Category: Dairy & Livestock

UK milk production in September totalled 1,136m litres.  This is a 4.5% decline compared to August 2023 and 1.3% below deliveries for the same month last year.  This is the first month in the 2023/24 milk year that deliveries have been below year-earlier levels.  Cumulative production to date is, however, still ahead of last year, but only by about 0.3%.  Some of the drop in September has been attributed to the disruption from milk haulier Lloyd Fraser going into administration during the month, even so, the AHDB are forecasting milk volumes to slow by at least 0.5% over the rest of the milk year and this could be greater if milk prices do not recover.

In terms of prices, UK dairy wholesale markets made some positive movements during October on the back of declining production.  All products have recorded an increase in prices.  Cream prices have gained by £140 per tonne over the month with both butter and SMP improving by £360 per tonne.  Mild cheddar, although recording an increase, this was lower at just £30 per tonne.  The recent increases in the GDT have also supported commodity markets.  At the two events held in October, the average index has increased by +4.4% and +4.3% respectively and now stands at $3,202 per tonne.  The index has increased by 16.9% over the last four auctions and is now over $3,000 per tonne for the first time since July.

With milk production declining and commodity prices increasing, this should alleviate some pressure from farmgate prices, although it might take a couple of months to filter through.  Meadow Foods and Barbers Cheese have both announced prices will ‘stand-on’ for November.

Defra is inviting views on changes to bovine (including buffalo and bison) identification, registration and movement in England.  The current Cattle Tracing System (CTS) was introduced back in 1998 and according to Defra is unable to accommodate any further development.  A new system is required to ensure ongoing confidence to consumers, and the international community.

The government’s ambition is to achieve a ‘world-leading Livestock Information Service (LIS)’ while simplifying legislation and supporting new technology.  This will allow disease to be identified and controlled more effectively.  Working with industry, it aims to put new processes in place to ‘improve the quality of cattle traceability data, and speed at which it is captured’ whilst reducing the administrative burden for keepers, livestock markets, and abattoirs where possible.

The plan is that when bovine electronic identification is introduced, keepers will be able to scan a beast’s ear tag to access its digital record, make changes, and report births, movements, and deaths.  This should mean keepers will no longer have to maintain a separate on-farm holding register or manually update passports.  Markets and abattoirs will also be able to process electronically identified animals far more quickly without need to cross-reference, or manually update passports.

Defra has said it will be working closely with stakeholders across all parts of the industry to plan the transition to a fully digital service at a pace that suits industry needs.

The full consultation can be found via https://consult.defra.gov.uk/bovine-id-and-traceability-policy-team/changes-to-bovine-identification-registration-and/.  Responses need to be submitted by 15th November.

Domestic milk deliveries continue to run ahead of last year.  The AHDB is estimating daily GB deliveries are about 0.8% higher than year-earlier levels, despite falling milk prices.  Production is being helped by good grazing.  After a difficult start to the season, grass growth has remained healthy throughout the season, although this has not been the case in Northern Ireland, where July and August have been particularly wet, impacting grazing.  (Defra monthly production figure are included in Key Farm Facts (KFFs).)

In terms of prices, quite surprisingly the GDT average price index has seen increases at both of the events held in September; the first rises since May.  In the auction held at the beginning of the month, it climbed by +2.7%, following a decline of -7.4% at the end of August.  In the latest event, held on 19th September, the index increased by a further +4.6% to average $2,957.  All products on offer experienced an increase, apart from Cheddar;

• SMP               +5.4%     $2,400
• WMP             +4.6%     $2,799
• Butter            +3.8%     $4,723
• AMF               +5.3%     $4,787
• Cheddar         -1.7%      $4,044

UK farmgate prices continue to decline with buyers citing pressure from commodity dairy markets both at home and globally.  Announcements from 1st October include;

• 1.6ppl reduction from Wyke Farms, bringing its standard liquid litre down to 36.106ppl
• Meadow Farms has announced a 1ppl reduction, this reduces its standard liquid milk price down to 33ppl
• Barber’s Cheese has also announced a 1.6ppl reduction.  This comes after an increase in August which it held for September.  This results in a standard liquid price of 35.15ppl

Meadow Farm has been updated for Anderson’s latest Webinar.  An increase in the lamb price since the previous update earlier in the summer means, even though the arable gross margin has declined, the returns for the current 2023/24 year have improved.  However, the farm’s margin from production remains negative and with declining subsidy payments the future for the business as it currently operates looks unsustainable.

