Category: Dairy & Livestock

Since our last article there has been multiple reported cases of Avian Flu and number of 3km Protection Zones and 10km Surveillance Sites have been put in place across the country.  With the worsening situation the the Chief Veterinary Officers for England, Scotland, Wales and Northern Ireland have agreed to bring in new housing measures from Monday 29th November.  This will mean that it will be a legal requirement for all bird keepers across the UK to keep their birds indoors and to follow strict biosecurity measures in order to limit the spread of and eradicate the disease.  There is already a requirement to house birds, in the districts of Harrogate, Hambleton and Richmondshire in North Yorkshire, but this will now cover the whole of the UK.  All the latest information can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu including links to information in Scotland and Wales.

UK milk production for October is lower than last year and supplies remain tight.  As is usual for this time of year, deliveries have increased compared to the previous month, but are about 1.5% lower than last year (see Key Farm Facts for data).  Restricted supplies are resulting in a rise in wholesale market and farmgate prices.  But processors are also facing increasing costs and further farmgate prices could be constrained unless costs can be passed on to consumers.  An increase in production in response to the high prices is also likely to be limited due to escalating input costs.  Whilst feed costs have been steadily increasing since the start of 2020, energy and fertiliser prices have risen sharply since the beginning of this year, squeezing margins (See our Friesian Farm article https://abcbooks.co.uk/friesian-farm-update-7/).

Reacting to tight global supplies, the GDT overall average price index recorded its biggest price rise since March at the beginning of November (up by 4.3%).  This was followed up by a further 1.9% increase at the latest event held on 16th November to average $4,287 – the highest figure since 2014.  Butter rose by 3.5% to $5,534 with WMP and SMP rising by 1.9% and 1.4% respectively to average $3,987 and $3,676.

UK processors have also responded.  In what looks like a bid to secure future supplies Arla has announced a 3.03ppl increase for its members from 1st December.  This will take its members liquid standard litre price to 35.29ppl and standard manufacturing litre to 36.68ppl.  Other notable increases include:

• Both Freshways and Medina have announced 3ppl increases from 1st January.  This will take their standard liquid litre to 33ppl and 32.8ppl respectively.
• Muller Direct suppliers will receive a 2ppl rise, also from 1st January, taking its standard litre to 32ppl

The Government has introduced a Slaughter Incentive Payment Scheme (SIPS) with the aim of increasing the throughput of pigs via processors and easing the backlog on farm.  The scheme is part of a package of measures which we wrote about last month (see https://abcbooks.co.uk/pig-sector/) These were introduced by Government to support the pig industry because of a build-up of pigs on farm due to a lack of processing capacity brought-on, in part, by a shortage of skilled butchers and disruption in CO2 supplies.

The scheme will contribute towards the extra costs involved in operating additional slaughter shifts at abattoirs.  The scheme is being run by RPA, it opened on 16th November and will close on 20th December 2021.  The claim period will run from 21st December to 31st January 2022.  The payment rate will be £3 per eligible pig and will be made within 28 days of a valid claim.  All pigs must be slaughtered and processed in England.  Further eligibility rules and how to register can be found at https://www.gov.uk/guidance/slaughter-incentive-payment-scheme-sips?utm_medium=email&utm_campaign=govuk-notifications&utm_source=6977af8b-8d04-40e0-b954-14947419170a&utm_content=daily

The latest figures for our Friesian Farm model illustrates the rapidly changing fortunes of dairy farming as milk prices and costs both move sharply.

Friesian Farm is a notional dairy business milking a little over 200 cows.   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 below shows the farm’s actual results for the two previous milk years (April to March), a budget for the current 2021/22 year then a forecast for 2022/23.  

The figures are averages for an entire milk year.  For the current 2021/22 year, this means milk prices are not as high as presently seen, as, for a large portion of the year values were lower.  By the same token, whilst costs have risen (winter concentrate feed being a big element) the biggest rises have only been seen over the last few months.  In particular, fertiliser for the year was bought last spring at far more ‘normal’ values.  This means the returns for the current milk year look likely, on average, to be good.

It is in the following year that cost increases are really seen.  This is not just in areas such as feed, fertiliser, fuel and electricity, but also in costs such as labour, property repairs and machinery purchase.  Even with a higher milk price, returns are much reduced.  The effect of the Agricultural Transition in England can also be clearly seen with the pence per litre value of the BPS declining.

Budgeting ahead is currently difficult due to the fast-moving situation with costs and prices.  However, it is fairly clear that testing times for dairy profitability lie ahead.

