Category: Dairy & Livestock

Natural England has launched the Farming Ammonia Reduction Grant Scheme for dairy and beef farmers.  The scheme is part of the Countryside Stewardship Scheme and will provide grants to help pay for covers to existing slurry stores.  The amount of grant available is £61 per square metre for self supporting covers or £11.20 per square metre for floating covers.  Applications must be received by Natural England by 31^st January 2016.  If the scheme is oversubscribed NE will prioritise applications on a first-come-first-served basis.

Applicants will be notified of the outcome by the end of March 2017.  If successful, they will receive a visit from an advisor within two weeks of being notified.  The advisor will assess the slurry store for the type of covers being proposed.  A report will be drawn up for NE.  A copy will also being given to the applicant along with further advice on reducing ammonia emissions and other diffuse pollution on their farm.  NE will confirm whether the application has been successful within two weeks of them receiving the report.

Photographs will need to be submitted along with the claim by 31^st July 2017.  Payment will be made by 30^th September 2017.  Further information and applications forms can be found on the DEFRA website at https://www.gov.uk/government/publications/beef-and-dairy-farmers-apply-for-a-farming-ammonia-reduction-grant

Milk Market

Continued tight supply globally and strong demand is pushing commodity prices higher.  The Global Dairy Trade (GDT) event held on 15^th November saw all commodities strengthen, with the overall product index up by 4.5% compared to two weeks earlier.  Notable was the decrease in volume on offer; 13.8% lower than that traded at the previous GDT event held at the beginning of November.  Fonterra has been continually reducing the amount on offer, it has also recently lowered its forecast volumes for the next 12 months.  But looking to 2017, demand has mainly been from China, with no other emerging market countries really buying, it is possible demand could weaken in the New Year if China steps back.  If producers start to respond to better market conditions by increasing output, prices could falter.

Muller

Muller non-aligned producers are not happy (perhaps an understatement) at the new contracts being offered to them.  The contracts which are due to start on 1^st January are currently being launched at meetings around the country.  But producers are saying the new arrangements effectively amount to a price cut with current volume bonuses being capped at a flat rate.  Muller, on the other hand, has said that the new contract is trying to achieve a better alignment with what the business requires and what it actually gets.  A group calling itself Muller Non-Aligned has been set up and is gaining numbers and momentum, calling for better representation for those suppliers not on supermarket-aligned contracts.  This looks set to run.

Intervention

The European Commission has proposed to start the sale of intervention stocks shortly.  This is earlier than expected, but with milk production still falling and EU prices currently competitive globally, the Commission probably thinks there is ‘room’ on the market.  The first release will be limited to 22,150 tonnes of SMP and if it goes ahead the tender process will have a closing date of 13^th December, with the first sale on 15^th December.  A further 900 tonnes (approximately) is expected to go to tender in January.  There is currently over 330,000 tonnes of SMP in EU intervention stores.

Beef

The beef market has now been on a steady upward trend since May.  The vote by the UK to leave the EU has provided a much-talked-about ‘Brexit boost’.  The significant weakening of the Pound has meant beef exports are far more competitive, especially for the cull cow trade.  Imports of beef are also more expensive, supporting domestic prices.  Trade however remains finely balanced.  Demand for most types of cattle is strong; particularly native breeds fitting supermarket specifications.  However, the price gap between bulls and steers has almost doubled to 30p/kg dw since April, as retailers show their preference for beef from steers or heifers.  Looking forward to the Christmas procurement period the balance could tip in favour of producers given the weakness of Sterling but there seems to be an air of caution among processors who are not sure how strong consumer demand will be.  Looking further ahead to 2017, supplies to the UK market are forecast to be lower, although culls from the dairy sector could increase volumes if the milk market remains challenging.  A lot will depend on demand however.  The weak Pound has given a short term boost to prices but import costs are starting to rise and inflation could reduce consumers’ purchasing power and buying behaviour over the next year.

Lamb

Last year lamb prices fell away at the end of June.  In 2016 prices stabilised at the end of June/July and have been performing well over the autumn.  Despite a larger lamb crop this year, poor pasture conditions throughout the summer has meant that lambs have been slower to finish and slaughterings have been much lower this year compared with 2015.  But prices have also been given a boost from the fall in Sterling after the Referendum which has been particularly good for lamb exports.  About 30% of UK lamb production is exported to the EU, this is expected to continue to rise.  Looking ahead, supplies up to Christmas are forecast to remain tight.  Even though more lambs are expected to come to market, exports are forecast to grow and imports reduce, but this is highly dependent on exchange rates.   In 2017, exports are expected to continue to grow, with imports declining, although consumer demand will influence prices more as, according to the AHDB, production in 2017 is forecast to be higher in every quarter compared to 2016.

Pigs

The UK SPP has been increasing since the beginning of April.  The EU-spec SPP for the week ending 12^th November increased to 149.86p per kg.  This is 23p more than for the same week in 2015 and is 32^nd consecutive week-on week price rise.  Pigmeat prices have been helped by exports to China, which have been significant this year due to insufficient domestic production.  The weak Pound has also ensured UK pork has remained competitive on both the domestic and export market, plus production has been tight.  As a result, producers’ share of retail pork prices has risen by 2 percentage points in October and is now 39%, this is 4% higher than October 2015 and on a par with 2014.  Looking ahead, a shift in the trade balance is forecast.  Imports are expected to decrease, in contrast to exports, which are forecast to increase, resulting in reduced supplies over the forthcoming months which should help to firm the market and continue to support prices.  Although a recent update on analysis carried out by AHDB pork shows how important the exchange rate and EU market is to the GB pig price.  Currency movements contributed 19p towards the rise in their modeled pig price between January and September.  Any strengthening of the Pound or a decline in the European pig price could place downward pressure on price prospects for 2017.