Category: Dairy & Livestock

Cattle

Prime cattle prices are on the increase again.  After rising strongly from March, the GB all prime average deadweight price peaked at the beginning of May at over 65p per kg more than the five-year average and over 85p per kg higher than at the same point last year, when prices were (admittedly) at their lowest.  Deadweight values eased a little throughout May but have been increasing again since June.  The GB all prime average for the week ending 17th July was back over £4 per kg at 400.08p.   For those hitting R4L specification, steers rose by 1.3p per kg on the week to 411.0p per kg and heifers by 2.4p per kg to 411.4p per kg for the same week.  Liveweight cattle prices are also up for the week ending 21st July; the all steer price by 3.3p per kg and all heifer price by 2.5p per kg to average 228.2p per kg and 234p per kg respectively.  The only cattle category to post a decline was cull cows.  Tight supplies continue to support the beef price with estimated slaughter numbers for prime cattle down by 1,000 head to 30,700 compared to the previous week.

Lamb

There was a sharp (seasonal) decline in lamb values at the beginning of June as New Season Lamb (NSL) numbers increased, but prices have remained comfortably above the highest price for the last five years.  Values stabilised by the end of June.  Prices for the latest week have seen an uplift as demand increased for the Muslim festival of Eid al-Adha which ran from 20th – 23rd July.  For the week ending 21st July the GB average NSL (liveweight) SQQ rose by 9.4p per kg on the week to average 260.7p per kg.  This is more than 44p up compared with the same week in 2020 and 70p higher than the 5-year average.  Deadweight values have also experienced an uptick.  For the week ending 17th July the GB NSL SQQ rose by 2.1p per kg on the week to 548.5p per kg some 69p per kg more than for the same week last year and 106p per kg more than the 5-year average.

Pigs

GB finished pig prices continue to move upwards and are now comfortably above the 5-year average.  For the week ending 17th July the EU-spec SPP rose 0.78p per kg on the week to average 160.66p per kg.  Even so they have still not quite caught up to last year’s values.  However, prices started to decline at this point in 2020, so if values continue their steady increase they look set to overtake last year shortly.  Slaughter numbers were notably down on the week by 6,400 (3.7%) and 10,700 head compared with the same week in 2020, with reports of staffing shortages in processing plants probably due to workers being ‘pinged’ due to Covid-19.

The EU is proposing to ban all cage systems for farmed animals.  This would cover laying hens, broilers, other poultry, rabbits, sow stalls, farrowing crates and individual calf pens.  It is proposed legislation would be put forward  before the end of 2023 with any ban coming into force in 2027.  The move is in response to a European Citizens Initiative (ECI) signed by 1.4m across the continent.  With Defra keen to push higher animal welfare in the UK, this move would mean that there is less chance of our farm produce being undercut by lower-standard produce from our closest neighbour.  

Pigs

Pig prices have continued to increase.  In the week ending 19th June the GB EU-Spec SPP rose by a further 1.17p per kg on the week to average 156.99p per kg.  Although still 7.94p behind the price for the same week in 2020, it is now comfortably (7.28ppkg) above the five-year average.  The longstanding rule-of-thumb is that margins should be achievable for efficient pig producers if the pig price is above 140p per kg (although current high feed prices makes this more challenging).  Back in February/March the SPP dropped to 139p per kg, but has been rising since.  Estimated slaughter numbers are up on the week by 2% at 175,800 head.  This is 23,800 more than last year and 13,500 head more than the 5-year average for the same week, meaning demand is driving the price increase.

Lamb

The lamb price has been exceptional.  But prices have seen a sharp drop over the week ending 23rd June.  There is always a seasonal decline at this time of year as numbers of new season lamb (NSL) coming to market increase considerably.  Even so prices are still good at 230.58p per kg liveweight.  There may also have been a little bit of early marketing of lambs, some not quite ready, to try and capitalise on the high prices, as numbers were 8% higher than last year and also the year before.  At this time of year, GB shifts to being a net exporter for sheep meat and as British lamb has been at a premium to French (our key destination) over recent weeks, export demand will be reduced.

