Category: Dairy & Livestock

There have been many reports in the press that that Avian Influenza (AI) is to blame for a shortage of eggs in the UK, which is angering many producers.  Some of the main supermarkets have started rationing how many boxes of eggs customers can buy (which tends to be a self-fulfilling prophecy as any hint of a shortage leads to panic-buying).  But whilst the worry of AI is hanging over egg producers, spiralling costs is having a far greater impact on egg supplies.  According to the British Free Range Egg Producers Association (BFREPA) a third of UK farmers have cut the number of hens in their flock because they cannot cover costs of production, with producers having been calling for greater returns since March.  According to the Association, the rise in egg prices consumers are seeing on the shelves is not being passed back to producers.

The industry has warned egg shortages are now expected to last ‘beyond Christmas’.  No practical measures of help have been offered by Defra, with Therese Coffey saying she is ‘confident’ that the industry can get through supply issues in the short term.  Meanwhile, NFU poultry board chair James Mottershead has said the Union is having conversations with retailers and also asking Government to look at the supply chain, to ensure it is transparent and that farmers are receiving a fair return.

Meanwhile, Defra has updated its Guidance on Egg Marketing Standards to advise free range producers, who are in areas with housing restrictions due to AI, which includes the whole of England, that they can continue to label their eggs as free range for 16 weeks from the date the birds were housed.  

Production

Favourable weather conditions during October has resulted in record GB production for the month (see Key Farm Facts).  The AHDB is estimating production for the month to be 4% above its own monthly forecast, averaging 33.5m litres per day, some 2.5% more than in September and a 3% year-on-year uplift.  Warm weather and average rainfall resulted in above-average grass growth.  However, with the recent heavy rainfall, most herds will now be housed and moving into the winter months will be more reliant on winter feed at higher costs, meaning yields could fall again if farmgate prices also drop (see below).

Globally, the latest production figures refer to the month of September.  However, these also show a year-on-year uplift (+0.3%).  September is the first month in 2022 to report an uplift in daily deliveries compared to year-earlier levels.  EU production is reported to have grown by 0.8% compared with September 2021, whilst US production was up by 1.5% on the year.  Rabobank is forecasting production in the US to now remain above year-earlier levels for the rest of the year and into early 2023.  This is partly as it is being compared with last year’s low production, but the bank is also reporting herd restocking and an increase in yield per cow.  Argentina has seen a year-on-year growth in production for the second month running, by +0.3%.  An uplift in milk prices in August (+5%) is reported to have encouraged an increase in production.

But challenging weather conditions in Australia and New Zealand has resulted in production for September being down in these countries by 6.2% and 3.2% respectively for the year.  Australia has experienced flooding in some parts with cold, wet weather impacting grass growth in New Zealand.

Prices

We have been wondering if farmgate milk prices had peaked for a couple of months now, but they have kept on edging up.  However, with commodity and futures markets all dropping and production increasing, the outlook for the New Year could see a change, with some forecasting large declines.  The Global Dairy Trade Index, although rising by 2.4% to average $3,623 per tonne at the latest event on 15th November, has shown some big drops since June (see KFFs).  With the only other rises since then being in September, the index average has fallen from its high in March 2022 ($5,039 per t) back to January 2021 levels.  Spot milk prices were trading above 50ppl in August, but are now back to around 45ppl, due to the increase in production.  Bulk cream has also seen a decline recently.  Most buyers are expected to stand-on for December, but eyes will be on Arla, especially following their surprise (large) increase of 1.33ppl announced for November earlier in the month – see (https://abcbooks.co.uk/arla-milk-price-increase/).

 

Arla has announced a 1.33ppl price increase for its members as from 1st November.  The (large) rise is a bit of a surprise given the fall in global markets (see last month’s article https://abcbooks.co.uk/dairy-update-19/) and the stabilisation of domestic milk production.  The increase will take the UK manufacturing price for conventional and organic milk to 52.24ppl and 57.02ppl respectively; this is based on 4.2% butterfat and 3.4% protein.

 

 

All poultry and captive birds throughout the whole of England will now have to be housed from Monday 7th November.  This is in addition to the measures we reported on last month (see https://abcbooks.co.uk/avian-flu-4/) as a result of the introduction of an Avian Influenza Prevention Zone (AIPZ) across Great Britain,  The housing measures legally require all bird keepers to keep their birds indoors and to follow stringent biosecurity measures to help protect their flocks from the disease, regardless of type or size.

The housing order follows a ‘package of support’ for the industry announced by Defra on Friday 28th October.  Under the new plans, the Government will alter the existing bird flu compensation scheme allowing compensation to be paid to farmers from the outset of planned culling rather than at the end. This should provide swifter payments to help cash flow pressures and give earlier certainty about entitlement to compensation.  Important to note, compensation is only paid for healthy birds that are culled to control the spread of the disease.  Compensation is not received for birds affected by the disease.

The support package also includes an easing of the marketing rules in England which will allow farmers who breed turkeys, geese or ducks for their meat to have the option to slaughter their flocks early and to freeze them.  These can then be defrosted and sold to consumers between the period of 28th November and 31st December 2022.

 

 

Beef

Deadweight cattle prices remain strong and have been creeping slowly upwards since August.  For the week ending 15th October the deadweight all steer price was 1.1p per kg up on the week at 440.9p per kg.  Although not as high as in July, it is 31.3p per kg above the same week in 2021.  According to latest Defra figures, total UK production of beef and veal for the period January to September is marginally down on the year at 665,200 tonnes.  Production in September was -1.3% less than August but +0.5% higher than in 2021.  Looking at the slaughter numbers, prime cattled totalled 160,000 in September, up 1% year-on-year, whilst cow throughtput was 6% (3,500 head) higher.  For the period January to September, prime cattle slaughter numbers are similar to last year, whereas cow numbers, on the back of elevated prices are up 3%.  However, total throughput remains below pre-pandemic levels and the 5-year average.  An easing of carcase weights in September means total production for the month remains similar on the year.  Carcase weights have been generally lower throughout the year, not surprising with the rise in costs; producers will want cattle to spend as little time on farm as possible.

Sheep

The deadweight SQQ NSL price has just ‘ticked’ up during the most recent week in October.  This follows a downward trend since mid-August.  For the week ending 18th October the SQQ NSL deadweight price stood at 524.1p per kg, some 4p per kg less that last year when prices started to increase sharply towards Christmas.  Sheep producers will be hoping for the same this year.  According to latest Defra figures, UK sheep meat production in September was 11% lower year-on-year and with similar carcase weights, the decline is due to a reduction in slaughter numbers.  However, production for the year January to September, is 4% higher compared to the same period in 2021.  Slaughter numbers were higher in the months February to May, which will have been influenced by the carryover from the previous year and probably added to the dip in prices in the spring.  But it is noticable how much lower UK clean sheep slaughter numbers have been through July, August and September for the last two years compared to the five year average.  In September thoughtputs of clean lambs stood at 961,000 head, 99,400 lower than last year and compares to the 5-year average for the month of just under 1.1m head.

Production

According to the latest forecast from the Global Dairy Market Outlook, global production for 2022 is expected to be 0.5% below year-earlier levels.  This is the same ‘overall’ forecast as reported in July (see https://abcbooks.co.uk/dairy-markets-update/) although there has been a change to the estimates from individual countries since then.  The global production is calculated from the six key exporting nations of the EU, USA, NZ, UK, Argentina and Australia.  The southern hemisphere countries of NZ, Australia and Argentina are all now forecast to do worse than previously estimated after poor weather resulted in a challenging start to their seasons.  Coupled with rising costs and labour shortages, NZ and Australia are forecasting production to decline by -3% and -4.4% respectively compared with 2021.  Argentina is still estimating growth compared to year-earlier levels, but marginally, at 0.7%.  Previously combined production for the three countries was forecast to decline year-on-year by -0.7%, this has been revised to -2.2% fall.  In contrast, the USDA is forecasting production to now increase by +3.0% in the USA, compared to previous estimates of -0.1% decline, citing herd expansion and an increase in yield during the second half of the year.

Meanwhile the EU and UK are forecasting declines of -0.5% and -1.1% respectively on the year; these are similar to previous production estimates.  However, UK production has started to improve.  For September, the AHDB estimates UK production to be 1,155 million litres; if correct this would be the same as in 2021.  Previously production had been running behind last year, but with the mild weather and rain, grass growth has improved after the dry summer.  The AHDB is also reporting deliveries for the first three weeks of October to be up on 2021, with the latest week (w/e 15th October) running 2.5% (0.8m litres) above the same week last year.

Prices

After seeing an increase at both events in September, the Global Dairy Trade (GDT) Index has been in decline in October.  At the latest event on 18th October, the index fell by -4.6% to average $3,723.  This follows a -3.5% drop earlier in the month.  But September’s increases were not the norm.  The index has now fallen in 12 out of the last 15 events.  In contrast, EU and UK wholesale prices have remained buoyant; why?  The decline in the GDT is mainly due to lack of demand from China due to strict Covid restrictions still in place and an increase in self-sufficiency.  The UK and EU are less reliant on China and currently supply in Europe is lower than demand, supporting prices.  Even so, prices may come under pressure if current high prices relative to other regions results in export demand falling.

Meanwhile UK farmgate prices remain strong, with many processors continuing to announce increases or ‘standing-on’ for November.

Arla is introducing a Sustainability Incentive to its farmers.  Two years ago, the cooperative introduced its Climate Check, which gave producers 1 Eurocent on their milk price for submitting ‘climate’ data from their farms.  From 2023, in addition to this, Arla producers will be able to receive up to 3 Eurocents per kilo of milk for carrying out ‘sustainability activities’.  Thus, future milk price will not only depend on fat, protein and quality, but will also depend on the environmental activities of the producer.

The cooperative will introduce a points-based model, in which activities on 19 different ‘levers’ are rewarded with points. 80 points will be available from the start and a further 20 points will be set aside for more levers, which means that a total of 100 points is expected to be available within a few years.  Each point that the farmer achieves, depending on the level of environmental sustainability activities engaged in, will trigger 0.03 eurocent per kilo of milk.  The cooperative is expecting the average Arla farmer to achieve 39 points or 2.17 Eurocents in the first year.  For a farm with an average annual milk production of 1.2 million kg, this equates to approximately €26,000 (around £22,500 at current exchange rates).  The levers with the biggest impact potential will achieve the most points.

The lever categories that farmers can score points on include:

• The ‘Big 5’
  • Feed efficiency
  • Fertiliser use
  • Land use
  • Protein efficiency
  • Animal robustness

• Manure handling
• Use of sustainable feed
• Use of renewable electricity (on-farm production or purchase of certificates)
• Biodiversity & carbon farming activities
• Knowledge building

From January, there will be an online tool for producers to input their data for the first six months, with the first incentive payment being received in the August 2023 milk cheque, based on deliveries made in July.

Arla which has 8,900 members based in the UK and six other European countries, has a commitment to reduce its emissions by 30% by 2030.  As it says, this is another significant step to being at the forefront of environmentally sustainable dairying.  Others are likely to be playing catch-up and it shows the direction of travel all producers can expect.

 

The first consignment of British lamb in over 20 years has been shipped to the USA.  The Small Ruminant Rule that banned British and EU lamb imports for over 20 years was rescinded by the US Government in January of this year (see https://abcbooks.co.uk/lamb-exports-to-the-us/).  Following the necessary inspections, the United States Department for Agriculture (USDA) agreed to open the market for British lamb.  The news will be a welcome boost to lamb producers, giving them access to over 300 million people and an estimated market of £37m over the next five years.

The Chief Veterinary Officers from England, Scotland and Wales have declared an Avian Influenza Prevention Zone (AIPZ) across the whole of Great Britain as of midday on 17th October.  This is to try and mitigate the risk of the disease spreading amongst poultry and captive birds following an increase in the number of detections of avian influenza (bird flu) in wild birds and other captive birds.  At the moment this just increases the biosecurity levels with no need to house, except for Norfolk, Suffolk and parts of Essex.  In these areas an AIPZ is already in place which includes mandatory housing measures for all poultry and captive birds is this zone.

Keepers with more than 500 birds will need to restrict access for non-essential people on their sites.  In addition, workers will need to change clothing and footwear before entering bird enclosures and vehicles will need to be cleansed and disinfected regularly.  Those with smaller numbers of poultry including chickens, ducks and geese must also take steps to limit the risk of the disease spreading to their animals, this includes ‘backyard owners’.  Measures include keeping birds in a fenced area, feed, water and bedding must be stored undercover, and steps taken to prevent access by wild birds.  Disinfectant footbaths should be place at strategic entry and exit points to housing.

All the latest information can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu#latest-situation

Schedule 1 of https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1111505/AIPZ_Declaration_17_October_England_excl_Norfolk_Suffolk_pt_Essex.pdf contains the minimum biosecurity measures for all keepers.  Those with over 500 birds should also abide with the measures in Schedule 2.

Information for those keepers who reside in Norfolk, Suffolk and parts of Essex and are already in an AIPZ with housing measures can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1109941/regional-AI-prevention-zone-declaration-housing-measure-suffolk-norfolk-part-essex-08102022.pdf 

The introduction of the AIPZ comes after the United Kingdom has faced its largest ever outbreak of avian flu, with more than 190 cases confirmed across the United Kingdom since late October 2021 and over 40 of these confirmed since the beginning of October this year.  The East of England has been hit particularly bad, hence the housing requirement of birds in this area.

Avian Influenza circulates naturally in wild birds and when they migrate to the UK from mainland Europe over the winter they can spread the disease to poultry and other captive birds.  This year, however, the disease has been more prominent in the summer months than previously.

 

Production

According to the AHDB, GB milk production is forecast to reach 12.26bn litres for the current season.  This will be 0.8% less than in 2021/22, but slightly up on the Levy Board’s June forecast (-1%).  The reasoning behind the revised figures is July data from BCMS shows that dairy herd numbers, although declining, are (marginally) higher than previously estimated at 1.63m head (1% decline on the year).  Historically, production has been growing on average by 1.5% per annum and growth was expected to reach 2.3% in 2022 and 2023.  However, yields have been low since June 2021 and are expected to remain subdued for the remainder of the year.  Some recovery is forecast for spring 2023, with a slight improvement on 2022 production, but still below 2021.  But if farm finances worsen, this could lead to further yield reductions and destocking.

Winter forage will be challenging, particularly in the East and South West of England, where the dry weather means silage has been fed sooner than normal.  Reports on silage quality is variable, and also for maize and wholecrop.  According to anecdotal evidence, the situation is highly variable between regions and even farms.

Prices

The GDT index has risen at both the events held in September.  This, it should be remembered though, comes after declines in every GDT auction since March (except for one in June) – quite a contrast to UK farmgate prices which have risen consistently and strongly through 2022.  However, GDT values are still historically high and the latest event takes the index back over $4,000 to $4,072.  In the UK, tight supplies are being weighed against a drop in demand as consumers face increasing tougher economic conditions, even so farmgate price announcements are still positive but appear to be slowing.  Some announcements for October include:

• Freshways 50ppl liquid standard litre will remain for October.
• First Milk has announced a 0.75ppl increase from 1st October, taking its manufacturing standard litre to 49.39ppl.
• Muller Direct suppliers will receive a 1ppl rise from 1st October.  And those aligned to the Tesco Sustainable Dairy Group (TSDG), will also receive the same 48ppl, effectively ignoring the current cost of production calculation.