Category: Dairy & Livestock

UK finished pig prices have been on a steady increase since March 2019 but the period of bouyancy may now be coming to an end.   The GB UK-spec SPP (Standard Pig Price) reached a high of 162.57p per kg at the beginning of July; nearly a penny dearer than the last high seen at the end of July 2017.  But prices have been struggling across the EU recently and these now seem to be influencing the British market.  Throughout August, prices have fallen week-on-week.  The GB UK-spec SPP for the week ending 5th September fell by 1.23p per kg on the week to 158.28p per kg.  This is the largest weekly fall since June 2019, although the price is still 8p per kg above 2019 levels for the same week.  A case of African Swine Fever has been confirmed in Germany, which could put prices under further downward pressure.

On 10th September Germany announced its first case of African Swine Fever (ASF); found in a wild boar near the Polish border.  Germany is the largest European pork producer and exporter.  Usually countries outside the EU place a total ban on pork imports from ASF infected countries, even if the disease is only found in wild boar.  The EU allows unaffected regions to continue to trade with other EU countries.  If this were the case, Germany’s usual export volumes would be available on the EU market, increasing supplies and depressing pig prices across the EU.

Germany exports a significant amount of pork to China.  The usual Chinese approach would be to apply a total ban to all German exports.  However, Germany has previously been hopeful it could agree a regional approach with China if the country was to become infected.  In addition, as ASF in China itself has meant a serious shortage of pork in the country, China may change its policy and accept a regional approach.  But even if this doesn’t happen, an updated report, by the AHDB, shows the EU pork situation has changed significantly over the past 18 months and it appears the spread of ASF into Germany may have less severe consequences on the market than it once would have had.

Due to ASF in China, there has been a sharp rise in demand and other countries in the EU have been sending significant quantities of pork to China, so that if Germany is unable to export and the volumes are retained in the EU, the market is unlikely to be swamped.  Prices are still likely to decline, but probably not by as much as once feared.

The Government has announced it has awarded a total of £500,000 towards five projects to diagnose bovine TB (bTB) in cattle faster.  The five schemes have each been given £100,000 for up to 12 months for proof-of-concept research.  In addition, the Animal and Plant Health Agency’s (APHA) own research to speed up the diagnosis of TB in cattle (and other livestock) will be put into practice next year.  This will see the use of a polymerase chain reaction (PCR) test which can identify bTB in post mortem tissue samples within seven days compared with the current two months.  This should be available from early 2021 and will mean where samples are taken and a negative PCR test is found, herd movement restrictions could be lifted much earlier than currently happens.

A report, recently published, found the cost of a TB breakdown directly borne by cattle farmers across England and Wales varies significantly but the median value was around £6,600.  For those with herds of over 300 cattle, the median value was £18,600 with herds of up to 50 animals experiencing costs in the region of £1,700.  The report, titled ‘Estimating the economic cost of bovine TB incidents on cattle farmers in the High Risk and Edge Areas of England and Wales’ can be found via http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=19957&FromSearch=Y&Publisher=1&SearchText=se3139&SortString=ProjectCode&SortOrder=Asc&Paging=10#Description

Dairy farmers appear to have employed a stronger culling policy in response to Covid-19.  The number of cows in the GB milking herd has been on a downward trend for many years now, but this has excelerated in 2020 as many producers were faced with reducing their milk output.  Overall, data from BCMS shows as at 1st July there was a total of 1.68 million dairy cows in the GB milking herd, this is a 2.9% reduction, or 51,000 less cows, than at the same point in 2019 and significantly more than the three-year average which stands at -1.3%.  Unsurprisingly, the data suggests that it is the older cohort of cows that have experienced higher-than-usual rates of culling.  Looking ahead though, the number of youngstock under two years has actually risen; albeit by only 0.4%.  This is the first time this has been seen since October 2016 and suggests there could be some stabilisation in the herd from 2021, in addition to a younger, more productive, herd.

Beef

The GB prime cattle price has been steadily rising since early May (see Key Farm Facts).  Deadweight prices are now in the region of 45p per kg more than last year’s levels (although these were at a five-year low) and about 22p per kg above the 5-year average.  Reports suggest strong demand and abattoirs ‘competing’ for supplies.  The opening-up of the food service sector is supporting demand and, although a little too early to tell, the Government’s ‘Eat Out to Help Out’ scheme should boost sales and we may see some ‘trading-up’ from burgers to steaks.

