheese) will receive a 1.3ppl increase from 1st March, taking its manufacturing standard litre price to 36.26ppl.
• At the time of writing Arla had not announced its March price, but suppliers received a 1.6ppl increase in February taking producers’ standard litre price to 33.6ppl.

Tight supplies have been the key driver for the rise in farmgate prices and, with high input costs, farmers have not been incentivised to ‘push’ for extra production.  Latest forecasts from the AHDB show GB production for the 2021/22 season (April to March) totaling 12.4 billion litres; down 1.2% on the year.  Furthermore, yields were unexpectedly lower in the latter part of 2021 which will have an impact going forward into 2022.  In addition, the long term decline in the dairy herd is expected to continue, as well as high input costs maintaining downwards pressure on production.  Whilst the forecasts for 2022 show a slight rise compared to 2021, output will be 0.6% lower than 2020.

It is a similar story around the world.  Global milk supplies from the key dairy exporting regions are set to remain tight in 2022; only forecast to grow by 0.6%.  Similar to the UK, high input costs, labour shortages and increases in environmental requirements are offsetting strong global milk prices.

Demand has also remained robust.  Domestically it has shifted from the foodservice sector to to retail during the pandemic, but this is expected to reverse during 2022 as food service recovers.  With low stock and an increase in demand from the foodservice sector, imports could start to rise.

With milk supplies so tight, processors have been keen to encourage production, hence the significant rise in farmgate prices between November and February 2022.  And, with increases in production limited, low stocks, and demand robust, prices are expected to remain good for at least the first half of 2022.

 

The UK sheep market has been buoyant throughout 2021 and has remained strong into 2022; tight supplies have continued to support prices.  Brexit challenged exports, particularly during the first half of 2021, but they recovered towards the end of the year.  Imports have remained low; New Zealand lambs have been attracted to other markets (Asia) due to high shipping costs and strong prices globally.

Looking to 2022, the AHDB is forecasting the carry-over from 2021 to be about 3.9 million head, with a further 1.8 million new season lambs expected to come forward in the first half of 2022.  New season numbers will be higher than in 2021, but the carry-over is less – due to Brexit more lambs than normal were marketed in Q3 and Q4 of 2020.  The AHDB is forecasting a strong 2% growth in the breeding flock on the back of high farmgate prices providing optimism in the industry.

The number of ewes available for slaughter is expected to be about 750,000 head in the first half of 2022 and 700,000 head in the second half.  This is up on 2021, particularly over the first six months, but is more in-line with historic averages.  Total sheep meat production for 2022 is forecast to be 294,000 tonnes, up on the five-year average of 291,100 tonnes.

Trade has been impacted by Covid and Brexit over the last couple of years.  But imports have been down for five years now, due to lower production in New Zealand and Australia and increased demand from Asia.  Covid has also caused shipping issues meaning high freight costs.  This is expected to continue for at least 2022, meaning Asia will remain an attractive market for NZ and Australian lamb.  We could see an increase in imports of Australian lamb later in the year when the UK-Australian free-trade agreement comes into force, but total imports are not expected to increase as AHDB is expecting these to just displace product from other countries.  Exports have struggled during 2021 due to increased friction (paperwork and checks) after the end of the Brexit Transition Period.  In addition, Covid has caused reduced demand from the continent and a lorry-driver shortage.  Exports have recovered during the latter half of 2021 and the AHDB is forecasting a 5% growth in 2022.

Retail lamb sales remain strong.  Although 2021 sales were back on 2020, according to Kantar, volumes were still 1.9% above 2019 levels.  Growth in the takeaway sector has offset losses in the eating-out market; volumes of lamb through foodservice as a whole were up 9.9% in 2021 compared with pre-pandemic levels.  Lamb has been less impacted by closures in the food service sector than other meats as more than half of the volume goes into the takeaway sector, meaning volumes through foodservice as a whole have remained above 2019 levels throughout the pandemic.  In 2022, eating out is not expected to return to pre-Covid levels due to hesitancy in the first half of the year and economic pressures on household budgets.  Retail sales may also suffer, but Easter could bring a boost this year after two year’s of Covid-restricted gatherings.  Takeaways are expected to remain strong, although these are less likely to use British lamb.  The AHDB is therefore predicting demand for lamb in 2022 to be down -3% on 2021 and slightly less than in 2019 levels.

All this means that farmgate prices are unlikely to drop significantly over 2022.  Values are forecast to remain good but could ease slightly compared to 2021.

 

The AHDB has released its latest outlook for the UK’s beef sector.  The beef market has experienced some exceptional prices in 2021 which have continued into 2022.  Tight supply and strong retail demand has driven prices.  But even so, higher feed, fertiliser and fuel prices are impacting on profitability.

The AHDB is forecasting a 1% increase in total beef production in 2022.  The UK prime cattle slaughter is expected to grow by 2%, but this is forecast to be offset by around a 1% fall in the slaughter of cull cows.  Prime beef supplies are expected to remain tight in the first half of 2022, but increase in the second half of the year.  In 2023, production could see further ‘moderate’ growth due to changes in dairy bull calf management.  An increase in beef semen used on dairy cows will result in more ‘beef-type’ cattle coming from the dairy herd, contributing to the total production.

