Category: Dairy & Livestock

The requirement to house all poultry to combat avian flu was lifted on the 2nd May.  UK Chief Veterinary Officers removed the mandatory housing requirement for poultry and captive birds.  However, the Avian Influenza Preventions Zone (AIPZ) still remain in force across the UK until further notice, with only the housing measures being lifted.  This means all bird keepers have to continue to abide by biosecurity requirements such as cleansing and disinfecting equipment, clothing & vehicles, limiting access to non-essential people on their sites, and workers changing clothing and footwear before entering and when leaving bird enclosures.  With hens once more being allowed outside, it means the UK free-range eggs can return to shop shelves.  These were removed in March as birds had been housed beyond the 16-week threshold to qualify as free-range at that point.  There have been over 100 cases of avian flu across the country since late-October – the largest ever outbreak.

Defra has released it latest data on livestock populations in the UK as at 1st December.  The table below summarises the figures.  After a number of years of decline, the dairy breeding herd has seen a marginal increase.  But even with better cattle prices, the beef breeding herd continues to fall.  With increases in feed, fuel and fertiliser in the autumn (which have risen further since) and the fall in support payments, some may have taken advantage of the strong cull price is reduce herd sizes or quit the sector altogether.

Looking in more detail, the numbers of both dairy and beef female cattle aged between 1-2 years show a year-on-year increase; 5.3% and 1.8% respectively.  For dairy this could mean a further increase in the breeding herd as the heifers come through.  With high cost levels, dairy farmers may be looking at more cows but with a lower input/lower yield system – if facilities allow this.  For beef, the number of male cattle between 1 and 2 years also shows a 1.8% increase; this could mean more cattle available for slaughter in the medium term.  Male cattle aged over 2 years, shows a 1.4% decline on year earlier levels which is why supplies remain tight.

The sheep breeding flock has seen another increase on the back of high farmgate prices.  The cull ewe price has been exceptional, some may take advantage of this with soaring input costs to reduce their flock size but equally others may replace older ewes with younger, more productive, animals.  The full statistical notice can be found at https://www.gov.uk/government/statistics/farming-statistics-livestock-populations-at-1-december-2021-uk?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=cd5189be-9e99-4a41-aba2-b028a0f9e1c2&utm_content=daily

Pig statistics for the UK at 1st December have been discontinued as the data is no longer available from the Devolved Administrations.

Cattle prices continue on an upward trend.  The average GB all-prime deadweight cattle price rose by a further 4.1p per kg for the week ending 16th April to average 436.3p per kg.  This is 33p above year-earlier levels and 80p per kg higher than the five-year average.  The average GB deadweight cull cow price, for the same week, rose by 2p to average 353.7p per kg.  Although the smallest weekly rise since mid-January this is 77p higher than the same week in 2021.  Cull cow prices have risen hugely since mid-January with the gap to prime cattle prices closing.

The GB liveweight Old Season Lamb (OSL) SQQ has remained fairly steady over the first 4 months of the year.  It has been running below last year’s high price since about February, but is still strong at about 40p per kg above the five-year average.  For the week ending 20th April it dropped just 0.12p to average 276.20p per kg liveweight.  The cull ewe price remains impressive, averaging £115.88 per head for the same week, as demand for Ramadan continues.

However, although output prices are strong, rising costs, in particular fertiliser, fuel and feed are impacting margins.  Next month we will take a look at how all this is affecting our Meadow Farm model.

The 2021/22 milk year (April to March) ended 1.5% below 2020/21 production levels at 12.36bn litres.  After a fairly strong spring flush, production fell quickly from the peak and remained below 2020/21 levels for the rest of the year as input costs started to rise.  For March, there was a rise in month-on-month production as cattle were turned out, but compared with the same month last year the AHDB is reporting deliveries are still running about 3% down.

Turning to the current milk year, the Levy board is forecasting deliveries for 2022/23 to total 12.25bn litres, a further 0.9% decline, but has said this could be worse if costs pressures continue, which at present is looking likely.

2021 was a ‘low growth year’ for global milk production in general; up by only 0.8%.  The current 2022 year is not looking any better.  Updated forecasts now show global production remaining flat from the key exporting dairy regions; US, EU-27, UK, New Zealand, Australia and Argentina.  This is a revision downwards from the previous forecast in January when annual growth of 0.6% was forecast.  Each of the key dairy exporting regions has reduced its forecast although, most notably, the biggest decline is the UK.