Beef

In contrast to lamb, the cattle price has risen over the latest week.  After six weeks of decline, for the week ending 19th June the deadweight price has risen for all categories of cattle.  The all prime average price was up by 3.4p per kg to 393.2p per kg deadweight.  The price remains strong at 32.7p per kg above the same week last year and 42.4p per kg above the five-year average.  Domestic supplies remain tight, prime slaughter numbers were down 2% on the week and 7% on the year.  It will be interesting to see what happens when Covid restrictions are lifted as the switch to home consumption appears to have been in domestic producers’ favour as a lot of food service product is imported, whilst that on the supermarket shelves tends to be GB-sourced.

Grass growth has been good through June after a very slow start in April.  But whilst farmers have been filling clamps, there is concern over the quality of this year’s silage.  Accoeding to the AHDB, crude protein levels appear to be below the five-year average.  Monthly figures for June are only recording 18.7% compared with the five year average of 21.5% for the month.  Poor quality silage could mean higher feed costs in the winter if producers having to supplement diets.

The Global Dairy Trade (GDT) average index has seen very little movement since the middle of March.  However, that said the last five events, although marginal have all been downwards, with the most recent the largest at -1.3%.  But the overall average is still historicaly high at $4,083 and the mood from New Zealand is positive.  Both SMP and WMP recorded declines at the latest auction of -1.7% and -1.8% respectively.  Butter also fell by -1.7%.  By contrast, both Anhydrous Milk Fat and Cheddar recorded marginal increase of +0.6% and +0.2%.

GB farmgate milk prices remain strong, with the majority of milk buyers increasing their price to suppliers for July with a few ‘standing-on’ for the month with First Milk having announced a further increase for August.  Suppliers will receive a further 0.5ppl rise, the fourth consecutive increase from the processor.  Other notable announcements from 1st July include:

• 0.75ppl increase for suppliers to Muller (Direct), Joseph Heler, Belton Cheese and Meadow Foods
• Sainsbury’s (SDDG) producers will receive a 0.89ppl increase
• Arla has announced its prices will remain unchanged for July

 

The outlook for dairy farming for the current year looks promising, according to the most up-to-date budgets for Anderson’s Friesian Farm.

Friesian Farm is a notional 210 cow business.  It has been used to track the fortunes of British dairy farming for well over a decade.  It has a year-round calving system, like most of the UK industry, but it is trying to maximise yield from forage.  The farm comprises 130 hectares (of which 60 hectares are rented on an FBT).  The proprietor provides labour along with one full time worker (plus casual/relief).  The table below shows the farm’s actual results for the two previous milk years (April to March), a budget for the current 2021/22 year then a forecast for 2022/23.  

The 2019/20 year showed a recovery in profitability after the drought-hit 2018/19, even though the milk price was weaker.  Farmgate prices firmed slightly for 2020/21, however variable costs rose – in particular feed, following the poor harvest of summer 2020.

For the current, 2021/22, year a further increase in farmgate milk prices has been seen so far and unless there is a collapse in the milk price from summer onwards, this is forecast to give a higher average price for the year.  Feed prices for winter 2021/22 should be lower, but other costs, most notably fertiliser are forecast to increase.  But the 2021/22 year currently looks set to provide good profits; a surplus of 4.8ppl gives a total business surplus of around £77,000 (after drawings).  Looking to 2022/23, milk prices are forecast to ease a little and the decline in BPS due to the Agricultural Transition is more evident.  By 2028, there will be no BPS in England, meaning Friesian Farm will be reliant solely on its dairying operation.

 

The Government has announced its next steps in the eradication of Bovine TB; these will include;

• Bovine TB cattle vaccination trials to commence this month (June) in England and Wales with the aim of rolling out cattle bTB vaccinations by 2025.  This would be a ‘game changer’ and cannot come soon enough, particularly for those that live with the drudgery of constantly testing.
• The end of issuing new licenses for intensive badger culls as from 2022.  In addition, existing cull licenses could be brought to an end after two years (down from 5) where ‘supported by scientific evidence’.  Many farmers will be disappointed to hear this, especially as even under the Government’s own admission it has led to a ‘significant reduction’ in the disease.
• A five-year badger vaccination trial in East Sussex to inform how to deploy future vaccination schemes across the country.
• Increased cattle testing, which will see herds in the High Risk Area being tested every six months.
• A new bTB Advisory Service to offer practical advice and cost-effective measures to livestock keepers to help keep their herds safe.
• A new training scheme – ‘Train the Trainer’ so that more people become qualified to vaccinate badgers.