Beef consumption has performed well throughout the pandemic.  It experienced the fastest volume increase in retail of all the meat proteins in the 52 weeks ending 14th June 2020.  However, it did return to slightly more normal levels in 2021, reducing by 6% on the year.  However, compared to 2019 levels retail sales remain strong; up by 4%.  Foodservice conditions remained difficult in 2021.  The AHDB estimates the eating-out market for beef in the 52 weeks ending 26th December 2021 declined by -5% year-on-year and this follows a -54% fall in 2020.  Deliveries and takeaways however, continue to perform well.  The AHDB estimates beef volumes in this market rose by a further 40% in 2021 year-on-year, meaning an 87% increase compared to pre-pandemic levels (2019).  However, this increase is not expected to be enough to offset the decline in beef consumption from eating-out and retail, meaning total beef consumption for 2021 is estimated to be 4% less than 2020 and the same as in 2019.

In 2022 the AHDB is forecasting total beef consumption to be down by a further -1% compared to 2021 (and 2019 levels).  This is mainly through a continued drop in retail sales.  Inflation and, in particular, the increase in energy costs is expected to impact on household finances and therefore purchases.  The food service sector is expected to start to see a recovery, especially through the second half of 2022.

Looking at trade, the AHDB forecasts imports to grow by about 1% in 2022 compared to 2021.  The first quarter should see a year-on-year increase as imports last year were affected by Brexit.  Ireland, the UK’s biggest supplier of beef, could see a 3% increase in cattle numbers and with its prices at a discount to the UK, imports are expected to be attractive, especially for the food service sector.  Exports are forecast to grow by 10% as demand from the foodservice sector on the continent increases, as it continues to open up after Covid and, at the same time, production across the EU and more widely in North America and New Zealand is forecast to remain tight.  Lower global supplies should support EU prices which in turn should maintain UK values.  But increased demand from the food service sector which often uses cheaper imports together with an increase in lower priced Irish beef could exert some downward pressure on UK prices.

The EU-spec SPP has been on a downwards trend since last August and there doesn’t seem to be any let-up.  In the week ending 15th January it dropped a further 1.10p per kg to 139p per kg; the lowest since March 2021.  Delays at abattoirs still remain, meaning pigs are heavier and fatter coming to market.  For the same week, carcase weights were at (another) record high at 95.42kg.  Probe measurements increased by 0.1mm on the week to 11.9mm, the highest recorded measurement for the SPP sample.

The UK pig meat trade is also subdued.  The latest export figures for November were 10% less than 2020 levels, although higher than October.  In the 11 months of the year, a total of 201,400 tonnes of pig meat was exported, 24% less than at the same point in 2020.  Reduced demand from China is the main reason, as its domestic production increases.  UK exports to China are down 30% on the year, even so it remains a key destination for UK exports.  In contrast, shipments of offal were 9% higher year-on-year in November and up 25% for the 11 months of the year so far.  China is the single biggest market, increasing by 17% on the year.  Imports of pig meat were 9% lower in November at 67,100 tonnes compared with year earlier levels and 8% down in total for the 11 months of the year.

With rising input costs and falling prices it is not surprising the latest statistics from Defra show that the English pig breeding herd has contracted by -4.2% on the year.  The figures for 1st December 2021, also reveal the number of fattening pigs on farm is up by 10.6% compared to December 2020 at just over 3.7 million, as producers continue to struggle with having to keep market-ready pigs on farm due to problems in the slaughter capacity at abattoirs.  The full statistics can be found at https://www.gov.uk/government/statistical-data-sets/structure-of-the-livestock-industry-in-england-at-december.  Cattle and sheep numbers in England as at 1 December 2021 will be published at the end of February 2022.

Markets

The prime lamb price has eased as demand post-Christmas slows down, but prices still remain very strong.  For the week ending 19th January, the GB liveweight old season lamb (OSL) SQQ was down 5p per kg from week earlier levels but at 263.22p per kg this is still nearly 9p per kg above the same week last year.  Availability remains tight, with throughput at GB auction marts estimated to be 11% down on the week and 10% lower than the same week in 2021.  Deadweight markets also eased, but still remain over 600p per kg and 32p above the same the same week a year ago.  Deadweight slaughterings were 9% down, compared to year earlier throughputs.

The picture is similar in the prime beef market.  Prices have fallen on the week, but only marginally and compared with last year’s (historically high) price, the all-prime deadweight average is still over 30p per kg more.  Slaughterings for the week ending 15th January were 13% below year-earlier levels; reports suggest staff absences are causing a problem for abattoirs and affecting throughput.  The cull cow price has risen, this is often the case in the New Year as demand switches from prime cuts to more processing beef.  There are also reports of increase demand on the Continent, where supplies are said to be short.

Trade

Sheep meat exports have struggled over the year due to Covid and post-Brexit trading arrangements.  However, reports show there was a significant uplift in November.  Exports in the year to the end of October were down 20% to 62,200 tonnes compared with 2020.  Every month, except March has recorded lower exports than the previous year, but in November, exports totalled 7,200 tonnes of sheep meat; only very marginally less than for the same month in 2020.  It is too early to tell whether exports have started to return back to more ‘normal’ levels, but is something to keep an eye on.  Imports for November fell sharply, by 39% year-on-year.  Imports to the end of November stood at 42,600 tonnes, 18% lower than for the same period in 2020.

Fresh and frozen beef exports have picked up over the year.  Starting well below the five-year average, they have risen and have been around the 5-year average since May/June.  For the year to the end of November, total exports were 12% down compared to year earlier levels, but for November were 8% up year-on-year, driven by increased shipments to France, which now acts as a ‘transit’ country for UK exporters to the wider continental EU.  Imports for fresh and frozen beef to the end of November stood at 216,300 tonnes, 4% more than a year ago, shipments from Ireland are up 2%  from the year before.  For November, imports were 8% higher than in 2020.