On the back of tight supplies prices should remain strong, but by how much prices can continue to increase before demand starts to be impacted is debatable.  Indeed, the Global Dairy Trade (GDT) price index has seen a decline at the last three events.  On 1st March the index reached a record high of $5,065 but fell by 0.9% and 1% at the two auctions held after that and by a larger 3.6% at the latest event held on 19th April.  There are reports that volumes purchased by the Northern Asia region were particularly weak.  However, the average index is still high, standing at $4,855.  Whether this decline will impact other regions remains to be seen; the weekly EU dairy wholesale prices have in general continued to rise through the last couple of months.

At farm level, processors continue to increase farmgate prices in an effort to encourage production.  We reported last month on the frustration of farmers on retail aligned contracts not reacting to costs quick enough.  Those on the Tesco Sustainable Dairy Group will be delighted that the new methodology of looking back three months and forward three months, as opposed to the previous calculation, which looked nine months back and three months forward.  This will see April’s milk price increased by 4.64ppl to 38.80ppl and a further rise of 2.04ppl to give a price of 40.84ppl from 1st May.  Many others are increasing their prices by 2-4ppl for May, the UK’s peak spring production month, unheard of in a ‘normal’ year.

Production and Costs

As the 2021/22 milk year draws to an end, production continues to run behind last year.  The year is forecast to total around 12.34bn litres; 1.6% less than in 2020/21.  Spring 2021 started pretty well, but production fell after the spring peak and, with increasing costs, has never recovered.  This year, however, it doesn’t look like production will be starting strongly.  Milk deliveries are currently running 4% behind last year.  Add onto that the pressure on margins and working capital from the rises in feed, fertiliser and fuel prices, it seems any sudden increases in production are unlikely.  These cost pressures are also expected to continue to impact production going into the autumn and winter when producers will be more reliant on bought-in feeds.

The AHDB is forecasting 2022/23 production to be 12.25bn; a further decline of 0.8% on where it expects 2021/22 to finish.  Its two key variables are size of the milking herd and milk yields, neither of which it expects to increase in the coming year.  The levy board is forecasting the milking herd to continue its long term decline despite youngstock numbers rising since 2020.  The AHDB is not expecting producers to expand their herds this year due to high input costs and also the high costs of building materials required for any expansion project.  In response, there could be an increase in the number of cull cows as the youngstock are used to replace older animals.  Yields had been improving at an average rate of 2.3% until last year.  But following 2021/22, the AHDB is also reducing its projected yield expectation for the coming year.

Higher input prices are seeing the costs of production go up on all farms, but how this is felt will be different depending on the system.  Autumn block and all-year-round calving systems will be more exposed to high feed costs, but spring block calving systems, who are more reliant on grazing, will be feeling the high cost of fertiliser prices.

Prices

Milk prices have been rising, although costs are often escalating faster than the market can react to.  However, some buyers are lagging behind more than others.  The once highly sought-after retail aligned contracts, which are linked  to production costs, have tended not to have kept up with the rapid increases, due to using 6 or even 12 month rolling averages.  The Sainsbury’s aligned pool COP tracker produced just a 0.4ppl rise for April – taking its standard litre to 34.3ppl for Muller SDDG and 34.18ppl for Arla SDDG; some way off the pace (see below).  However, the retailer is planning to make an ‘exceptional intervention’ to its model which will see the price increase by 4.72ppl compared to March.

Other 1st April price increases include:

• Topping the table is M&S who has announced a 0.48ppl increase which means its conventional liquid standard litre has passed the 40ppl mark at 40.03ppl
• South Caernarfon Creameries (cheese) members will receive a 1ppl rise.  Taking its manufacturing standard litre to 37ppl and liquid standard litre to 35.75ppl
• Waitrose aligned suppliers will receive a 1ppl increase (from 1st March).  Meaning its standard litre is now 37.85ppl
• Muller has announced a 1.5ppl increase taking its standard litre to 36.5ppl
• Medina has announced a 2ppl rise for 1st April and a further 2ppl for 1st May, taking its standard liquid price for May to 39.8ppl
• Suppliers to Saputo, will also receive a 2ppl increase, which means its manufacturing standard litre is now 38ppl and its standard liquid litre 36.64ppl.

Budgets

It is hugely difficult to budget in any farming sector currently, including dairying, with such large and sudden changes in prices and costs.  However, we have produced some updated figures for our Friesian Farm model ahead of the Dairy Tech show on the 7th April.  The figures are summarised in the table below.

It can be seen that the 2021/22 year just ending was profitable for the farm as milk prices increased and costs, whilst rising, had not yet hit current levels.  The upcoming 2022/23 year shows the massive increase in the cost of production.  Although the budgeted milk price is also moving up strongly, it results in a margin from production only just above break-even levels.

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 above shows the farm’s actual results for the two previous milk years (April to March), an estimate for the current 2021/22 year then a forecast for 2022/23.  