 

An Avian Influenza Prevention Zone (AIPZ) has been declared across the whole of Great Britain as of 5pm on 3 November 2021.  It introduces strict biosecurity measures for all bird keepers (including those who keep pet birds) to help prevent the spread of avian influenza from wild birds or any other source.  This means for keepers with more than 500 birds, they will need to restrict access for non-essential people on their sites, workers will need to change clothing and footwear before entering bird enclosures and site vehicles will need to be cleaned and disinfected regularly to limit the risk of the disease spreading.

The AIPZ, now in force across GB, does not currently include a requirement to house birds.  However, this is being kept under constant review.

The most recent outbreak has been confirmed in birds at a premises in Angus, Scotland.  Further testing has confirmed this to be a highly pathogenic strain (HPAI H5N1).  A 3km Protection Zone and 10km Surveillance Zone are now in place around the premises.  Disease Control Zones remain in force around premises near Chirk, Wrexham and a premises near Droitwich Spa, Worcestershire, England.

Further information is available on the Government website at https://www.gov.uk/guidance/avian-influenza-bird-flu

Production

Global milk forecasts have been reduced as we head towards winter.  The challenging weather and increase in feed costs, despite good prices (see below) has seen the combined growth forecast from the six largest largest exporters (EU-27, US, Australia, Argentina, NZ and the UK) reduced from 1.4% down to 1% for 2021.  This equates to about 1.1bn litres.

But not all the countries have reduced their growth, some have increased.  Both the US and the EU-27 have decreased their forecasts by about 1.4bn, but this has partially been offset by increases from Argentina and NZ.  Increased production costs in the US is expected to result in a drop in cow numbers and yield in the second half of the year, meaning its forecast has been reduced, even so production from the US is still expected grow by 1.7% year-on-year.  The EU-27 has reduced its annual growth to just 0.3%.  Similar to the UK, challenging grass growing weather over the summer and high feed costs is impacting on yields; although there could be some recovery in the last quarter.

New Zealand and Argentina, on the other hand, are forecasting 1.9% and 2% growth for 2021.  In NZ this has already been delivered and further growth compared to last year’s levels over the remainder of the year is unlikely.  The UK and Australia are forecast to see growth of 0.4% and 0.9% respectively for the year.

Prices

With production globally and at home falling, prices continue to rise.  At the latest event held on 19th October 2021 the Global Dairy Trade index increased by 2.2% to $4,061.  SMP and WMP rose by 2.5% and 1.5% to average $3,401 and $3,803 respectively.  Butter increased by 4.7% to $5,111.  All products recorded an increase on the previous event.

In the UK, spot milk price is trading over 40ppl now, with UK bulk cream looking likely to reach £2.00 per kg.  All farmgate prices are increasing, but costs are also rising at an alarming rate.  Arla has announced it will be increasing the price paid to its conventional suppliers by 0.9ppl (€1) from 1st November.  This will take its manufacturing standard litre to 33.52ppl and the liquid standard litre to 32.26ppl.  However Graham Wilkinson, Group Senior Agricultural Director at Arla Foods, has commented that cost inflation is impacting farmers in a way they haven’t seen in many years.  He also acknowledged that November’s increase ‘will simply not be enough’ to cover the increase in longer-term costs that so many farmers are now experiencing.  This in turn could pose a risk to its supply in the UK and Arla will be focusing on this going forward.  Other notable price changes from 1st November include:

• The first to make an announcement was Muller.  Its Direct Suppliers (non-aligned) will receive a 1ppl increase from 1st November, taking their standard liquid litre to 30ppl
• The Tesco cost tracker has recorded a 0.7ppl increase meaning Tesco aligned producers from the Muller Group will receive 33.36ppl from 1st November and Arla suppliers 33.11ppl.
• Glanbia has announced a 1ppl rise for its suppliers, taking the manufacturing standard price to 30ppl and the liquid standard litre to 28.99ppl, but this likely to still be on the low side.

 

The problems in the pig sector remain critical.  The SPP fell by 4.66p per kg in the week ending 16th October to average 146.35p per kg; over 11p less than at the same time last year and at a time when costs are soaring.

Brexit and Covid have compounded staff shortages, particularly of skilled butchers which continues to impact throughput in processing plants.  Labour issues have seen some processing plants cutting back by 25% per week since August.  The result being pigs remaining on farm, taking up room, and eating feed, (the cost of which is at record highs).  The NPA is estimating between 120,000 to 150,000 pigs are in the backlog on farm.  Some healthy pigs have regrettably already been culled as farms simply run out of space to house them.