Domestic cattle supplies are expected to tighten over the remainder of the year which should help to support prices.  But there has been a question mark over production in Ireland and whether increased supplies will enter the UK market and put pressure on prices.  However, recent industry reports suggest the current beef supply in Ireland is also tight.  But forecasts are for an increase in Irish beef in 12 to 18 months.  Ireland’s 1st June Survey results show a year-on-year decline in cattle numbers aged 12-30 months; those destined for slaughter over the rest of 2020.  But due to Covi-19 disrupting calf export opportunities there are around 121,000 more calves aged 0-12 months currently on Irish farms compared to year earlier levels, which could lead to an increase in beef production in 2021.

Lamb

The prime new season lamb (NSL) price remains strong for the time of year, at 73.9p per kg deadweight above the same point last year.  The lamb kill has recorded a strong recovery in July, partly due to the food service sector continuing to re-open but mainly due to Eid-al-Adha which fell in July this year as opposed to August.  After slaughterings fell below 2019 levels in March, April and May due to Covid-19, the lamb kill rose above last year’s numbers in June and July, with the latter showing a 17% increase on the year and 29% more than June 2020 levels.  Strong prime lamb prices are also bolstering prices for breeding sheep and store lambs as the autumn sales get underway.  However with the possibility of a no-deal Brexit looming at the end of the year will these stores lambs look expensive when they are ready to be sold?  Yet another autumn of uncertainty.

Defra has published its response to its latest TB consultation.  This covers the delivery of both badger vaccination and culling in the Edge Areas (see our article of 26th May at https://abcbooks.co.uk/bovine-tb-4/).  Its view remains that implementing no-cull zones to reduce the risk of vaccinated badgers being culled in the Edge Area will help manage the delivery of vaccination and culling in the same area.  The Government has also published new ‘Guidance to Natural England on Licenses to Control the Risk of Bovine Tuberculosis from Badgers’.  This incorporates the proposed changes which were consulted on and, in particular, the no-cull zones.  The full response and a summary of the changes can be found at https://www.gov.uk/government/consultations/bovine-tb-badger-vaccination-and-culling-in-englands-edge-areas/outcome/summary-of-responses-and-government-response

The outlook for dairy farming remains steady if unspectacular.  This is the main conclusion of the latest Friesian Farm figures.

Friesian Farm is a notional 200 cow all-year-round-calving business.  It has been used to track the fortunes of British dairy farming for well over a decade.  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, a budget for the current 2020/21 year then a forecast for 2021/22.  

The 2018/19 results were negatively affected by the summer drought resulting in greater purchased feed pushing up variable costs.  The following 2019/20 year was more ‘normal’ – despite a lower milk price the business produced a (small) surplus from dairying to which was added the BPS payment.  The surplus of 3.1ppl gives a total business surplus of around £50,000 (after drawings).

The figures for the current 2020/21 year show relatively little change from those published earlier in the year.  The average milk price for the year has been increased as the Covid effects now look less severe.  But is still below last year’s level.  No attempt has been made to forecast the potential effects if there is ‘No Deal’ after the end of the Transition Period in December.   The other big change for this year versus last is that variable costs have risen.  This is mainly due to higher forecast concentrate feed prices next winter after the poor 2020 harvest.

Looking to 2021/22, milk price is forecast to weaken slightly – mainly due to increasing production around the world and lacklustre demand due to the economic downturn.  Costs reduce due to lower concentrate feed prices and also reduced fertiliser values.  The farm makes a profit from it’s dairying activity, but this is still less than its BPS income.  It can be seen that the BPS falls slightly as the first reduction of the Agricultural Transition kicks-in.  By 2028, there will be no BPS in England, meaning Friesian Farm will be reliant solely on its dairying operation.

 

 

 

Latest estimates from the AHDB show GB milk production is back up to where the Levy Board would have expected it to be for the time of the year.  The AHDB has been keeping an estimate of likely deliveries if some producers had not cut their production to reduce oversupply due to Covid-19.  Data now shows actual deliveries starting to run back into line with these estimates on about the second week in July.  It is estimated production was cut by 75 million litres in the period April to June, mainly through the removal of cows from the herd and to a lesser extent by drying cows off early.