Bovine TB remains one of the biggest health issues in UK livestock.  Last year alone, 27,000 cattle in England were slaughtered tackling the disease. 

 

 

 

The Government has set out its ‘plans, aims and ambitions’ for animal welfare both domestically and internationally in a new policy paper.  Our Action Plan for Animal Welfare covers 5 key areas;

• Sentience and enforcement
• International trade and advocacy
• Farm animals
• Pets and sporting animals
• Wild animals

The Government cites the departure from the EU as an ‘opportunity to do things better’ including taking a more active role on the world stage.

The full Policy Paper can be found via Action Plan for Animal Welfare – GOV.UK (www.gov.uk)  but the section of most significance to farming is (obviously) farm animals.  This includes the ending of export of live animals for fattening and slaughter.  Other welfare in transport reforms, such as maximum journey times, temperature and space have been consulted on recently and the paper states the responses to these will be used to determine future legislation to improve transport conditions for animals.  Another area the Government is looking into is ending the use of farrowing crates for sows and cages for laying hens, building on the ban of battery cages and sow stalls.

As part of the Agricultural Transition, the Animal Health and Welfare Pathway is set to launch in 2022.  Not much detail has been published about this yet, but in the Policy Paper it says Annual Health and Welfare Reviews will be ‘financially supported’ as part of this.  In addition, livestock farmers will receive support for ‘health and welfare enhancements’ that are ‘valued by the public’ and not currently delivered sufficiently by the market through existing regulatory standards.  Furthermore, the Government has said it will consult on how food labelling can be reformed to make it clearer for consumers to make choices that align with their values and also to stimulate demand for higher welfare products including looking at animal welfare in its update to Government Buying Standards for the Food and Catering Services.

Finally in the Farm Animal section, further consultations are earmarked to look into welfare improvements in slaughter houses and legislation to give the police more powers to address livestock worrying.

This is a wide ranging Policy Paper which could have some serious impacts on the livestock sector.  It also gives some insight into the new Animal Health and Welfare Pathway.

The Andersons Centre’s mixed lowland farm model ‘Meadow Farm’ has been updated.   The table below shows the final results for 2019/20 and 2020/21, and an estimate for the current year, and an early forecast for 2022/23.

The 2019/20 year was affected by low livestock prices, particularly for beef.  But the beef price recovered throughout 2020 and is currently very strong.  The lamb price also continued to perform well throughout the year and with a Free Trade Agreement (FTA) negotiated with the EU, prices this spring have exceeded expectation.  Meadow Farm sells all its finished cattle from August to October and lambs from July, with all having left the farm by the end of December.  Therefore, it didn’t fully capitalise on the very high lamb prices seen in the first quarter of 2021.  Even so, as the table shows, the livestock gross margin in 2020/21 was the strongest it has been for some time.  After a tough winter and spring, it looked like the arable results from harvest 2020 would be poor.  However, as a result on the rise in crop prices seen through autumn 2020 the gross margin strengthened.  Overheads fell, in part due to a drop in the fuel price, but also because of a decline in machinery and property depreciation.  With such a poor year in 2019/20 the proprietors of Meadow Farm did not invest in any big pieces of machinery.  But such low levels of reinvestment are not sustainable.  The result being the combined margin from production for 2020/21 is the strongest it has been for a number of years, however the margin from production is still negative and it still takes the BPS and CSS payments to provide profit.

Looking ahead to the rest of the current 2021/22 year, livestock prices are expected to remain good, but not quite at the levels of 2020/21, especially the lamb price.  The arable gross margin is budgeted to remain pretty similar as a drop in crop price is compensated by better yields.  Overheads reduce, due to lower machinery depreciation, but some of the machinery will soon need replacing.  The margin from production is not as good as 2020/21 but is still better than recent history.  2021/22 is the first year of the Agricultural Transition and the BPS is reduced by 5%, but the addition of this still leaves a good profit for the business relative to other years.

