Category: Dairy & Livestock

Production

The cold weather has seen milk production ‘checked’.  Output had been running ahead of last year’s deliveries and the AHDB’s forecast for this year, raising concern whether processing sites would cope with the increase.  But the recent cold spell and lack of grass growth has slowed the seasonal lift in production down.  The 7-day rolling average GB milk production to 10th April was just 0.2% above the AHDB’s forecast, compared to 1.1% a week earlier.  With the cold, dry spell continuing to curtail grass growth, production is expected to remain constrained.  Defra production figures can be found in Key Farm Facts each month.

Prices

Commodity and farmgate milk prices remain good.  Since the large increase (15%) in the average Global Dairy Trade (GDT) index at the beginning of March there has been little movement.  In the two events held in April, the index increased by 0.3% at the beginning of the month and fell by just 0.1% at the latest auction held on 20th April to average $4,110; the highest it has been since early 2014.  Recent movements include:

• SMP: no Change,  to average $3,365 per tonne
• WMP: +0.4%, to average $4,097 per tonne
• Cheddar: +1.29%, to average $4,436 per tonne
• Butter: -0.6%, to average $5,736 per tonne

Closer to home, Arla is the headline story again, with a further 1.5 euro cent per kg, equivalent to 1.4p per litre, increase for May for its member suppliers.  Such a large increase is a (welcome) surprise.  It means the co-operative’s conventional manufacturing price is now 32.79p per litre, with liquid at 31.55p per litre and organic 41.15p per litre.  Commenting on the increase, Arla has said ‘commodity market prices have remained relatively stable in the last month supported by healthy demand and our strong operations.  The current outlook is stable’.  Arla is now firmly leading the way on milk price.  There have been a few other announcements including;

• Arla non-member suppliers will receive a 0.75p per litre increase from 1st May
• Tesco (TSDG) tracker price will increase by 0.86p per litre from 1st May.  This takes the Muller TSDG standard litre to 32.13p per litre and Arla TSDG to 31.88p per litre
• First Milk Members will receive a 0.5p per litre increase from the beginning of next month
• Saputo has announced an increase split over two months.  There will be a 1p per litre uplift from 1st May, followed by a further 0.5p per litre from 1st June.

Pig farmers affected by the temporary closure of the Quality Pork Producers abattoir in Brechin, Scotland will be able to apply for hardship support through a new £715,000 scheme.  The abattoir was closed from 23rd January 2021 for two weeks due to an outbreak of Covid-19, resulting in increasing costs to pig farmers.  The scheme will help meet some of these costs.  Further details of the scheme will be published on the Scottish Government’s website.

Both beef and sheep farmgate prices remain very strong.  The deadweight beef price, after easing a little in early February, has risen again from an already-high level.  For the week ending 13th March the deadweight GB all prime cattle price was 380.8p per kg, up 3.8p on the week.  This is now 45.4p per kg above year-earlier levels and about 40p per kg more than the five-year average.  Prices are being supported by tight supplies; throughput for the week totalled 31,900 head.  This is 600 head less than the previous week and 2,700 head down on the same week last year.

In the sheep meat market, deadweight prices have reached a new high.  For the week ending 13th March, the GB OSL SQQ was up 19p per kg on the previous week to 634p per kg, over 175p higher than the five-year average.  Deadweight slaughter levels were low, 7% down on the previous week and almost 16% below the same week in 2020 at only 179,200 head.  In contrast the liveweight GB SQQ fell by just over 3p for the week to 17th March to 289.7ppkg, but this is still a very good price at nearly 80p per kg above the five-year average.  Live auctions saw a 1% increase in numbers; strong prices may have encouraged some farmers to market lambs a little earlier, perhaps even attracting some lesser quality or under finished, reducing the SQQ for the week.

Both lamb and beef have shown an increase in household purchases, by volume and spend in the 12 weeks ending 21st February.  According to Kantar, the volume of beef purchased was 12.7% up year-on-year, with the spend 15.8% higher on the year.  Mince contributed the most to the volume, but steak remains the fastest growing cut.  Over the same 12 week period the volume of lamb purchased increased by 16.4% and the spend grew by an impressive 21.7% year on year.