The British Standard Pig Price (SPP) has seen some stabilisation over the last month and has started to see a much-needed increase.  The latest SPP for the week ending 19th March has actually experienced quite a strong gain, up by 3.2p per kg to 141.71p per kg.  This is the highest price for 2022 and is now above levels received this time last year.  But as we have written about extensively, input costs have risen exponentially and will have more than offset any output gains in the pig sector.  However, over the last couple of weeks there are reports that retailers and processors have been increasing their contribution price by 10-15p per kg, with Morrisons (Woodheads) putting their price up by 30p to 180p per kg; leaving some questioning whether there should be an alternative pricing mechanism to the SPP which can respond more quickly to the market signals.

With very few pigs traded on the spot market, it only makes up a limited share of the SPP in comparison to contract prices.  If contract prices are heavily based on the previous week’s SPP, the effect of other factors that can move the market is ‘dampened’, explaining why the SPP is ‘slow’ to move.

However this does mean producers should continue to receive some much needed price increases over the coming weeks as these feed through to contracts.  Furthermore, the National Pig Association (NPA) has said it has written to all the major retailers asking them to increase their pig price to at least £2 per pig – so producers at least have a chance of breaking even.  It estimates most UK producers are now facing costs of production in excess of £2 per kg.

There is some better news regarding the numbers of pigs overdue movement or slaughter.  Results from the February 2022 survey report 22% of pig farms in England reported having a backlog of pigs on farms as at 1st February 2022, down from 25% on 1st December.  When raised to a national level, this equates to 47,000 weaners over due movement and 155,000 fatteners overdue for slaughtered compared with 73,000 and 168,000 respectively in December.  Still a concern to producers, but at least heading the right direction.

Defra has opened a questionnaire for farmers, asking for suggestions as to what items should be available though the new Animal Health and Welfare Grants.  As part of the Animal Health and Welfare Pathway the grants will fund the purchase of equipment, technology and infrastructure which support health and welfare issues seen as applicable to most farms.  Smaller grants for items valued from around £50 to £10,000 will be available, as well as larger grants for bespoke infrastructure investments.  As part of its ongoing co-design of schemes, Defra wants to make sure it provides grants suitable for all types of farmers that cover the latest innovations, so has created sector specific questionnaires for those interested to share their ideas.  Our article of 11th March set out the health and welfare priorities that had been agreed for the six livestock sectors (pigs, sheep, dairy, beef, meat chickens and laying hens).  Defra is now looking to collect suggestions that would be most effective in helping stock keepers to achieve these welfare priorities.   More information and a link to the questionnaires can be found via https://defrafarming.blog.gov.uk/2022/03/24/animal-health-and-welfare-grants-your-chance-to-suggest-items/  although Defra is not giving respondees much time, as the deadline for suggestions is 31st March 2022.

As of Monday 21st March, free range eggs are no longer available in the UK.  Due to Avian Influenza, the Government introduced housing measures back in November 2021 to minimise the disease spreading .  Meaning that keepers of all chickens, plus ducks, geese or any other birds are legally required to keep them indoors and to follow strict biosecurity measures.  For the first 16 weeks there was a derogation to allow free range eggs (and poultry) to continue to be labelled as free range (even though hens were housed) but this has now come to an end and eggs must now be labelled ‘barn eggs’.  The British Retail Consortium has said most supermarkets are putting up signs to explain this to consumers and once the risk levels have reduced and Defra lifts the housing ban, the birds will then be able to go outside and eggs and poultry will be able to go back to being labelled free range.

It had been hoped that the Government would lift the housing ban soon, but new outbreaks mean this has not happened.  In fact, the Chief Veterinary Officer, on 23rd March, urged poultry keepers in Suffolk to ‘step up their efforts’ in the fight against bird flu following a recent spike in cases in the county.  According to Christine Middlemiss, there have been 5 new infected premises in Suffolk in the last month alone.  The warning comes as the UK faces its largest ever outbreak of bird flu with over 100 cases confirmed since the start of November.

Defra has set out its initial priorities for the Animal Health and Welfare Pathway across each livestock sector.  These have been drawn up alongside industry vets, non-governmental organisations and welfare scientists, and will be the basis for future support for each of the sectors.  A summary is included in the table below;

Through the Pathway farmers will be able to receive financial support to address these priorities.  Funding will be available via:

• An Annual Health and Welfare Review with their chosen vet
• Animal Health and Welfare Grants for investments in equipment, technology and infrastructure
• Disease eradication and control programmes
• Payment by results for ongoing costs

We have written previously about the Annual Health & Welfare Review which will be launched this year as part of SFI 2022.  In addition the Animal Health and Welfare grants are also planned to be available this year and Defra has said it will shortly be sending out a questionnaire asking for ideas for what should be included within these grants.