Category: Dairy & Livestock

The prospect of lamb sales to the US has seemingly moved closer.  Boris Johnson announced the lifting of the restriction, imposed in 1996 as a response to BSE, after meeting with the US President Joe Biden.  The ban on UK beef which was implemented at the same time, was removed last September.  The precise details of the agreement, including when sales can actually re-start are unclear.  The AHDB estimates sales of lamb and mutton to the US could be worth £37m in the first five years.  Hopes of a wider UK/US trade deal being concluded swiftly seemed to have receded.

 

Prices

The GDT average index has risen sharply over the month.  After posting consecutive declines since April, there was a small uplift (0.3%) at the auction held at the end of August, but this was followed by a 4% increase at the first event in September and another 1% rise at the latest event on 21st September.  This takes the average index over the $4,000 mark to $4,011.  The index is often viewed as the bellwether for the global dairy commodity market and currently there is a general upturn in the market, although still some way off levels seen in the spring.  A ‘fly in the ointment’ could be a slow down in import demand from China.  According to analysis of the market by Rabobank, supply is outpacing demand in China and the second half of 2021 could see import demand lessening, weighing on global dairy commodity prices.  But reports of a shift in demand to other parts of Asia and the Middle East could compensate for this (see below).

Domestic farmgate prices remain strong.  The UK average farmgate milk price for August is 31.24ppl, some 2.5% higher than the previous month and 11% more than for the same month last year (Key Farm Facts includes this data monthly).

After announcing a price cut of between 0.87 and 0.9ppl from 1st September, due to increased operating costs, Arla has announced a 0.32ppl rise as from 1st October; somewhat of a welcome surprise.  After last month’s reduction many were hoping for a stand-on to prices at best.  Whilst inflationary processing costs resulted in last month’s cut, October’s increase is a result of a reduction in European milk production in July and, according to the processor, the prices for all European dairy commodities, especially cheese, have increased significantly due to high demand and lower availability throughout August.  Futhermore, Arla cites a shift in global demand from China to Asia and the Middle East supporting positive development in the global milk powder prices.  Arla’s standard manufacturing price will be 32.62ppl for conventional milk and 40.98ppl for organic.  Barbers, Belton Farm, Meadow Foods and Saputo have all announced a stand-on to their price until at least November.

Production

Defra’s latest statistics show UK milk production for August at 1,198m litres.  This is 3.9% lower than July and 0.2% lower than for the same month last year, although still marginally above the five year average (1,186m litres).  Whilst it hasn’t been the sunniest summer, rainfall has been limited and has affected grass growth and hence production.  This is even more pronounced, if we remove Northern Ireland (NI) production.  GB deliveries are 1% below year earlier levels and 12m litres below the AHDB’s forecast for August deliveries.  NI continues to show good growth; a 4% year-on-year increase for August according to the AHDB.  The increase is attributable, in part, to beef farmers converting to dairy.  So far in 2021, NI deliveries are up 4% on the year compared to GB which has only seen a 0.4% increase.

The AHDB expects production to run below year-earlier levels until the New Year due to market conditions.  Although the milk price is good (see above), feed prices remain high meaning the milk to feed price ration will not encourage more production.  Rising labour and energy costs are also squeezing margins.

Prices

Beef and sheep prices have eased a little, but remain very strong.  The GB all prime deadweight average price stands about 40p per kg above last year (which itself was the highest for 5 years).  The cow price has seen a slight decline since mid-August.  But typically more cows are culled at this time of year, so the price usually sees a decline, even so, once again prices are about 40p per kg above 2020 levels.  The liveweight and deadweight lamb price, has also dropped over recent weeks but remains high in historic terms.  For the week ending 11th September the GB deadweight NSL SQQ fell by 2.2p per kg to average 526.9p per kg but this is 62.6p per kg above the same week last year and £1.13 above the 5-year average.

