Category: Dairy & Livestock

Andersons has updated its Meadow Farm Model.  This is a notional mixed farm with grazing livestock and some arable.  The table below shows the results for the last two years and an estimate for the current year, to the end of March 2020, plus a forecast for 2020/21.

The results for 2017/18 showed a better performance compared with the previous year, mainly due to higher beef and sheep prices.  But 2018/19 and, in particular, the current financial year sees a decline in profits.  The wet spring, followed by the drought in 2018 affected yields and grass growth, contributing to lower income and higher costs.  In the current year the low beef price has been the biggest factor, not helped by lower crop prices.   At the same time, overheads have increased.  Looking ahead to 2020/21, the beef price is expected to see a modest recovery, with the lamb price showing a slight decline.  Overheads are forecast to reduce, but this mainly due to lower machinery depreciation; with such a poor year in 2019/20, machinery investment has been put on hold.  This is not a sustainable policy for the long-term.

The business continues to be dependant on the Basic Payment and the additional income from the Countryside Stewardship Scheme (CSS) for profitability.  As farm policy evolves and support moves away from the Basic Payment to the new Environmental Land Management Scheme (ELMS), we expect the amount available to these types of farms to reduce by about 50% by the end of the next decade.

Meadow Farm is a notional 154 hectare (380 acre) lowland mixed beef and sheep business typical of many family-run livestock operations across Great Britain.  The farm has a 60 cow suckler herd and a 500 ewe mule sheep flock; in both cases finishing all progeny.  There is also a small dairy-cross bull-beef enterprise and 32 hectares (80 acres) of feed wheat and feed barley is grown.  The model is managed on a real-time basis and provides an accurate representation of business structures and changes in annual performance. 

Results from two new pieces of research come to completely opposite conclusions on the effectiveness of culling badgers in reducing bTB in cattle.

A report by conservation charity Zoological Society of London (ZSL), claims badger culling makes bovine TB worse in cattle.  The report finds that, following a cull, the surviving badgers roam further (the ‘perturbation’ effect) and therefore spread the disease.  According to the report, researchers found that after a cull in Cornwall, 61% of the surviving badgers roamed further afield, visiting 45% more fields each month.  But the industry has questioned the effectiveness of the report as it was based on such a small sample size and in just one area of the county.

In contrast, the long awaited peer-reviewed research, produced by the Animal and Plant Health Agency (APHA), found the culling of badgers was effective.  The review looked at data from the first three licensed badger cull areas in England; between 2013 and 2017 in Gloucestershire and Somerset and 2015 to 2017 in Dorset.  The research found that, in Gloucestershire and Somerset the reduction in bTB incidence rates in the cull areas relative to comparison areas was 66% and 37% respectively after years years.  In Dorset there was no change in the incidence rates in the cull areas compared to the comparison sites after the two years, but incidents dropped by 55% during the same period in the 2km buffer zone around the edge area.  The latter finding rather contradicts the perturbation claim in the previous study.  The report confirmed the results from the study showed there were ‘statistically significant decreases’ in cattle TB incidence in the Gloucestershire and Somerset cull areas.

The UK will still be allowed to continue to export live animals and animal products to the EU even if we leave with a No-Deal.  This comes after the EU’s Standing Committee on Plants, Animals, Food and Feed (SCoPAFF) confirmed the acceptance of the UK’s listed status application after it met the health and biosecurity assurances required for a third country.  However, third country listed approval only allows animals and animal products to continue to be exported.  If we leave with a No-Deal, there will be new requirements, which the UK will have to adhere to.  These include tariffs and non-tariff barriers, such as going through the correct EU Border Inspection Post and the requirement to have a signed Export Health Certificate.

British beef farmers will be given a much needed boost by the news exports of British beef to China have been given the go-ahead.  China imposed a ban on imports of British beef back in 1996 following the BSE outbreak.  Defra has confirmed shipments will begin again in the next few months after the Chinese authorities have cleared four beef sites for export with further sites being reviewed.  The announcement follows several years of engagement between the UK and Chinese government officials, culminating in extensive inspections by the Chinese authorities.  It is estimated the beef industry will benefit by £230 million.

Is the GB pig price finally starting to see a significant increase?  With all the problems of African Swine Fever (ASF) in China and EU pig prices rising, we had been expecting the GB price to have made a noticeable improvement before now.  Admittedly, the GB SPP has been steadily increasing since April, but plateaued from July through to September.  But for the week ending, 5th October, the EU-spec GB SPP recorded its largest weekly increase since June, up by 1.11p to 155.32p per kg.  This is now 8.53p per kg ahead of the price recorded for the same week last year.  In addition, estimated slaughterings reached 184,000 head for the week, some 3,200 more than the previous week and 11,600 up on the same period in 2018.  Meaning there is real demand in the market, not just a lack of product.  High EU prices are driving exports and keeping import prices high, all supporting GB prices.

Tomlinson’s Dairies of Wrexham has ceased trading.  Highlighting the current problems in the UK liquid milk sector, the 10th biggest liquid milk processor has given its 30 farmer suppliers immediate notice to quit.  It is understood half of these have already been taken on by Yew Tree Dairy, but the fate of the rest is not known.  The company had been under financial pressure for some time, after expanding significantly to take on a Sainsbury’s liquid milk supply contract.  Whilst it had recently been given an extension to this contract, it was unable to continue trading; Muller will take up this contract with immediate effect.  The position of suppliers is unknown as it appears some are owed significant sums of money.

The main categories of UK livestock have all shown a small decline over the past year.  These are the results of the provisional June 2019 Survey results recently published by Defra.  the table below summarises the figures;

2019 Data is Provisional    Poultry figures for 2019 not yet available.

The total number of cattle and calves has dropped to its lowest level since the basis of data collection changed in 2009.  The fall has been driven mostly by a decline in the beef sector, with the beef breeding herd continuing its historic decline.

The sheep breeding flock has also recorded a year-on-year decline.  This may be producers retrenching ahead of a possible Brexit.  However, the June figures tend not to be the best guide to future breeding intentions as the Survey occurs before autumn cullings and sheep sales.  The December figures provide a better indication of the coming lamb crop.

Total pig numbers have decreased slightly from 2018, although they are still higher than any other year since 2004.  The breeding herd is static.  The full Survey results can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/837834/structure-jun2019prov-UK-10oct19.pdf.

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.