Defra has announced the deadline for applications to the Dairy Response Fund has been extended until midnight on 11th September.  The support is available to those who supply cow’s milk to a wholesale purchaser and have been adversely affected by Covid-19.  There will be a one-off payment of up to £10,000 to cover 70% of income losses in April and May.

Further details can be found in our Bulletin article https://abcbooks.co.uk/dairy-support/  and on the Defra website at https://www.gov.uk/government/publications/dairy-response-fund-2020?utm_source=38e768d4-bff6-4aac-b6d7-142480025c2a&utm_medium=email&utm_campaign=govuk-notifications&utm_content=daily

Eligible applicants need to complete a Dairy Response Fund 2020 application form and email it to [email protected] together with milk statements for February, April and May.

Medina

Dairy processor Medina has announced it will be closing its Watson’s Dairy in Hampshire, to try and consolidate its processing operations in a bid to save money.  The fresh liquid processing site had capacity for 200 million litres, although it has not been not operating at full capacity.  This will now be diverted to Buckleys (Huddersfield), Severnside (Gloucestershire) and Freshways (London).   There could be a potential loss of 144 jobs, but the closure, according to Medina, should not have an impact on its 156 farmer suppliers.  Medina has been hit hard by Covid-19 due to the closure of the food service sector and wholesale markets; it cut its milk price to producers by 5ppl, but consecutive milk price increases in June, July and August, by 1ppl, 1.5ppl and 1.5ppl respectively and the announcement of a further 1ppl increase from 1st September will bring it back to pre-Covid levels at a standard price of 25.75ppl.

Prices

Following a large, 8.3% increase at the event held at the beginning of the month, the Global Dairy Trade (GDT) average index fell by 0.7% to $3,201 at the auction held on 21^st July.  Earlier in the month WMP increased by 14% to average $3,208 and SMP, cheddar and butter all increased by 3.5%, 3.3% and 3% respectively.  At the latest auction, WMP backed up its big increase with a further 0.6% rise to average $3,218, butter and SMP both fell by -4.9% and -0.5% respectively.  Cheddar bucked the trend, increasing by 0.6% to average $3,803.

Closer to home the direction of farmgate prices is upwards as lockdown eases and peak supply is passed.  Some of the key changes include:

• Yew Tree Dairy and Paynes Dairies have both announced 1ppl price rises as from 1^st August, as has cheese processor Wyke Farms.
• Suppliers to Meadow Foods in South Wales, Cumbria and Lancashire have been given a 1ppl increase, back dated to 1^st July, which brings them back in line with the rest of the suppliers to Meadow Foods.
• Arla has announced its prices will remain unchanged for August.  Its standard price for conventional manufacturing milk will be 29.26ppl and organic milk 36.21ppl

Production

The AHDB has reported that France saw the largest drop in production in response to the Covid-19 crisis.  Lockdown occurred across Europe and North America just as dairy farmers in the Northern Hemisphere were approaching the spring milk peak.  In France, where farmers received direct aid for reducing production, average daily deliveries in May were down by 2% compared to the same month in 2019.  In the US and the UK, where there were no official reduction schemes, average production was down by 1.1% and 0.8% respectively.  In other key producing regions there wasn’t much change.  However, in Ireland, deliveries actually increased compared to 2019 – this is consistent with long-term trends of annual production increases.  The latest monthly delivery figures for GB can be found in Key Farm Facts.

Defra has confirmed bovine TB vaccination trials are to start in England and Wales.  This follows a major breakthrough by Government scientists and could see the vaccine for cattle rolled out in 2025.  The field trials will take place over the next four years on behalf of Defra, the Welsh and the Scottish Governments.  The deployment of a cattle bTB vaccine was one of the key priorities in the Government’s response to an independent review of its 25 year bTB strategy conducted by Professor Charles Godfray, which set out the goal to phase out intensive culling in the next few years.  A cattle vaccine is part of the plan to eradicate the diesease in England by 2038.   A cattle vaccine will be a massive breakthrough for the industry and will be hugely welcomed by all.  Bovine TB is one of the biggest animal health issues that England and Wales face today and over 40,000 cattle are slaughtered each year because of it.