Category: Dairy & Livestock

Natural England (NE) has published information on the badger control licences for 2019.  29 existing areas will receive reauthorisation as well as 11 new sites.  The new zones include areas in Avon, Cheshire, Cornwall, Dorset, Herefordshire, Devon (2), Staffordshire (2) and Wiltshire (2).  However, the edge area county of Derbyshire has not been included in the new cull zones.  To the dismay of those who had put the application together, it was turned down at the last minute.  NE has not given an explanation as to why the application, which met with all the criteria and protocols and had been approved all the way along, was turned down at the last hurdle.

There is not a lot of movement in the milk price currently, which is probably not a bad thing for producers, as the price remains reasonably good.  At the latest Global Dairy Trade (GDT) event, the average price index saw a respectable 2% increase to average €3,303 per tonne; the first rise since the end of July.

At home, deliveries continue to be very strong.  Cumulative production to the end of August is 2.2% ahead of last year.  Even so many processors have announced they are standing-on with their price for October including; First Milk, Barber’s (Cheese), Saputo, South Caernarfon Creameries and Glanbia Cheese.

When UK milk prices do generally start to move, it is expected to be downwards.  Some processors have already announced reductions;

• Wyke Farms will reduce the price it pays to suppliers by 1.5ppl from 1^st October
• Both Joseph Heler (Cheese) and Payne’s Dairies have announced a 1ppl reduction from the start of October.

UK beef prices show no signs of improvement (see Key Farm Facts for details).  Prices declined further during September, rather than improving as many had predicted.

The forecast decline in production in the second half of the year has not (yet) occurred.  Slaughterings are running close to last year’s levels, despite predictions of lower numbers coming forwards from the summer onwards.  In addition, average slaughter weights are up (+2%) meaning the availability of product is higher.  Increased supply is meeting quite weak demand with consumer purchases of beef still lacklustre.  (Whether any of this lack of consumer demand is due to the stream of messages about GHG emissions from red meat is not clear.)  There has also been a shift from high value cuts (steaks and joints) to lower-value products (mince and burgers).  Also affecting the market has been Brexit, with the stockpiling and subsequent destocking as various deadlines have come and gone.  Finally, in September, the slight strengthening of Sterling will have put downwards pressure on prices.   With previous predictions of an upturn in the market having proved incorrect, it would be brave to forecast when beef producers might see an increase in values.  However, if the threat of No-Deal recedes then consumers may feel more confident and the run-up to Christmas could see some uplift.

Last month’s Bulletin set out that lamb values had remained firm, despite Brexit uncertainty.  Prices remain close to last year’s values and the five-year average, despite some evidence that more lambs are being marketed ahead of the 31^st October Brexit deadline.  As the autumn sales progress prices for both store lambs and breeding ewes have remained (surprisingly) strong.

Andersons’ Friesian Farm model is showing decent returns so far for 2019/2020.  The latest figures are presented in the table below.  The first two columns show the results for 2017/18 and 2018/19.  In 2017/18 profits bounced back after losses in the previous two years following the milk price slump.  In 2018/19, the margin dropped following the late, wet spring and summer drought.

The last two columns are the budget for the current year, 2019/20 and the forecast for 2020/21.  So far the 2019/20 year is showing a reasonable result.  Even though some processors have announced price cuts for September/October, with further reductions likely for the remainder of 2019, the milk price has been relatively consistent until now and the average for the year is not expected to be far below 2018/19.  Looking ahead to 2020/21, prices are forecast to weaken further and with costs creeping up, the margin from production is almost eroded.  This means the majority of the business surplus is coming from direct payments, which obviously is not sustainable as these are reduced over the coming years.

Defra and the Welsh Government have launched a consultation on proposals to introduce a new method to determine the age of sheep at the time of slaughter.  Sheep classed as being over 12 months old must have their carcases split and their spinal cord removed; a measure introduced as part of the response to BSE.  Currently this is assessed by ‘mouthing’; lambs which have their permanent incisors through are classed as being over a year old and need to be split.  Under the proposals abattoirs would have the option to introduce a system based on a date.  Any lambs sent for slaughter up to June 30th in the year after their birth would be treated as being under 12 months old.

In the summer of 2018 the EU agreed that the age could be assessed by mouthing, the acual age of the lamb or ‘as estimated by a method approved by the competent authority’.  Defra had originally said it would use 30th June date as from 2019, but then changed its mind, worried about the effect this would have on our trading relationship with the EU in the even of a No-Deal Brexit.  The full consultation can be found at https://www.gov.uk/government/consultations/ageing-sheep-at-slaughter-introducing-a-new-method?utm_source=88616d9e-1539-4a80-84a0-f4e2f643dbae&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate   responses need to be submitted by 31st October 2019.

George Eustice has confirmed the Government plans to support the sheep sector in the event of a No-Deal Brexit.  According to the Farming Minister, two options are being explored; a headage payment on breeding ewes and a slaughter premium via a top-up to payments when lambs are sold.  Although any final decisions will not be possible until the UK has left the EU, the RPA has been instructed to get the administrative processes in place and discussions have taken place with the Treasury regarding funding required.  The sheep sector is expected to be hit the hardest under a No-Deal.  About a third of UK lamb is exported, with 95% of this going to the EU, currently this enters the EU tariff-free but this will not be the case under a No-Deal.

The Tulip pig processing business has been sold by Danish Crown to the US-based Pilgrim’s Pride Corporation.  In turn, Pilgrim’s Pride is owned by the Brazilian multi-national, JBS, one of the biggest meat companies in the world.  The sale price for Tulip is reported to be $354m.  It is the largest integrated pork producer in the UK with farms supplying twelve processing facilities.  It has sales of over £1bn but has recently struggled for profitability.  Pilgrim’s Pride already owns the poultry processor, Moy Park – Northern Ireland’s largest private-sector business.  Pilgrim’s Pride states it intends to invest in the Tulip business and is still looking at further acquisitions in the European meat sector.

Cow’s milk continues to hold its own in the market, despite the growing range of ‘alternative milks’.  This finding comes from an analysis by the AHDB of recent sales data.  Despite all the news (and noise) surrounding plant-based drinks they only represent 4.4% of the total volume share of the market.  Spend on cow’s milk in the 52 weeks to June 16^th, rose by 2.2%; this was mainly driven by price increase, with the volume remaining pretty stable, just declining by 0.4%.  However, plant-based beverages are growing, with spend for the same period up by 18% on the previous year.  But long established plant-based drinks, such as soya, seem to be losing out to new beverages, such as nut and oat drinks.  With cow’s milk stabilising and not losing market share to these alternatives it would appear shoppers are not particularly switching from cow’s milk but trying these in addition, as something new.

The badger cull could be extended to 10 new areas this autumn.  According to Natural England it has received 14 new applications, from which the Government can choose 10; this will increase the total number of cull areas to 40.  A decision is not expected until September.  Currently there are cull areas in Dorset, Cornwall, Devon, Gloucestershire, Herefordshire, Somerset, Cheshire, Wiltshire, Staffordshire and Cumbria.  The culling of badgers is one measure being pursued by Defra in its battle to eradicate Bovine TB by 2038.

The German chemical business, Bayer, has sold its animal health division to Elanco.  The deal is reportedly worth $7.6bn and includes the firm’s farm animal drugs plus its pet products.  The sale is part of a drive by Bayer to divest non-core businesses.  The purchase makes Elanco the second biggest global animal health company after Zoetis (the ex-Pfizer business).  The Bayer-Elanco deal is still subject to regulatory approval, but is expected to conclude sometime in 2020.  The animal-health market is moving in the same direction as agro-chemicals with increased consolidation among manufacturers, such that it is dominated by a few global businesses.