It is a different picture for the pig market, but prices may be stabilising.  For the week ending 13th March the EU-spec SPP fell by a marginal 0.04p per kg to 139.41ppkg; this is 23.81p per kg less than the same week in 2020.  However prices for the previous two weeks had seen a rise, so markets may be finding some balance.  Plentiful supplies and lower pig prices on the continent continue to weigh on the domestic price.  Slaughter numbers were down slightly (1%) on the previous week to 199,400 head, but 12% higher than the previous year and 16% above the five year average.

From 1st April poultry keepers will be allowed to let their birds outside again.  Due to the risks imposed by Avian Flu, housing restrictions were brought in for all captive birds back in December.  But following a reduction in the risk of the disease to both wild and kept birds, the alert level has reduced to ‘medium’ and housing restrictions will cease from midnight on 31st March.  Even so, the enhanced bio-security measures announced back in November will still apply.  In addition the devolved administrations have put out joint guidance on ‘How to prepare for when your free-range birds can be let outside again’.  This can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/972412/advice-to-poultry-keepers-preparing-range.pdf

Dairy Markets

At the first Global Dairy Trade (GDT) auction held in March the average price index increased by a huge 15% to $4,231 per tonne.   Whilst it fell back by 3.8% at the latest event, to $4,089 per tonne this is still the highest price the index has been since early 2014.

Strong demand, particularly from China, together with New Zealand’s seasonal decline in production is the main reason behind the price increase.  The Whole Milk Powder (WMP) price led the increases, rising to $4,083 per tonne.  Although little of this product is produced here in the UK, it should still support domestic farmgate prices as more milk globally will be directed into the powder, leaving less available for other products.

All eyes will be turning to the spring flush.  The AHDB is forecasting March’s milk production to be slightly less than last year but April and May higher (0.8% and 1.5%).  Last year many producers limited their production in these months because of Covid-disruptions.  This year the industry is in a much better position to deal with the flush and lockdown restrictions should begin to ease, increasing food service demand.

Farmgate Milk Prices

The headline story is a €1.5ppl increase for Arla Members from April; a big increase particularly for the time of the year.  This takes its standard milk price over 30ppl.  Arla Direct suppliers (Non Members) will receive a more modest 0.25ppl.  Arla has also announced its 13th payment will be increased from €1 to €1.75ppl for the 2020 calendar year.

Other price announcements include:

• Barber’s Cheesemakers and Saputo prices will stand-on for April
• M&S suppliers will receive a 0.6ppl increase from April
• Freshways has announced, following its 1ppl reduction in March, that will be its last for four months.  From July there will be 1.5ppl increase to reflect the forecast lifting of lockdown measures as per the Government’s Roadmap which should result in an increase in demand from the foodservice, hospitality and leisure sectors.

Processor Consolidation

The UK’s third and fourth largest liquid milk processors are in merger talks.  Freshways Dairy and Medina Dairy are looking to combine their businesses.  Between them, they process around 500m litres of milk per year and have a turnover of £400m.  Both companies have a large presence in the foodservice sector and were hit hard by the Covid-19 lockdown.

Arla looks set to close its Trevarrian soft cheese creamery by summer 2021.  Consultation has already started with its 37 members of staff at the Cornish site where it produces a range of Brie and Camembert.  The loss of key own-label cheese supermarket contracts together with Covid-induced volatility in the food service sector has been the final straw, following a decline in sales for a number of years.  The farmer suppliers, should not be too affected as the milk from the eight Arla Members will now go to Arla’s sites in Taw Valley and Westbury.

Livestock Auctioneers Association (LAA) has reported an increase in throughput at livestock markets during 2020.  Marts may have required a higher number of staff, and experienced tighter bio-security measures and other operational costs associated with keeping the markets open thoughout most of the pandemic, but figures show more than 11 million animals were sold through live sales rings during the year.   Just under 10 million sheep and over 1 million head of cattle sold were sold, an increase of 370,000 and 30,000 head respectively, compared to 2019.  Total turnover was up by £260 million to over £1.8 billion.

The AHDB has published its Dairy Market Outlook for 2021.  The full publication can be found at https://ahdb.org.uk/news/2021-dairy-market-outlook-now-online.   The levy board is forecasting GB milk production to increase marginally in 2021, but the pandemic and trade friction are expected to continue to have an impact on consumption, trade, and farmgate prices through the year.