Meadow Farm is a mixed lowland farm, 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 table below shows the final results for the last two years, an estimate for  2023/24 and a (tentative) forcast for 2024/25.  The 2021/22 year was exceptional as the farm made a margin from production for the first time in many years.  For 2022/23, it can be seen how ‘agflation’ impacted even when livestock and crop prices were buoyant.  In that year input prices rose substantially and feed costs were especially expensive for this type of holding.  The result being the farm made a loss of £208 per Ha from production.  A further cut to the BPS meant overall the farm made a loss.

For the current, 2023/24 year, high beef prices and an improved lamb price result in a higher estimated livestock gross margin.  Meadow Farm markets its cattle in the autumn and lambs from July through to December.  It looked likely that the beef price would have to be adjusted downwards as cattle prices had fallen throughout the summer, but over the last month they have made a strong upsurge.  The GB deadweight steer overall price has risen from a year low of 455p per kg in the week ending 12th August to 475p per kg in the w/e 16th September 2023 (see Key Farm Facts).   The lamb price has been at similar levels to last year over the summer, but is now tracking above it.  The latest GB deadweight SQQ overall figure for the w/e 23rd September 2023 was 553p per kg compared with 525p per kg a year earlier.  Whilst lower cereals prices brings down the crop gross margin, the overall gross margin figure is higher than 2022/23.  However, overhead costs are drifting upwards and the farm again makes a loss from production, although lower than the previous year.

The budget for the 2024/25 year shows a deterioration in the margin once more – mainly through lower budgeted prices.  With another drop in the BPS the farm returns to a loss-making position.  Meadow Farm is currently in the Countryside Stewardship scheme.  This agreement ends December 2023 and the proprietors are currently drawing up an SFI scheme to start when the CS finishes to see if some of the ‘lost’ BPS can be recouped from this scheme.

Defra has widened the eligibility criteria for the SFI Annual Health and Welfare Review.  Previously it was only eligible to those who had received the BPS.  But farmers who have not received the BPS before, as well as those who applied for the Lump Sum Exit Scheme payment, can now apply for the funding to pay for a vet to visit their farm and carry out of a health and welfare review.  There is just a minimum number of animals now:

• 11 or more beef cattle
• 11 or more dairy cattle
• 21 or more sheep
• 51 or more pigs

For further details go to https://apply-for-an-annual-health-and-welfare-review.defra.gov.uk/apply/guidance-for-farmers#check-youre-eligible-to-apply  This is likely to affect more smaller farmers, but it could also affect some livestock keepers who take land on ‘grasskeeping’ only arrangements and did not claim the BPS.

The Global Dairy Trade (GDT) average index has fallen by -4.3% and -7.4% at the events held in August.  The average index now stands at $2,875 compared with $3,768 this time last year.  The last time it dropped below $3,000 was in June 2020.  WMP and SMP fell by -10.9% and -5.2% respectively at the event held on 15th August.  Butter also weakened by 3%, although cheddar experienced a +5.8% rise.  The GDT is seen as the bellwether for global markets, meaning domestic prices could well remain under pressure.

Ongoing weak demand from China is influencing world milk markets.  Chinese dairy imports started to weaken in 2022 and this trend has continued into 2023.  In the first half of 2023, China’s total imports of dairy products stood at 1.39Mt, a decrease of 15.2% year-on-year; this is at a four-year low.  The decline is due to a number of reasons including the heatwave the country has experienced, a slowdown in economic growth, zero-Covid policy and an increase in home production.  In 2023, China’s milk production is expected to increase by 4.6% compared with 2022 to 41 million tonnes, with WMP increasing by nearly 1.12 million tonnes – meaning demand from China for WMP will be limited.  With China being one of the major importers of WMP, they strongly influence global markets, hence the weakness currently being experienced.

In terms of domestic farmgate prices, the Defra UK milk price actually showed a slight increase in July’s price, which stood at 36.11p per litre compared with 36.02p per litre in June.  However, this is still over 10p per litre down compared with June 2022.  Both Meadow Foods and Barbers have held their prices for September, but Belton Farms has announced a 1ppl cut to bring its price to 36.05p per litre.

UK milk production has eased over the month to record 1,247 million litres in July; 2.2% lower than in June, although 1% more than July 2022 when production was affected by the heatwave. Milk prices and production figures can be found in Key Farm Facts.

OMSCO (Organic Milk Suppliers Cooperative) has changed its trading name to Organic Herd.  OMSCO is the UK’s largest organic dairy co-op and the rebrand is accompanied by the launch of a premium range of products including cheeses, butter, chocolate and drinking chocolate.  CEO Martyn Anthony said the aim is to communicate its values as ‘a producer of the highest quality organic milk and milk products, as well as being a leader in championing the intrinsic benefits of organic dairy’.