The Government appears to have finally recognised the industry has hit a crisis point and in a move welcomed by the sector, has announced a support package to include:

• Private Storage Aid – A scheme to allow processors to store slaughtered pigs for 3-6 months so they can be processed at a later date.
• Temporary Visa system – Until December 31st up to 800 pork butchers will be eligible for visas from the existing allocation in the Seasonal Workers Pilot Scheme, allowing them to travel and work in the UK for a period of 6 months. However, the Government has said this is not a long term solution and the sector needs to offer better training, career options and increase wages to attract labour from the ‘large domestic pool’.
• Levy Holiday – AHDB and QMS have already announced they will be suspending levy payments for November 2021, saving the sector just under £1m.

Other measures will also include:

• Working with the AHDB to support those processors who have been blocked by China, to find alternative export markets
• Engage with retailers and the food service sector to increase the variety of cuts consumed domestically.

Being recognised by the Government that the sector is in a crisis and then being offered a support package is very welcomed by the industry, but the situation on farms remains very critical requiring the measures to be implemented quickly if they are to alleviate the situation that most pig farmers are currently in.

The Welsh Goverment has launched a consultation on changes on how to identify, register and report livestock movements together with the proposed implementation of Bovine Electronic Identification (EID).  The consultation covers:

• Whole movement reporting (departure and destination) and journey information
• Mandatory same day reporting for Central Point Recording Centres
• Voluntary use of an online herd or flock register facility for all species
• Show and event movements
• Pre-movement reporting
• Improving pig identification

Responses to the consultation need to be submitted by 2nd January 2022.  The full consultation can be found at https://gov.wales/changes-livestock-identification-registration-and-movement 

The results of the provisional June 2021 Survey, recently published by Defra, show the breeding herds and flock in UK have all declined in number over the past year underlining the uncertainties facing the beef, sheep and pig sectors.   The table below summarises the figures.

The total number of cattle and calves has continued to fall and is at its lowest level since the basis of data collection changed in 2009.  Both the dairy and beef breeding herds continue their historic decline, although the decline in the dairy herd is fairly marginal.  The finished beef price has been at a record high this year, but this is still not enough to offset the underlying factors in the sector.  With support payments declining and strong cull values some may have decided it is time to exit the industry.  For dairy, although the breeding herd has declined marginally, for cattle aged between 1 and 2 years and those less than 1 year the Survey shows a 2% and 5.1% year-on-year increase in numbers.  This suggests more replacements coming through and a possible rise in herd numbers in the future.  The increasing use of sexed-semen is likely playing a part in this.

Despite exceptional finished lamb prices, the UK breeding flock has also recorded a year-on-year drop, with all categories showing a fall in numbers.  The sheep sector is very similar to the beef in that it has been operating on very tight margins for many years now with a lot of businesses relying on support payments.  The high prices being received for all categories of sheep could see some ‘cash-in’.

Although the pig breeding herd has experienced a decline, total pig numbers have increased by 4.4%.  This could imply production per pig has increased, or it could be as a result of producers having to keep pigs on farm longer than normal due to a reduction in the processing facilities experienced this year.  The economic climate for pig producers is currently very challenging and we could see a further contraction of the breeding herd unless circumstances improve.  The full Survey results can be found at https://www.gov.uk/government/statistics/farming-statistics-provisional-crop-areas-yields-and-livestock-populations-at-1-june-2021-united-kingdom?utm_medium=email&utm_campaign=govuk-notifications&utm_source=a934b7a0-6a83-481c-8e02-1a5cce6a15b2&utm_content=daily

Defra has released further insight into the the new Annual Health and Welfare Review.  The Review, which is due to be launched in spring 2022, will be the first part of the new Animal Health and Welfare Pathway.  The Review will consist of a fully-funded annual visit by the farmer’s own vet for the lifetime of the Pathway.  The vet will carry out diagnostic testing and provide farmers with tailored advice and management to improve the health and welfare of their animals.  The Review will also include signposting to other financial support to improve the health and welfare of the herd or flock.  This could include capital grants to improve the sustainability and reduce the environmental impact of the business or increase animal welfare.

The vet will also collect data; this will be used to increase the health and welfare of the farmer’s own herd/flock, but it will also be shared with Defra so it can get a better understanding of the health and welfare of the national and regional herds/flock.  This information will then be used to inform and develop future policy to ensure it is targeted in the right areas.

The Review will initially only be available to commercial cattle, pig and sheep farmers in England who are currently eligible for the BPS.  Eventually it will be open to all livestock farmers above a minimum threshold – 50 pigs, 20 sheep or 10 cows.  The application process is currently being tested, but should be simple, either online or via a telephone call.