Category: Dairy & Livestock

The Andersons Centre’s mixed lowland farm model ‘Meadow Farm’ has been updated.   The table below shows the final results for 2019/20 and 2020/21, and an estimate for the current year, and an early forecast for 2022/23.

The 2019/20 year was affected by low livestock prices, particularly for beef.  But the beef price recovered throughout 2020 and is currently very strong.  The lamb price also continued to perform well throughout the year and with a Free Trade Agreement (FTA) negotiated with the EU, prices this spring have exceeded expectation.  Meadow Farm sells all its finished cattle from August to October and lambs from July, with all having left the farm by the end of December.  Therefore, it didn’t fully capitalise on the very high lamb prices seen in the first quarter of 2021.  Even so, as the table shows, the livestock gross margin in 2020/21 was the strongest it has been for some time.  After a tough winter and spring, it looked like the arable results from harvest 2020 would be poor.  However, as a result on the rise in crop prices seen through autumn 2020 the gross margin strengthened.  Overheads fell, in part due to a drop in the fuel price, but also because of a decline in machinery and property depreciation.  With such a poor year in 2019/20 the proprietors of Meadow Farm did not invest in any big pieces of machinery.  But such low levels of reinvestment are not sustainable.  The result being the combined margin from production for 2020/21 is the strongest it has been for a number of years, however the margin from production is still negative and it still takes the BPS and CSS payments to provide profit.

Looking ahead to the rest of the current 2021/22 year, livestock prices are expected to remain good, but not quite at the levels of 2020/21, especially the lamb price.  The arable gross margin is budgeted to remain pretty similar as a drop in crop price is compensated by better yields.  Overheads reduce, due to lower machinery depreciation, but some of the machinery will soon need replacing.  The margin from production is not as good as 2020/21 but is still better than recent history.  2021/22 is the first year of the Agricultural Transition and the BPS is reduced by 5%, but the addition of this still leaves a good profit for the business relative to other years.

The final column is the first (tentative) forecast for 2022/23.  Livestock prices are expected to drop back further, likewise arable prices and yields are expected to be more ‘normal’.  Overheads rise due to increased fuel prices and a small machinery purchase means the depreciation increases.  The margin from production is not as good as the last couple of years and the BPS is reduced by 20%, meaning the business surplus is back to 2019/20 levels.  The proprietors of Meadow Farm are keeping an eye on the new Sustainable Farming Incentive, to see if some of the ‘lost’ BPS can be recouped from this scheme.

Meadow Farm is typical of many livestock holdings in England, it is a notional 154 hectare (380 acre) beef and sheep farm in the Midlands.  It consists of grassland, with wheat and barley for livestock feed.  There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500 breeding ewe flock.  The business is subsidy-dependent, but with direct payments decreasing from 2021 it will need to adapt; maybe through restructuring to reduce its overheads, which are fundamentally too high, or perhaps by taking advantage of the new ELM scheme, or possibly a combination of both.

Production

It appears the cold dry weather in April may have resulted in GB milk production peaking early.  Latest figures from AHDB Dairy show deliveries peaked on 28th April at 37.93 million litres, with  the 7-day rolling average peaking at 37.77 million litres.  Grass growth in April was impacted by the weather, curtailing the spring flush.  May weather has been the opposite in terms of rainfall, although has still been cold.  Grass is now growing though, and at a faster rate than at this time last year which should help milk production over the coming weeks.  But how much April’s weather has affected first cut silage could be a problem later in the season, with quantity and quality likely to be reduced.

Trade

Post-Brexit dairy exports are improving but at are still a long way behind 2020 levels with dairy appearing to be one of the worst hit sectors.  AHDB figures show just 131 tonnes of milk and 436 tonnes of cream were exported to the EU in February 2021 compared with 76,500 tonnes and 901 tonnes of milk and cream respectively in February 2020.

Prices

There has been little change in the Global Dairy Trade average price index throughout April and May.  At the latest event held on 21st May the average index fell marginally by 0.2%, remaining strong at $4,150.  Butter saw the largest movement, down by 2.2% to $4,929, other products didn’t move by as much:

• SMP         +0.7%         $3,447
• WMP        -0.2%         $4,123
• Cheddar   +1.0%        $4,321

The lack of exports is not affecting the GB Farmgate milk price which continues to rise, with Arla continuing to lead the way; announcing a further 0.5 Eurocent (0.44ppl) increase for its members from 1st June.  This brings its manufacturing standard litre to 33.23ppl and the liquid standard litre to 31.98ppl.  Other notable increases include:

• A further 0.5ppl increase for First Milk members from 1st June
• Meadow Foods suppliers will receive a 1.25ppl increase from 1st June
• Muller UK has announced a 1ppl increase for its non-aligned suppliers, this is the first price change since November
• Middle ground liquid processor Freshways, has updated its price increase from 1.5ppl to 2.5ppl as from 1st July.  After cutting prices in March by 1ppl, this will bring its standard litre up to 28.5ppl
• Medina Dairies (another middle ground liquid processor) has announced a 2.7ppl increase for its suppliers as from 1st July.
• Suppliers to Yew Tree Dairy will receive a 2ppl rise from 1st June.

