Category: Dairy & Livestock

Prices

The GDT average price index, often seen as the bellwether for the dairy markets, has seen strong improvements at both events held in January.  At the auction on 5th January 2021 the average price index was up by 3.9% and rose a further 4.8% at the latest event held on 19th January to close the month at $3,593.  Only cheddar experienced a small drop, by 0.3%; SMP and WMP rose by 7% and 2.2% respectively, with butter up by 4.6%.  SMP is now at $3,243 per tonne, the highest value for the last five years.    Anhydrous Milk Fat (AMF) saw a 17.2% increase.  The index has risen at every event now since the end of September 2020, except for one at the end of November.  This is despite Covid-19 impacting the demand from the food service sector, but recently there has been a weakening of the US dollar making products cheaper which looks like it has more than offset the lack of demand due to Covid disruptions.

This positivity is also reflected in domestic farmgate prices, which according to Defra’s latest release were averaging 30.38ppl in December (See Key Farm Facts).  And this looks set to continue, with a number of processors announcing prices will be maintained until at least March, these include; First Milk members, Arla members, Credition Dairy, Saputo, Barbers and Belton Cheese.  As a result of the Tesco cost tracker review, Tesco aligned suppliers will receive a 0.4ppl increase from 1st February and suppliers to the Co-op Group will also see a rise from the beginning of February of 0.22ppl.

Production

The AHDB is forecasting global milk production to rise by around 1% in 2021, increasing total supplies by 3.1bn litres.  This is at a slower rate than 2020.  Despite disruptions to Coronavirus it is expected deliveries increased by just under 4.9bn litres in 2020, up by 1.7% compared with 2019.

Meanwhile, the EU is forecasting milk production in the EU-27 to increase by 0.6% per annum, reaching 157bn litres in 2030.  This is the forecast in the EU Commission’s latest Agricultural Outlook 2020-2030.  The full report can be found via agricultural-outlook-2020-report_en.pdf (europa.eu).  The growth in production is less than in recent years due to a reduction in estimated herd size and a lower yield growth (1.4% per annum).  According to the report, this is because non-conventional systems are expected to experience an uptake in response to consumer demands for sustainability and the environment; the share of organic milk is expected to grow from 3.5% to 10% by 2030.

Beef

Prime cattle prices have started the New Year strong.  For the week ending 16th January 2021, all deadweight price categories recorded an increase.  The R4L steer price increased by 6p per kg on the week with the all-prime price rising by 5p to average 376p per kg.  This measure is now 46p above last year’s level for the same week and 33p above the five-year average.  In 2020, the price started the year at a 5-year low and ended at a 5-year high.  The cull cow market has also made a strong start to the year, with the deadweight price rising by 9p per kg on the week.  According to British market research company, Kantar, in the last 12 weeks to 27th December 2020, total spend on beef was up 12.8% year-on-year to £1.1bn and volumes grew by 9.7%.  All beef products have seen volume growth for the third month in a row.  ‘Ready to cook’ is the fastest growing category, with volume up by 36.8% on the year and 45.1% in the last 12 weeks to 27th December.

Total UK beef and veal production in 2020 increased by 2% compared with 2019 to 931,000 tonnes, the highest since 2011.  Prime cattle slaughterings rose 2%, mainly due to an increase in heifer numbers, which were up by 4%.  Young bull slaughterings were down by 5% on the year, the fourth consecutive yearly decline.

Lamb

Similar to beef, the lamb trade has also made an impressive start to the year.  After breathing a sigh of relief following the trade deal with the EU, lamb producers saw the deadweight SQQ price increase by 50p per kg to average 569p per kg, for the week ending 16th January 2021.  This is some 114p per kg above the same week last year, which itself was the highest for the last 5 years.  The liveweight price, however did fall back, but is still 42p per kg above the same week at the beginning of 2020.  The domestic lamb price has been supported by a reduction in imports, driven in particular by a decline in shipments from New Zealand.  Total imports fell by 9% in November compared to 2019.  This was the lowest import level for the month of November since 1997.  Imports from New Zealand for the month declined by 10%.  For the whole year to the end of November, imports were down by 7%.  However, exports have also seen a decline, particularly to our main trading partner, France.  Demand from France has been hit by the Coronavirus pandemic, with volumes to the country down by 27% in November compared to the same month in 2019.  In total November saw a 17% decline in exports, compared to year earlier levels.

Pork

Over-supplies of pork and lower pig prices on the continent continue to pull the domestic price down.  According to the AHDB, GB prices are still amongst the highest in Europe, but for the week ending 16th January 2021, the EU-Spec SPP fell by 1.7p per kg to average 143.1p per kg.  This measure is now nearly 20p per kg less than last year.  Because of lack in demand and Covid-related disruptions at processors, market ready pigs are being kept on farms and carcase weights keep breaking records, now averaging 90.96kg up by 250g on the week.  Clean pig slaughter numbers did see a year-on-year rise in December by 5%, but this was not enough to offset the declines in the previous two months and market ready pigs remain on farms.

Muller

Muller has announced a new scheme to incentivise its 600 direct suppliers to improve their environmental impact, herd health and supply chain collaboration.  The new Muller Advantage programme will commence in January 2021 and will pay 1ppl annually for the measures which reduce antibiotic use, source sustainable animal feed, reduce energy and water usage, recycle, and enhance biodiversity.  The new Programme replaces the Muller Direct Premium (1ppl for improving herd health) which ran for a year.  In addition, participants will be able to continue to commit a proportion of their milk  against fixed prices and future contracts to reduce their businesses exposure to milk price volatility.

Prices

At the latest Global Dairy Trade (GDT) held on 1st December, the average index rose by 4.3% to $3,261.  All products saw a rise, as demand from China increases following a post-Covid recovery in its economy;

WMP  +5% to $3,182

SMP  +3.6% to $2,889

Butter  +3.8% to $3,986

Cheddar  +2.4% to $3,734

Anhydrous milk fat  +2.6% to $4,278

Butter Milk Powder  +13% to $2,731

Lactose   +13.5% to $1,004

There have been relatively few farmgate price announcements in the UK for the New Year.  This could be because purchasers are waiting on the Brexit outcome.  That said, those who have announced changes have been positive.  Sainsbury’s Muller and Arla aligned suppliers will receive a 0.27ppl price increase from 1st January and First Milk members and suppliers to Belton Farm will receive a 0.25ppl and 0.5ppl rise respectively from the New Year.  Saputo, has announced its price will stand-on until 1st February, furthermore it has announced there will be no price reductions during the first quarter of 2021.

 

Beef

Prime cattle deadweight prices declined in the first week of December but still remain firm.  Refer to Key Farm Facts for the GB deadweight price for all finished steers.  It shows how prices have risen since the end of May and are about 43p per kg deadweight above the same week last year and also in the region of 24p per kg dw above the five-year average.  Prices are currently higher than for the same week in any of the last five years.  Tight supplies are helping to support prices and this is expected to continue.  The latest data from BCMS (October) shows the numbers of prime cattle available (12-30 months) are 5% (83,400 head) less than last year.  Beef females and males are reportedly down by 3% and 4% respectively and dairy males by 19% as more sexed semen is used in the dairy herd.

It is therefore disappointing to see a decline in prices at a time of year when you would expect demand to be increasing.  It is perhaps due to uncertainty over Brexit.  There are reports that some of the UK supermarkets may be favouring Irish beef in the short-term and leaving GB cattle ‘in reserve’ in case there are interruptions to imports come 1st January.

Lamb

The GB finished lamb price has remained strong throughout the autumn and has been on the rise again since the end of October (see Key Farm Facts).  The GB deadweight SQQ is about 50p per kg above last year’s level for the same week and 80p per kg above the five-year average.  Weekly prices have been at five-year highs since July.  This has had a knock-on effect on store and breeding sheep sale prices which have also been strong, particularly in the light of a possible No Deal Brexit.

But why are finished prices so good?  It seems tight domestic supplies and strong lamb prices in France are supporting GB values.  According to the AHDB, in November the UK lamb kill was 6% lower than last year (1.16m head) and the lowest since 2015.  In June and July lambs were coming to market more quickly than usual, but this has not been maintained.  Furthermore, adult sheep slaughter is significantly behind last year, with November 20% less than in 2019.  This lower level of adult kill may see more lambs being carried over into the New Year for slaughter as fewer lambs are required for replacements.   Or, perhaps, due to strong prices this year, intentions have shifted to keeping more sheep and we may see the breeding flock expanding.  The outcome of Brexit is likely to inform this decision.

With 40% of all UK lamb exports going to France, developments there are key to the UK price.  At the end of November the French reference price for deadweight heavy lambs was 76p per kg higher than in 2019 and over £1 more than the five-year average.  Tight supplies have caused the increase in price – demand has actually fallen in France due to closures in the food service market because of Covid.  Are UK producers being lulled into a false sense of security with the high finished, store and breeding values?  French imports of UK sheep meat have already fallen this year by 14%.  If the UK does not agree a trade deal with the EU, prices in France may rise higher, but the value of sheep meat in the UK would decline as a substantial tariff would apply, making UK exports less competitive.

Pigmeat

The finished pig price has seen a steady decline since July.  The EU-spec SPP is now about 10p below year-earlier levels, but still nearly 5p per kg more than the five year average.  Coronavirus and ASF in Germany are impacting values.  Reports suggest there is a backlog of pigs accumulating on UK farms as abattoir throughputs are being restricted due to Covid-19 measures.  The total number of clean pigs slaughtered in November was 6% less year-on-year and 7% lower than October figures.  Consequently, according to Defra, clean carcase weights in November were 0.82kg more than in October and 3.59kg heavier than last year; the heaviest average clean carcase weight on record.

In Germany, where China’s ban on German imports is still in place due to ASF in the country, the European market is having to absorb the majority of this product.  Consequently this is putting downward pressure on EU prices, which has extended to the GB market.

 

The English and Welsh Governments have issued a consultation on banning the export of live animals for slaughter and fattening.  The Governments are also consulting on  wider proposals to  improve animal welfare in transport.  These include reduced maximum journey times, increased space requirements, stricter rules on transport in extreme temperatures and tighter rules for transporting live animals by sea.  The consultation can be found at; https://consult.defra.gov.uk/transforming-farm-animal-health-and-welfare-team/improvements-to-animal-welfare-in-transport/  It closes on the 28th January.

The RABDF’s Dairy Tech 2021 event has been moved to a two-week online event due to Covid.  Running from 3rd-17th February 2021, there will be daily online sessions which will commence after milking has completed at 10.30am.  According to the RABDF, the online event gives the chance to access some of the leading experts from across the world, but the plan is for Dairy Tech to return to Stoneleigh in 2022.  More details are expected in due course.

Those coming to England for seasonal poultry work will be able to start work immediately.  Unlike other international travelers, those arriving to work on farms from countries subject to the 14 day isolation rule, will not have to self-isolate as long as other rules and guidelines are adhered to.  Before traveling, workers will have to complete a Passenger Locator Form with their journey, contact details and address of the farm on which they will be living and working.  At UK border controls, workers will have to prove they are a seasonal agricultural worker.  On arrival into the UK, somebody from the farm where they will be living and working must collect them and take them straight there, face masks must be worn.  During the first 14 days, workers will need to follow social distancing rules and will only be able to leave the farm under strict circumstances, such as an emergency or to get essential supplies and medicines, only if these can’t be delivered.  The Government has produced strict guidelines for employers and workers to follow, these can be found at https://www.gov.uk/guidance/coming-to-england-for-seasonal-poultry-work-on-farms-and-processing-sites

The dairy industry appears to be coping better in the second lockdown, proving once again how resilient the industry is.  Commodity prices have remained fairly stable.  However, the middle ground liquid processors who supply the food service sector have once again been hit the hardest, but with schools and universities remaining open and also some of the big coffee chains still available for takeaways, the situation has been better than during the first lockdown.  There has also been an upturn in demand from from the retail sector as people buy more dairy products for home consumption.  And of course, this lockdown comes at a time of year when production is lower and there is more processing capacity.

Nevertheless, the spot price has eased as overall demand is weak.  However, cream and cheddar prices have remained stable and, if anything, are firming, perhaps helped by Christmas preparations.  Demand for butter is said to be weak due to the uncertainty still surrounding Brexit; the additional costs of trading have reduced interest in UK-sourced butter.

Farmgate prices have also remained stable, with a number of processors announcing prices to remain unchanged until the New Year, these include:

• Arla, Medina, Muller Direct, Meadow Foods, Saputo, Freshways, Yew Tree Dairy, Graham’s Dairy, Crediton Dairy and Belton Farm

There have also been some price increases announced, mainly from cheese processors and these include:

• A 0.5ppl increase from 1st December for suppliers to Helers
• 1ppl increase for those delivering to Barbers from 1st December

Further afield, the Global Dairy Trade (GDT) average index finished the month marginally down from where it started.  At the event held on 3rd November the index dropped by 2%, but at the latest auction it rebound by 1.8% to average $3,157.

 

Following our articles earlier in the month, there have been further outbreaks of the highly pathogenic Avian Influenza H5N8 strain.  These have been reported in captive birds at a wetland centre near Stroud in Gloucestershire and also in poultry and captive birds at a premises near Melton Mowbray, Leicestershire.  Protection and surveillance zones have been put in place around all the infected premises.  All the latest updates and advice can be found on Gov.uk via https://www.gov.uk/guidance/avian-influenza-bird-flu#latest-situation.

 

Defra and the Animal and Plant Health Agency (APHA) introduced a national Avian Influenza Provention Zone (AIPZ) on 11th November.  This means it is a legal requirement for all bird keepers to follow strict biosecurity measures, these can be found at https://www.gov.uk/guidance/avian-influenza-bird-flu#biosecurity-advice.  Those with over 500 birds, must also restrict access to non-essential people on their site, workers will need to change clothing and footwear before entering bird enclosures, and site vehicles will need to be cleaned and disinfected regularly.

The introduction of the AIPZ follows two confirmed cases of Avian flu (although unrelated) in the first week of November (see our article of 6th November https://abcbooks.co.uk/avian-influenza-identified/) and a further H5N8 case found in a broiler breeder farm in Herefordshire on 11th November.  In all cases Protection Zones around the farms have been put in place and the all the birds have been humanely culled.  A small number of wild birds near Dawlish in Devon and Weymouth, Dorset have also been identified with the disease.

Defra and APHA have advised that Avian Influenza is in no way connected to the Covid-19 pandemic which is caused by the SARS-CoV-2 virus which apparently is not carried by poultry.