Beef

The latest prime cattle prices have recently shown a week-on-week increase after falling for most of the summer.  Although prices have been comfortably above year-earlier levels for the whole of 2023, the rises throughout the spring have almost been eroded.  Since the end of May, the GB deadweight All-steer price has fallen from 494p per kg for the week ending 20th May to 455p per kg on 12th August.  In the week ending 19th August, the price rose by 1.7p per kg on the week, the first rise in 12 weeks.  It is too early to say if prices have now stabilised, but why have we seen such a decline?

Domestic demand has fallen due to the cost of living crisis.  According to Kantar retail data, volumes of beef sold through GB retail has been below 2022 levels since the start of the year.  The unpredictable summer weather as further impacted sales of burgers and grills.  Although beef volumes in the food service sector has been positive, this has been more than off set by the decline retail.  This picture is similar on the Continent, with consumers reducing spending and this is expected to continue for the rest of the year, according to European Commission forecasts.

The pressure on prices has been further exacerbated by an increase in supply.  Not only have UK slaughterings inceased, but imports of Irish beef started to rise in May, following several months of lower volumes.  Furthermore Bord Bia is forecasting Irish cattle slaughter to increase in the final quarter of the year.  However, overall supplies will be less than in 2022, when the kill was particularly high.  But not only have volumes increased, the price of Irish cattle has also fallen, placing downward pressure on UK prices.  Irish cattle prices are reliant on the export market and with reduced demand on the Continent (see above) prices have fallen.  British cattle usually trade at a premium, but this drop in the Irish price is pulling down GB prices as well.  This could affect a recovery in markets into the autumn.

Lamb

The new season lamb trade appears to be stabilising just ahead of last year’s levels, following its seasonal decline.  The GB liveweight SQQ for the week ending 19th August was 261p per kg compared with 239p per kg for the year earlier.  Similar to beef, domestic demand has weakened as consumers switch to cheaper proteins, but so far this year prices have been supported by export demand.  Shipments in the first quarter of 2023 grew by 22% year-on-year.  Supplies have tightened on the Continent due to declining production and product from Australia and New Zealand being diverted to the Chinese market.  If this continues, domestic prices should remain supported.

A new industry-led bovine TB project has commenced in Wales.  The Pembrokeshire Project is part of the five-year bovine TB Delivery Plan in Wales, announced back in March.  The project aims to facilitate collaborative working between vets and farmers and empowers ‘local informed decision making’ and leadership in diseased control.  The project will work with a small sample of farms in Pembrokeshire, where the bovine TB incidence and prevalence has worsened against the overall improving national backdrop.

Defra has released the guidance for the new Animal Health and Welfare Infrastructure Grant to give applicants time to prepare ahead of the scheme opening later in the summer.  Grants of between £15,000 and £500,000 will be available for infrastructure projects which improve the health and welfare of animals.  This first round of grants will be for improving or building new calf housing; in the future funding will extend to adult cattle, pig and poultry housing.

In this round, the grant can pay for capital costs to build new, or upgrade existing, calf housing buildings such as:

• A-frame buildings with 4 walls
• mono-pitch buildings with 3 walls and one open side
• permanent open-sided structures with igloos or hutches

The buildings must be a permanent non-movable building, intended for use for a minimum of 5 years.  Other types of building that do not fit the above categories may be eligible but the grant offers funding to help deliver higher standards for health and welfare and is not intended to help meet the minimum standards.  Where the building allows (size, aspect, etc), the roof must be designed to support solar PV panels, for use as part of the project or potential use in the future.  These are eligible for funding and do not form part of the minimum grant.

Grants cover a maximum rate of 40% of the eligible costs (25% of the rooftop solar PV).  The grant is competitive and will be scored against funding priorities (improve calf health and welfare, enhance environmental sustainability, introduce innovation).  The application is a 3-stage process;

• Stage 1 – Online Checker – an initial eligibility check and to see how the project fits with the funding priorities
• Stage 2 – Ambient Environment Assessment (AEA) – if a project scores well at Stage 1, applicants will be asked to send in details of the design and specifications of the proposed project
• Stage 3 – Full Application – those that supply a satisfactory AEA will be invited to make a full application.

Full details on how the grant works, the specifications and how to apply can be found via https://www.gov.uk/government/publications/calf-housing-for-health-and-welfare-2023.  The precise opening date for the scheme is not yet known.  We will keep readers informed.