Consumption

According to the latest consumption data from market research company Kantar, milk remains a household staple.  In the year ending 24th January 2021 cow’s milk was purchased by 98% of British households.  With lockdown during 2020, ‘consumption occasions’ for milk were forced into the home, where ‘milk in tea’ accounted for 48% of total milk occasions.  According to Kantar the retail spend on cow’s milk grew by 9.7% to 3.37 billion over the same 52 week period.

The risk of Avian Influenza has been reduced to ‘low’.  This means as of 15th May the enhanced biosecurity measures which were in place have been lifted.  All bird gatherings are now permitted as long as APHA is given 7 days notification of the event and there is compliance with the new General Licence.  Additional biosecurity measures will remain in place around infected premises.  More information can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu

Payments under the Scottish Upland Sheep Support Scheme (SUSSS) commenced at the start of May.  Payment rates for the 2020 year are down a little at £59.80 per ewe lamb compared with £62.36 last year.  This is a reflection of higher numbers being claimed under the scheme.

Finished pig prices have started to make a welcome rise.  After declining monthly since the middle of 2020, prices started to increase in March.  For the week ending the 10th April the EU-spec APP averaged 146.49p per kg up 0.87p on the week.  Although still about 20p per kg less than the same week last year, it is now tracking about 2p per kg higher than the five-year average.  Plentiful supplies and lower prices on the continent have been weighing on domestic prices.  But although EU production is expected to increase in 2021, it is only forecast to rise by 0.7% compared to 1.2% in 2020, according to the European Commission’s short term outlook.  The Commission is expecting production in the first half of 2021 to be good, but lower sow numbers should see production lessen in the second half of the year.  Exports from the EU are forecast to decline by 2%, but will still be at ‘very high levels’.  Because of ASF in China, exports have been significant over the last two years.  The sector is now recovering in China, but outbreaks continue to hamper its recovery.  Other Asian regions are taking longer to rebuild their herds.

Cattle prices continue to soar.  The deadweight cattle price has passed the £4 per kg price for the first time.  Finished cattle prices have risen strongly again since March and the GB all prime average deadweight price for the w/e 17th April was 403.7p per kg.  This is nearly 80p per kg more than the same week in 2020.  R4L prices are comfortably over the £4 barrier at 413.8p and 414.6p per kg for steers and heifers respectively, demonstrating the importance of marketing cattle at the correct time and hitting spec.  Cull cow prices also saw a good week-on-week rise with overall GB prices up by 2.5p to 276.4p per kg with those meeting -O4L spec increasing by 5.3p to 295.6p per kg.  Slaughter numbers for clean and cull cattle were up on the week but comparisons are difficult due to bank holidays.

The lamb trade has been exceeding all expectations.  Whilst the liveweight old season lamb (OSL) trade has seen a decline for the latest week, this is normal for the time of the year.  The GB OSL SQQ decreased by 10p per kg to 302.3p per kg in the week ending 21st April, but prices remain some 90p per kg above the same week last year.  In contrast, deadweight prices actually rose.  For the week ending 17th April the GB OSL SQQ increased by 33.5p to 679.5p per kg; 200p more than the same week last year.

Monthly livestock price information can be found in Key Farm Facts.

Sir Peter Kendall is to undertake a strategic review of the Northern Ireland food and farming sector for the devolved Government.  The Independent Strategic Review of the NI Agri-Food Sector (ISRAF) is expected to take 6 months and will look at the challenges and opportunities the sector faces.  It will help inform future policy.  Including, presumably, future farm support arrangements.  For more details see https://www.daera-ni.gov.uk/articles/independent-strategic-review-ni-agri-food

Production

The cold weather has seen milk production ‘checked’.  Output had been running ahead of last year’s deliveries and the AHDB’s forecast for this year, raising concern whether processing sites would cope with the increase.  But the recent cold spell and lack of grass growth has slowed the seasonal lift in production down.  The 7-day rolling average GB milk production to 10th April was just 0.2% above the AHDB’s forecast, compared to 1.1% a week earlier.  With the cold, dry spell continuing to curtail grass growth, production is expected to remain constrained.  Defra production figures can be found in Key Farm Facts each month.