Production

Both cattle and lamb supplies have been tight and production remains low.  In August a total of 73,200 tonnes of beef and veal was produced in the UK; 2% lower than in the same month in 2020.  In total, 159,700 prime cattle were slaughtered during August; 3% below the same month last year.  For the period January to August beef production was down by 4% at 593,000 tonnes compared with 2020.  The prime cattle slaughter totalled 1.32 million head a decline of 4% and the cow kill was 5% less at 402,300 head.

The UK monthly sheep meat production has also been below last year and the 5-year average for every month so far this year, with July and August experiencing particularly sharp year-on-year declines.  In August, production totalled 22,800 tonnes, 16% less than in 2020 (which was similar to the 5-year average).  The lamb kill was 18% down at 1,010,700 head, described by the AHDB as ‘exceptionally low for the time of year’ and below its forecast.  In the year-to-date (January to August) the lamb kill totals 7,255,200 head, almost 900,000 less than for the same period in 2020.  This is equivalent to around one month’s national kill during the months March to June, with the kill numbers typically picking up July to December.  Figures show the ewe slaughterings are down even more, by 222,100 head at 741,400 equating to approximately 6 weeks national kill.  All this equates to the sheep meat production to August being 11% lower on the year at 166,600 tonnes.

 

The Government has launched a Call for Evidence to seek views on a new food labelling system.  The ‘Labelling for Animal Welfare Call for Evidence’ is open for 12 weeks, closing on 6th December 2021 and will sit alongside the wider review of food labelling for the Food Strategy White Paper.  Evidence is requested on the impacts of different forms of labelling and how labelling for animal welfare may align with wider labelling reforms, including nutrition and eco-labelling.  Defra is particularly interested in the potential impacts on businesses and also on the effectiveness of labelling at influencing farmer, business and consumer behaviour.  The Call for Evidence only relates to England, Wales and Northern Ireland.  Animal welfare and food labelling are devolved matters; responses will be discussed with Scotland.  More information can be found at https://www.gov.uk/government/consultations/labelling-for-animal-welfare-call-for-evidence

 

Natural England has authorised seven new badger cull areas to start in 2021.  These are located in Shropshire (two areas), Hampshire, Berkshire, Staffordshire, Worcestershire and Oxfordshire.  In addition, licence holders in 33 existing badger control areas have been authorised to resume their operations for another year.  The badger cull has been in operation now since 2013 as part of the Government’s measures to eradicate Bovine TB.  However, the Government has already announced it will be phased out over the next five-years and no new licences will be issued after 2022 (see our article https://abcbooks.co.uk/bovine-tb-7/) 

British pig producers have received a boost after Mexico opens its doors to British pork imports for the first time.  According to the AHDB, there is strong demand from this market for high quality pork; the levy board is estimating it to be worth £50m over the first five years of trade.  The result follows four years of negotiations and inspections.  The Mexican National Department for Health, Safety and Agricultural and Food Quality inspected a number of premises during a visit in February 2020.  This led to four processing facilities and four associated cold stores being approved in England and Wales for export.  Furthermore, the UK and Mexico have committed to begin negotiating a new and ‘ambitious’ free trade agreement this year.  These negotiations are also expected to help with our accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

 

 

Applications have now opened in Scotland for the Pig Producers Hardship Support Scheme (see earlier article https://abcbooks.co.uk/hardship-support-for-scottish-pig-farmers/).  The scheme will provide financial support to pig producers who supplied the Quality Pig Processors (QPP) plant in Brechin Scotland between 8th February and 31st March 2021 and were paid £15 per pig less during this period.   The scheme has funding for up to £715,000 and is open to applications until 26th September 2021.   Payments will be made on a first come first served process and no later than 1st November.  The Scottish Government has put the scheme in place to support Scottish pig farmers who, through no fault of their own, incurred losses, due the Covid-induced closure of the Brechin abattoir in January this year and the subsequent loss of the plant’s export licence to China.  Further information can be found on the Scottish Government’s website at https://www.gov.scot/publications/pig-producers-hardship-support-scheme-form-and-guidance/

 

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: