Category: Dairy & Livestock

Deadweight cattle prices have been on an upward trend since April.  Prices are comfortably above year earlier levels.  The average steer price for the week ending 12^th August was 370.2ppkg compared to 343.4ppkg last year.  Those meeting the R4L specification are receiving 384.9ppkg for steers and 383ppkg for heifers.  Prices have tended to ease come September over recent years as more numbers typically come to market, and there has been a slight steadying of the market already over recent weeks.

As we gear up for the autumn store cattle sales, prices have largely been above 2016 levels throughout the year.  According to the AHDB, the yearling and 18 month old continental store steer price recorded increases of 4% and 5% respectively over the first six months of the year.  For the week ending 29^th July the yearling and 18 month steer price recorded £859.70 per head and £978.44 per head respectively – an 8% year on year rise.  This would suggest that finishers believe that strong beef prices will continue through into 2018. 

In the sheep market, an increase in slaughterings has put downward pressure on prices.  For the week ending 9^th August liveweight throughputs of clean sheep were nearly 16% higher than the previous week at 122,032 head, with deadweight slaughter numbers increasing by 2% at 235,900 head.  The liveweight GB SQQ fell by 3p per kg compared to the previous week ending up just 3p above year earlier levels at 192.7p per kg.  In the deadweight market, for the week ending 5^th August the GB SQQ fell by 12.1p per kg on the week to finish at 440.6p per kg, but still remains about 34p above last year’s levels.

The pigmeat price looks to be stabilising a little after being on an upward trend since March.  For the week ending 12^th August the EU spec SPP was 164.53p per kg, some 29.53p higher than year-earlier values but a slight decline on the week of 0.01p.  According to data from the Kantar Worldpanel, sales of pork have fallen.  In the past 12 weeks ending on 16^th July, primary pork volume sales have fallen by 5.3% year-on-year, although, due to an 8% increase in the price of pork, the spend for the last 12 weeks has seen a 2% increase compared to year-earlier levels.  The lack of promotional activity will have contributed to the decline in sales, but price inflation will also have seen some consumers switch to cheaper products such as poultry.  Indeed over the last 12 week period, primary poultry sales increased by 1.8% and total spend on poultry was up by 1.5% year-on-year.  Being based in Melton Mowbray, it is good to see the total spend on pork pies has increased by 11% year-on-year!

The average price index at the last two GDT auctions has fallen.  At the event held on 1^st August the average price index was down by 1.6%.  Perhaps coming as somewhat of a surprise, the drop could actually have been further, if it hadn’t have been for Whole Milk Powder, which making up about half of all the product sold, increasing by 1.3%.  The only other product to see an increase was Buttermilk Powder by 0.4%.  At the latest event, held on 15^th August, the average index fell marginally by 0.4%.  Once again WMP made up about half the product sold but at this event the price fell by 0.6%.  Other key changes over the two auctions held in August include:

• Anhydrous Milk fat     -1.2% (-4.9% at the first event)
• Cheddar                      +1.4% (-4.8%)
• SMP                            +0.3% (-3.0%)

In the UK wholesale prices, other than SMP, have increased again through July, although at a slightly slower rate, continuing to put upward pressure on on farmgate prices.  Further price increases have been announced:

• First Milk has increased its ‘A’ price from 1^st August by 0.9ppl for their Scotland, East Wales and Midlands pools.  Its Haverfordwest and Lake District Pools have increased by 0.5ppl.  This is the last month where the ‘B’ price will be payable (see last month’s article) and this has remained at 25ppl
• Paynes, Belton and Graham’s have all increased their price by 1ppl as from 1^st August
• Meadow Foods has announced it will be increasing its prices by 0.85ppl from 1^st September, this follows a 1ppl increase in August.
• Pensworth will be increasing its price from September by 0.75ppl

HDB Dairy is undertaking some analysis of how the domestic dairy industry could replace imports.  At present, the UK has the second largest trade deficit in dairy products in the world (behind China).  In volume terms, the amount exported is not that far behind imports – 1.1m tonnes of exports against 1.2m tonnes of imports in 2015 (note, however, that these export tonnages include liquid milk being sent to the Republic of Ireland for processing).  However, the value of the imported products tends to be much higher – the trade gap in value terms is around £1bn.  Much of the product has traditionally come from the EU.  With Brexit on the horizon, could some of this market be captured by domestic production?  The AHDB provide some statistics on key dairy products being imported (see table).  It does caution that the UK may not have the processing capacity devoted to some of these products, and also that the profitability of some of these markets may not be high enough to make them attractive.

Source: HMRC

DEFRA has launched a consultation on proposals to change the TB control measures in England.  The proposals include the introduction of six-monthly surveillance testing of higher risk herds in the High Risk Area.  This received, in general, a positive response to the ‘call for views’ in August 2016.  Currently, the TB testing landscape across the High Risk Area is complex, with herds receiving multiple types of ad hoc testing.  The proposals aim to rationalise this regime, by moving to six monthly routine surveillance testing, with the opportunity of less frequent testing of lower risk herds.  DEFRA estimates that 80% of herds in the High Risk Area will actually face fewer TB tests than they do at present.  The other key proposals include:

• Increased use of private vets
• Changes to TB compensation system to encourage risk reducing behaviour on-farm.

The full consultation can be found at: https://consult.defra.gov.uk/bovine-tb/simplifying-testing-and-other-control-measures/ Responses need to be submitted by 29^th September 2017.

Morrison’s announced at the Great Yorkshire Show that it will be using 100% British meat for its own-label brand ‘Market Deals’.  This will mean the retailer will stop selling fresh imported lamb from New Zealand and Australia.  The move follows the Co-op’s pledge, back in May, to switch to selling 100% British fresh meat all year round.  Whilst both are very welcome, the move by Morrisons is possibly more important, due tothe scale of the retailer.

Producers have been told to be cautious about ramping up production following comments by Arla CEO Peder Tuborgh that there will be a butter and cream shortage at Christmas.  Fats have been the main driving force behind the increase in commodity prices and rising farmgate prices.  AHDB figures show that butter and cream prices have more than doubled since this time last year.  Butter values have risen by £800 per tonne in a month to average £5,100 per tonne in June, whilst bulk cream values have increased by more than £400 to average £2,370 per tonne.

The value of butter is now accounting for more than 65% of AMPE, normally it contributes about 45-50% with the remainder being made up by powders; SMP and WMP.  With powder prices being constrained by intervention stocks, it is the butter market that is applying upward pressure on farmgate prices. UK butterfat is currently below last year levels, cumulative levels show it at 4.02% in May, compared to 4.07% in 2016, but ahead of the 5 year average at 4%.

However, it seems pretty unbelievable that, when dairy farmers are still recovering from the last couple of years, during which they were told that there was too much milk about and producers were being compensated for reducing production, we are now being told that we face a shortage.  Processors need to be working with producers and sending out better market signals to farmers as this boom and bust cycle is obviously not sustainable. 

The European Commission has authorised the use of processed proteins derived from insects to be used in farmed fish food.  The European Compound Feed Manufacturers’ Federation has described the decision as a ‘promising alternative source of protein for animal feed’.