Production

In its latest Dairy Market Outlook, the AHDB expects GB milk production to total 12.56 billion litres for the 2020/21 season (April-March), up 0.2% on 2019/20.  For the calendar year 2021, the forecast is for a 0.5% rise compared with 2020 to 12.59bn litres.  It is hoped, with the easing of Covid related restrictions from March there should be an increase in food service demand and the restrictions on production experienced last spring are not expected to reoccur this year; the spring flush is forecast to be up 1.2% (39m litres) on 2020.

Trade

According to the AHDB total UK dairy exports were down 11% on the year for January- November 2020.  Imports were also lower, by 7%; both due to the pandemic disrupting trade.  Reduced demand from the foodservice sector at home and across Europe is expected to continue during the early part of 2021 but it is forecast to improve as we progress through the year.  The majority of the UK dairy trade is with the EU, meaning the trade deal was good news for the sector.  However, the additional paperwork, health certifications etc (Non-Tariff Measures) will add time and costs to trading and is of particular concern for short-shelf-life products, such as cream and skim concentrate.  Exporting the surplus of these products helps balance the UK milk market, any disruption, particularly during the spring flush, when processing will be tight, could put pressure on markets.  With regards to imports, the changes to paperwork will be phased in from April to July 2021 and hopefully this should present less problems.

Consumption

All the major dairy categories have seen retail growth both in volume and spend during the pandemic; although still not fully offsetting the loss from the foodservice sector.  An increase in cooking from scratch, baking at home during lockdown, at-home lunches and more hot drinks have all contributed.  Fresh cream was the fastest growing sector with retail volumes up by 22.8% to the year ending 27th December according to market research company Kantar.  Butter and cheese retail volumes grew by 18% and 15% respectively.  Perhaps a little surprising, is the fact mozzarella was one of the fastest growing cheeses; despite restaurant closures, an increase in demand for takeaways has boosted mozzarella consumption, with 6% more pizzas sold to the w/e 4th October 2020 compared to year earlier levels.  Some of these consumption trends are expected to continue through 2021.  Even by the end of the year AHDB is assuming out-of-home consumption will not have returned to pre-Covid levels as some consumer ‘wariness’ will continue.  The scenario of higher retail demand offsetting some of the lost foodservice sector demand, but not all, is expected to continue.

Looking ahead, uncertainties remain.  Exports maybe impacted via trade friction or lower demand, leaving more product on the market.  The middle ground liquid processors have been particularly hit hard by the loss of the foodservice sector any setbacks in recovery of this market could affect liquid prices.  But with only a marginal increase in production and the expectation that demand will recover by the second half of 2021, dairy markets look relatively promising.  However costs; feed, fuel and fertilisers are expected to increase over the course of 2021 putting pressure on margins.

The end date for Defra’s ‘Call for Views’ on possible future measures to accelerate bovine TB eradication in England has been extended to 21st April 2021.  The deadline for responses to the current consultation on bovine TB remains 24th March 2021.  See article of 10th February for details of the Consultation and the Call for Views.

At the latest Global Dairy Trade (GDT) auction, the price index continued to perform well, increasing by 3% to average $3,746.  It is now 24% higher than at the low point in April last year and has increased in 10 out of the last 11 events.  At the last auction on February 16th, all products on offer realised an increase;

• WMP – +4.3% to average $3,615 per tonne
• SMP – +0.3% to average $3,207 per tonne
• Cheddar – +2% to average $4,268 per tonne
• Butter – +2% to average $5,129 per tonne
• AMF – +1.1% to average $5,527 per tonne
• Lactose – +0.4% to average $1,232 per tonne

Closer to home, domestic farmgate milk prices are easing, with some reductions being announced, particularly for the the middle ground liquid processors who are being hit by school closures and limited food service demand during the third lockdown.  However, plenty of processors are holding their prices until at least 1st April including;

• Graham’s Dairy
• Belton Farm
• Barbers
• Crediton Dairy
• First Milk Members’
• Saputo

Liquid processors, Paynes Dairies has announced a 0.5ppl reduction from to 1st February.  Similarly Pensworth dairies has been forced (due to Covid) to reduce it’s price by 1ppl from 8th February.  Suppliers to Freshways have been given a month’s notice that their price will be reduced from between 0.5ppl and 1ppl from 1st March, but with the market changing rapidly under lockdown it is unable to confirm the the exact amount at present.  Medina has also announced a 1ppl milk price reduction from 1st March.  It is likely downward pressure on prices will continue in the short term as the pandemic continues to impact on the supply/demand balance, but longer term with lockdowns easing it is hoped this will diminish.