The final column is the first (tentative) forecast for 2022/23.  Livestock prices are expected to drop back further, likewise arable prices and yields are expected to be more ‘normal’.  Overheads rise due to increased fuel prices and a small machinery purchase means the depreciation increases.  The margin from production is not as good as the last couple of years and the BPS is reduced by 20%, meaning the business surplus is back to 2019/20 levels.  The proprietors of Meadow Farm are keeping an eye on the new Sustainable Farming Incentive, to see if some of the ‘lost’ BPS can be recouped from this scheme.

Meadow Farm is typical of many livestock holdings in England, it is a notional 154 hectare (380 acre) beef and sheep farm in the Midlands.  It consists of grassland, with wheat and barley for livestock feed.  There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500 breeding ewe flock.  The business is subsidy-dependent, but with direct payments decreasing from 2021 it will need to adapt; maybe through restructuring to reduce its overheads, which are fundamentally too high, or perhaps by taking advantage of the new ELM scheme, or possibly a combination of both.

Production

It appears the cold dry weather in April may have resulted in GB milk production peaking early.  Latest figures from AHDB Dairy show deliveries peaked on 28th April at 37.93 million litres, with  the 7-day rolling average peaking at 37.77 million litres.  Grass growth in April was impacted by the weather, curtailing the spring flush.  May weather has been the opposite in terms of rainfall, although has still been cold.  Grass is now growing though, and at a faster rate than at this time last year which should help milk production over the coming weeks.  But how much April’s weather has affected first cut silage could be a problem later in the season, with quantity and quality likely to be reduced.

Trade

Post-Brexit dairy exports are improving but at are still a long way behind 2020 levels with dairy appearing to be one of the worst hit sectors.  AHDB figures show just 131 tonnes of milk and 436 tonnes of cream were exported to the EU in February 2021 compared with 76,500 tonnes and 901 tonnes of milk and cream respectively in February 2020.

Prices

There has been little change in the Global Dairy Trade average price index throughout April and May.  At the latest event held on 21st May the average index fell marginally by 0.2%, remaining strong at $4,150.  Butter saw the largest movement, down by 2.2% to $4,929, other products didn’t move by as much:

• SMP         +0.7%         $3,447
• WMP        -0.2%         $4,123
• Cheddar   +1.0%        $4,321

The lack of exports is not affecting the GB Farmgate milk price which continues to rise, with Arla continuing to lead the way; announcing a further 0.5 Eurocent (0.44ppl) increase for its members from 1st June.  This brings its manufacturing standard litre to 33.23ppl and the liquid standard litre to 31.98ppl.  Other notable increases include:

• A further 0.5ppl increase for First Milk members from 1st June
• Meadow Foods suppliers will receive a 1.25ppl increase from 1st June
• Muller UK has announced a 1ppl increase for its non-aligned suppliers, this is the first price change since November
• Middle ground liquid processor Freshways, has updated its price increase from 1.5ppl to 2.5ppl as from 1st July.  After cutting prices in March by 1ppl, this will bring its standard litre up to 28.5ppl
• Medina Dairies (another middle ground liquid processor) has announced a 2.7ppl increase for its suppliers as from 1st July.
• Suppliers to Yew Tree Dairy will receive a 2ppl rise from 1st June.

Consumption

According to the latest consumption data from market research company Kantar, milk remains a household staple.  In the year ending 24th January 2021 cow’s milk was purchased by 98% of British households.  With lockdown during 2020, ‘consumption occasions’ for milk were forced into the home, where ‘milk in tea’ accounted for 48% of total milk occasions.  According to Kantar the retail spend on cow’s milk grew by 9.7% to 3.37 billion over the same 52 week period.

The risk of Avian Influenza has been reduced to ‘low’.  This means as of 15th May the enhanced biosecurity measures which were in place have been lifted.  All bird gatherings are now permitted as long as APHA is given 7 days notification of the event and there is compliance with the new General Licence.  Additional biosecurity measures will remain in place around infected premises.  More information can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu