Category: Dairy & Livestock

Cambrian Mountains Lamb has joined Gower Lamb (see August’s article https://abcbooks.co.uk/gower-lamb/) in being added to the UK’s geographical indications (GI) register.  This means, to be marketed as Cambrian Mountains Lamb, the product has to be produced to an approved specification.  This includes things such as being born, reared and slaughtered within the designated area of the Cambrian Mountains of Mid-Wales and produced from ewes with 80% Welsh Mountain genetics or other traditional Welsh native hill breeds listed in the specification.

 

Gower Saltmarsh Lamb is the first food product to be added to the UK’s new Geographical Indicators (GI) list.  The UK GI replaces the previous EU scheme which provides protection for food produced from specific regions or using defined processes.  It aims to prevent ‘copycats’ undercutting traditional food products.  However, unlike the foods that have been registered under the EU’s scheme, the UK GI only provides protection in England, Wales and Scotland.  It is still possible for UK producers to apply under the EU scheme (third-country applications are allowed) but it requires a separate set of paperwork.  Products already registered under the EU scheme prior to Brexit will continue to be protected – e.g. Stilton cheese, Melton Mowbray Pork Pies.  

Beef

GB cattle prices have been strong throughout the year so far, with prime and cull deadweight values about 50p per kg more than the five-year average.  Robust demand for domestic beef from the retail sector and tighter supplies have supported the price.  According to Defra, UK beef production from January to June totalled 447,100 tonnes; 3% less than the same period in 2020.  Carcase weights are very similar, so the decrease is attributable to lower numbers.  The prime cattle kill and cow slaughter were down 3% and 4% respectively on the year.  Imports and Exports were also lower.  For the period January to May, imports of fresh and frozen beef were 24% less than in 2020, with exports also down for the same period by 30%.  Reduced imports were mainly due to lower shipments from Ireland, but imports from other EU countries were also reduced.  In contrast shipments from non-EU countries increased by 25%; from a pretty low base though, to 2,400 tonnes.  Lower exports to the EU and in particular the Netherlands and Ireland were responsible for the reduction in exports.

Looking ahead, the AHDB is forecasting total UK beef production in 2021 to decline by 4% compared with 2020, to 885,000 tonnes.  Both prime cattle and cow slaughter numbers are forecast to be 4% lower in 2021 compared with 2020.  Average carcase weights have been on a general downwards trend since 2015 and marginally lower weights are forecast for 2021.  Imports are forecast to be down slightly; by 0.4% over the year as trade increases in the second half of 2021.  A rise in demand from the foodservice sector, together with lower domestic supplies is expected to increase the demand for imported beef, this could have a negative impact on GB cattle prices.  However, Irish supplies are expected to be tight this year.  Bord Bia has indicated a 6% reduction in the Irish cattle kill in 2021 compared with 2020.  Furthermore, wider EU beef production is forecast to drop by 1.4% for the year and supplies globally are expected to be tighter for the rest of 2021 due to lower availability in Australia, Brazil and Argentina.  Imports from the EU could also be impacted by changes to requirements on UK imports which are to be introduced from October 2021 such as health certificates.  Physical checks are due to be introduced from January 2022.

With regards to exports, the AHDB is expecting them to decline further than first forecasted for the year; latest estimates are down by 8%.  This reflects the lower volumes in the first quarter (see above), but with trade increasing towards the end of the year as European foodservice markets continue to re-open.  However, exports could be limited by tight domestic supplies, strong cattle prices and the new challenges to export for trade between the UK and EU.  The table below summarises the AHDB’s forecasts for supplies:

For farmgate prices, tight supplies both domestic and from Ireland will continue to support values.  But we have seen how retail demand for British beef has helped during Covid.  The foodservice sector tends to rely more on imported product, so as this market continues to open up it will be important that this sector supports domestic suppliers.

Sheep

Finished lamb prices reached record-breaking highs this spring and continue to trade comfortably above the highest price received over the last five years (which currently happens to be last year).  Similar to beef, sheep prices are being supported by tight supplies and strong domestic demand from retail and the takeaway market.  Imports for January to May are down by 20% year-on-year.  Shipments from New Zealand and Australia have been reducing for a few years now due to lower production in these countries and also an increase in demand from Asia.  Imports from Ireland have also more than halved over the period.  UK exports relate closely to production, and so the reduction in lamb output impacts on exports.  Additional trade friction between the UK and EU has also played a part in exports declining by 23% over the first 5 months of the year.

This year, the monthly lamb slaughter profile is expected to return to a more normal pattern.  In 2020 the Brexit uncertainty saw lambs marketed earlier than usual.  As a result, the AHDB is forecasting the lamb kill in the second half of 2021 to be 4% lower than in 2020, with a 4% year-on-year increase in the carry over.  A lower lamb kill combined with reduced adult slaughter numbers results in the AHDB forecasting the UK sheep meat production for the year to decline by 7% to 274,000 tonnes.  Imports and exports are both forecast to decline.  Supplies from both Australia and New Zealand are predicted to continue to be lower than historic levels.  Both are rebuilding their flocks following droughts and demand from Asia remains, but this may be limited as Chinese domestic pork production recovers from African Swine Fever.  In addition, global shipping costs and container availability is reducing the competitiveness of New Zealand lamb.  Imports are expected to decline by 13% this year, although this is expected to stabilise as imports are required to balance domestic production in the UK.  Exports will correlate with production and will therefore also decline this year.

Tight domestic supplies and high shipping costs should help insulate the UK market and support prices through 2021, as there are signs global prices are starting to decrease.  Further ahead will depend on whether the increase in consumer demand can be maintained.  The table below summarises the AHDB’s forecasts for supplies:

 

GB milk production is forecast to increase by 0.3% to 12.58 billion litres in the 2021/22 milk year according to the latest forecast from the AHDB.  Although the milk herd is expected to decline, higher yields are forecast to compensate.  However, the levy board does acknowledge yields may be ‘challenged’ over the winter if margins remain pressured by high feed costs.

Youngstock numbers have been rising since 2020, due in part to the increased use of sexed semen.  But the milking herd is still expected to continue its long-term decline.  Rather than leading to an increase in the herd, higher replacement numbers are expected to provide a younger, more productive one as farmers cull out older, less productive animals, especially as the cull cow price is so attractive.

Retail demand for dairy has remained strong through the pandemic.  As the foodservice sector opens up expectation is retail sales will ease compared to 2020 levels but remain above pre-Covid levels.  Consumers are expected to continue to partly work from home and the trend towards cooking from scratch is likely to continue as household budgets are squeezed.

In the medium term, global demand for dairy products is forecast to remain strong.  Latest figures from the FAO-OECD Agricultural Outlook show per capita consumption rising across the board.  However, more immediately, softening of demand from China in the second half of 2021 and growing supplies from New Zealand could impact prices later in the year.

Domestic prices for dairy products have performed well so far in 2021 and continued retail demand plus the re-opening of the ‘out-of-home’ sector are expected to be able to absorb any growth in milk production over the remainder of the year.  As import demand returns, prices will be impacted by global trends.  The competitiveness of imports will also be dependent on the logistical challenges of the new UK/EU trade deal.  But both processor and farmers’ margins are likely to be pressured by rising costs.  In particular, for processors higher energy and labour costs, and for farmers feed and fuel.  Keeping a handle on these over the coming months will be key.

The new Livestock Information Service (LIS) will be launched in November for reporting animal movements.  Initially it will only be for reporting sheep, goat and deer movements and will replace the current Animal Reporting and Movement Service (ARAMS) which is currently used for these types of livestock.  Later in 2022 and 2023 it will also replace the present systems used for cattle and pig movements (BCMS and eAML2) and will become an easy-to-use service for all species.  The LIS has been developed by Livestock Information Ltd, a new company set up in October 2019 to improve how animal traceability is managed in England.  It is owned by AHDB and Defra meaning it can collect statutory data for government, but also data to provide livestock businesses with information and analysis.

 

 

 

Production

GB Milk production has experienced the fastest decline from peak for 10 years.  According to the AHDB, production in the 2nd week of July was running at 4.1 million litres (11%) per day lower than at the peak in the spring.  Volumes have fallen sharply in the last month – being 3 million litres per day less than at the start of June.  For the week ending 10th July, deliveries averaged 33.58 million litres per day, lower than both 2019/20 and 2020/21 milk years.  As we reported in May, the peak this year was in late April, earlier than usual, so production has had longer to fall from the high.

Grass growth has been unusual this year, with late frosts impacting early growth.  But throughout June growth has been above the five-year average.  However, the AHDB’s Forage For Knowledge survey reports both crude protein and metabolisable energy content have both been low, which will have had an impact on yields and with the high price of feed, high input and indoor herds will be more cautious.  There is also anecdotal evidence of an increase in autumn calving herds meaning these cows are now being dried off.  But, perhaps of more concern and likely to have more of an impact is the recent high temperatures.  Deliveries for this period are still not published but the heat stress on the cows (and grass) will mean production is likely to drop further before any increase is seen.

In contrast to domestic output, Global supplies are rising, although it must be noted data is only available until the end of May.  Milk deliveries in the six key exporting regions (EU 27, UK, Argentina, Australia, NZ and the US) were 3.3% higher year-on-year in May, reaching 828m litres per day.  This is the highest annual increase since November 2017.  Deliveries for NZ for May were up by 7.6% on the year, but production in NZ for May is relatively low and this only accounts for an extra 2.2m litres.  The US were the main contributers, experiencing a growth in production of 4.6% for the month, an increase of 12.5m litres per day compared with May 2020 – although it must be remembered production in 2020 was limited due to Covid-19 lockdowns.  In the EU-27, Italy, France and Ireland contributed the most to the increase in production, which after a slow start to the year has seen May deliveries up by 2.3% year-on-year.

Prices

The Global Dairy Trade (GDT) average price index has experienced marginal declines at each of the events in May and June, but for both auctions in July the drop has been larger.  At the beginning of the month, the average index was down by -3.6% and at the latest event it fell by a further -2.9% to $3,839.  SMP and WMP made up the majority of product on offer and experienced declines of -5.2% and -3.8% to average $2,971 and $3,730 respectively.

GB farmgate milk prices remain strong, with prices either rising or standing-on for August; notable announcements include:

• Arla has announced its prices will stand-on again for August
• Tesco aligned group will receive a 0.53ppl increase from August
• Both suppliers to Saputo and First Milk will receive a 0.5ppl increase from August.  For First Milk this is the fourth consecutive increase.

Cattle

Prime cattle prices are on the increase again.  After rising strongly from March, the GB all prime average deadweight price peaked at the beginning of May at over 65p per kg more than the five-year average and over 85p per kg higher than at the same point last year, when prices were (admittedly) at their lowest.  Deadweight values eased a little throughout May but have been increasing again since June.  The GB all prime average for the week ending 17th July was back over £4 per kg at 400.08p.   For those hitting R4L specification, steers rose by 1.3p per kg on the week to 411.0p per kg and heifers by 2.4p per kg to 411.4p per kg for the same week.  Liveweight cattle prices are also up for the week ending 21st July; the all steer price by 3.3p per kg and all heifer price by 2.5p per kg to average 228.2p per kg and 234p per kg respectively.  The only cattle category to post a decline was cull cows.  Tight supplies continue to support the beef price with estimated slaughter numbers for prime cattle down by 1,000 head to 30,700 compared to the previous week.

Lamb

There was a sharp (seasonal) decline in lamb values at the beginning of June as New Season Lamb (NSL) numbers increased, but prices have remained comfortably above the highest price for the last five years.  Values stabilised by the end of June.  Prices for the latest week have seen an uplift as demand increased for the Muslim festival of Eid al-Adha which ran from 20th – 23rd July.  For the week ending 21st July the GB average NSL (liveweight) SQQ rose by 9.4p per kg on the week to average 260.7p per kg.  This is more than 44p up compared with the same week in 2020 and 70p higher than the 5-year average.  Deadweight values have also experienced an uptick.  For the week ending 17th July the GB NSL SQQ rose by 2.1p per kg on the week to 548.5p per kg some 69p per kg more than for the same week last year and 106p per kg more than the 5-year average.

Pigs

GB finished pig prices continue to move upwards and are now comfortably above the 5-year average.  For the week ending 17th July the EU-spec SPP rose 0.78p per kg on the week to average 160.66p per kg.  Even so they have still not quite caught up to last year’s values.  However, prices started to decline at this point in 2020, so if values continue their steady increase they look set to overtake last year shortly.  Slaughter numbers were notably down on the week by 6,400 (3.7%) and 10,700 head compared with the same week in 2020, with reports of staffing shortages in processing plants probably due to workers being ‘pinged’ due to Covid-19.

The EU is proposing to ban all cage systems for farmed animals.  This would cover laying hens, broilers, other poultry, rabbits, sow stalls, farrowing crates and individual calf pens.  It is proposed legislation would be put forward  before the end of 2023 with any ban coming into force in 2027.  The move is in response to a European Citizens Initiative (ECI) signed by 1.4m across the continent.  With Defra keen to push higher animal welfare in the UK, this move would mean that there is less chance of our farm produce being undercut by lower-standard produce from our closest neighbour.  

Pigs

Pig prices have continued to increase.  In the week ending 19th June the GB EU-Spec SPP rose by a further 1.17p per kg on the week to average 156.99p per kg.  Although still 7.94p behind the price for the same week in 2020, it is now comfortably (7.28ppkg) above the five-year average.  The longstanding rule-of-thumb is that margins should be achievable for efficient pig producers if the pig price is above 140p per kg (although current high feed prices makes this more challenging).  Back in February/March the SPP dropped to 139p per kg, but has been rising since.  Estimated slaughter numbers are up on the week by 2% at 175,800 head.  This is 23,800 more than last year and 13,500 head more than the 5-year average for the same week, meaning demand is driving the price increase.

Lamb

The lamb price has been exceptional.  But prices have seen a sharp drop over the week ending 23rd June.  There is always a seasonal decline at this time of year as numbers of new season lamb (NSL) coming to market increase considerably.  Even so prices are still good at 230.58p per kg liveweight.  There may also have been a little bit of early marketing of lambs, some not quite ready, to try and capitalise on the high prices, as numbers were 8% higher than last year and also the year before.  At this time of year, GB shifts to being a net exporter for sheep meat and as British lamb has been at a premium to French (our key destination) over recent weeks, export demand will be reduced.

Beef

In contrast to lamb, the cattle price has risen over the latest week.  After six weeks of decline, for the week ending 19th June the deadweight price has risen for all categories of cattle.  The all prime average price was up by 3.4p per kg to 393.2p per kg deadweight.  The price remains strong at 32.7p per kg above the same week last year and 42.4p per kg above the five-year average.  Domestic supplies remain tight, prime slaughter numbers were down 2% on the week and 7% on the year.  It will be interesting to see what happens when Covid restrictions are lifted as the switch to home consumption appears to have been in domestic producers’ favour as a lot of food service product is imported, whilst that on the supermarket shelves tends to be GB-sourced.

Grass growth has been good through June after a very slow start in April.  But whilst farmers have been filling clamps, there is concern over the quality of this year’s silage.  Accoeding to the AHDB, crude protein levels appear to be below the five-year average.  Monthly figures for June are only recording 18.7% compared with the five year average of 21.5% for the month.  Poor quality silage could mean higher feed costs in the winter if producers having to supplement diets.

The Global Dairy Trade (GDT) average index has seen very little movement since the middle of March.  However, that said the last five events, although marginal have all been downwards, with the most recent the largest at -1.3%.  But the overall average is still historicaly high at $4,083 and the mood from New Zealand is positive.  Both SMP and WMP recorded declines at the latest auction of -1.7% and -1.8% respectively.  Butter also fell by -1.7%.  By contrast, both Anhydrous Milk Fat and Cheddar recorded marginal increase of +0.6% and +0.2%.

GB farmgate milk prices remain strong, with the majority of milk buyers increasing their price to suppliers for July with a few ‘standing-on’ for the month with First Milk having announced a further increase for August.  Suppliers will receive a further 0.5ppl rise, the fourth consecutive increase from the processor.  Other notable announcements from 1st July include:

• 0.75ppl increase for suppliers to Muller (Direct), Joseph Heler, Belton Cheese and Meadow Foods
• Sainsbury’s (SDDG) producers will receive a 0.89ppl increase
• Arla has announced its prices will remain unchanged for July