Prices

Commodity and farmgate milk prices remain good.  Since the large increase (15%) in the average Global Dairy Trade (GDT) index at the beginning of March there has been little movement.  In the two events held in April, the index increased by 0.3% at the beginning of the month and fell by just 0.1% at the latest auction held on 20th April to average $4,110; the highest it has been since early 2014.  Recent movements include:

• SMP: no Change,  to average $3,365 per tonne
• WMP: +0.4%, to average $4,097 per tonne
• Cheddar: +1.29%, to average $4,436 per tonne
• Butter: -0.6%, to average $5,736 per tonne

Closer to home, Arla is the headline story again, with a further 1.5 euro cent per kg, equivalent to 1.4p per litre, increase for May for its member suppliers.  Such a large increase is a (welcome) surprise.  It means the co-operative’s conventional manufacturing price is now 32.79p per litre, with liquid at 31.55p per litre and organic 41.15p per litre.  Commenting on the increase, Arla has said ‘commodity market prices have remained relatively stable in the last month supported by healthy demand and our strong operations.  The current outlook is stable’.  Arla is now firmly leading the way on milk price.  There have been a few other announcements including;

• Arla non-member suppliers will receive a 0.75p per litre increase from 1st May
• Tesco (TSDG) tracker price will increase by 0.86p per litre from 1st May.  This takes the Muller TSDG standard litre to 32.13p per litre and Arla TSDG to 31.88p per litre
• First Milk Members will receive a 0.5p per litre increase from the beginning of next month
• Saputo has announced an increase split over two months.  There will be a 1p per litre uplift from 1st May, followed by a further 0.5p per litre from 1st June.

Pig farmers affected by the temporary closure of the Quality Pork Producers abattoir in Brechin, Scotland will be able to apply for hardship support through a new £715,000 scheme.  The abattoir was closed from 23rd January 2021 for two weeks due to an outbreak of Covid-19, resulting in increasing costs to pig farmers.  The scheme will help meet some of these costs.  Further details of the scheme will be published on the Scottish Government’s website.

Both beef and sheep farmgate prices remain very strong.  The deadweight beef price, after easing a little in early February, has risen again from an already-high level.  For the week ending 13th March the deadweight GB all prime cattle price was 380.8p per kg, up 3.8p on the week.  This is now 45.4p per kg above year-earlier levels and about 40p per kg more than the five-year average.  Prices are being supported by tight supplies; throughput for the week totalled 31,900 head.  This is 600 head less than the previous week and 2,700 head down on the same week last year.

In the sheep meat market, deadweight prices have reached a new high.  For the week ending 13th March, the GB OSL SQQ was up 19p per kg on the previous week to 634p per kg, over 175p higher than the five-year average.  Deadweight slaughter levels were low, 7% down on the previous week and almost 16% below the same week in 2020 at only 179,200 head.  In contrast the liveweight GB SQQ fell by just over 3p for the week to 17th March to 289.7ppkg, but this is still a very good price at nearly 80p per kg above the five-year average.  Live auctions saw a 1% increase in numbers; strong prices may have encouraged some farmers to market lambs a little earlier, perhaps even attracting some lesser quality or under finished, reducing the SQQ for the week.

Both lamb and beef have shown an increase in household purchases, by volume and spend in the 12 weeks ending 21st February.  According to Kantar, the volume of beef purchased was 12.7% up year-on-year, with the spend 15.8% higher on the year.  Mince contributed the most to the volume, but steak remains the fastest growing cut.  Over the same 12 week period the volume of lamb purchased increased by 16.4% and the spend grew by an impressive 21.7% year on year.

It is a different picture for the pig market, but prices may be stabilising.  For the week ending 13th March the EU-spec SPP fell by a marginal 0.04p per kg to 139.41ppkg; this is 23.81p per kg less than the same week in 2020.  However prices for the previous two weeks had seen a rise, so markets may be finding some balance.  Plentiful supplies and lower pig prices on the continent continue to weigh on the domestic price.  Slaughter numbers were down slightly (1%) on the previous week to 199,400 head, but 12% higher than the previous year and 16% above the five year average.

From 1st April poultry keepers will be allowed to let their birds outside again.  Due to the risks imposed by Avian Flu, housing restrictions were brought in for all captive birds back in December.  But following a reduction in the risk of the disease to both wild and kept birds, the alert level has reduced to ‘medium’ and housing restrictions will cease from midnight on 31st March.  Even so, the enhanced bio-security measures announced back in November will still apply.  In addition the devolved administrations have put out joint guidance on ‘How to prepare for when your free-range birds can be let outside again’.  This can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/972412/advice-to-poultry-keepers-preparing-range.pdf