Category: Dairy & Livestock

Following the consultation held earlier in the year (see our article of 22nd January 2024 https://abcbooks.co.uk/free-range-egg-consultation/) Defra will alter legislation to allow free-range eggs to continue to be labelled as such for the duration of any mandatory housing measures in England and Scotland.  Under the existing Egg Marketing Standards Regulation, the maximum amount of time allowed for hens to be kept indoors during periods of mandatory housing measures (i.e. bird flu), and the eggs they lay to be still labelled as free-range, is 16 weeks.  After this period of time the eggs must be labelled as ‘barn’.  Defra has said if housing measures are introduced for free-range hens, notices will be issued to inform the public and media of their introduction.  It will also encourage the egg industry and retailers to communicate this to their customers.

Production

AHDB reports that GB milk production was down 0.9% in the April-July compared to the same period in 2023.  However, with prices firming and reasonably good weather conditions, it is believed that production for the rest of the summer and autumn will at least match last-year’s levels.

In global terms, milk production in the main exporting countries is forecast to be almost static in 2024 (down 0.1%).  Output declines in NZ, Argentina and the UK are matched by increases in the US, EU and Australia.

Such meagre growth in output is contributing to firming prices.  However, increases have been slow as global demand remains weak.  In particular, Chinese demand has been very poor.  It imported its lowest amount of dairy products since 2018 in the first half of 2024.  Part of this is down to the continued struggles of the Chinese economy.  However, the country has made significant investments in its own dairy sector and is now satisfying more of its own demand.  Chinese imports may therefore be less of a factor in driving global prices in the future.

Prices

At the latest GDT auction on the 20th August the index rose by 5.5% to reach $3,920 per tonne.  This is the highest level seen since the summer of 2022 and is now 36% higher than the same time last year.

Domestic farmgate milk prices also continue to edge upwards.  A number of companies have announced price increases from the 1st September.  Amoung these are;

• Muller – standard litre up 1.25ppl (to 40.25ppl)
• First Milk – manufacturing price up 1ppl (to 42ppl)
• Leprino Foods (previously Glanbia) – up 1ppl to 41.5ppl
• Meadow Foods – price up by 1.5ppl

New controls came into force in England from 21st August and in Wales from 22nd August to safeguard Britain’s sheep and goat populations from outbreaks of Peste des Petits Ruminants (PPR).  PPR poses no risk to human health but is a highly contagious disease affecting goats and sheep.  The new controls will strengthen the requirements for bringing sheep and goat meat and milk into Great Britain from the European Union (EU), European Free Trade Association states, Greenland and Faroe Islands.  In recent months, there have been outbreaks in mainland Europe, and the commercial import of certain commodities is already restricted to prevent the spread of PPR into Great Britain.  However, the new rules will mean it is now no longer permitted to bring unpackaged sheep and goat meat and meat products, or sheep and goat milk and milk products, from these areas.  Additionally, commercially produced and packaged sheep and goat milk and milk products are not permitted from Greece or Romania.  Scotland is expected to introduce new controls shortly.

 

Beef

The GB cattle price has risen sharply since the middle of July.  The GB deadweight steer overall price stood at 493.1p per kg for the week ending 17th August; up over 12p per kg in the last two weeks.  For the same week in 2023, the price had fallen to 456.7p per kg, before rising throughout the autumn.  Domestic supplies are tight which is supporting prices.  However, ther are reports of an increase in imports from Ireland where export prices have become more competitive recently.  Official import data will not be available for a few weeks yet, but if this is the case the buoyant prices suggests market demand is able to currently absorb this.

Sheep

The GB deadweight New Season (NS) lamb price has remained stable since the middle of July after declining sharply during June.  The NS SQQ deadweight price stood at 664.8p per kg for the w/e 17th August, this compares with 580.7p per kg for the same week in 2023.  Tight domestic supplies and a strong export market are supporting prices.  Furthermore, recent price increase for lamb in both Australia and New Zealand should further support domestic prices.  Imports from these countries have been higher this year than in 2023 because the price has been so competitive.  But in NZ, where prices have been pressured all year, they have risen by 18p per kg in the 3 weeks to August 10th as supplies tighten.  The situation is similar in Australia where it appears demand for lighter lambs earlier in the season means more were slaughtered, impacting supply now.

Since the beginning of June, clean cattle prices have stabilised and are now back above year-earlier levels.  In 2023 prices fell sharply over the summer months, which has not happened this year – helping the year-on-year comnparison.  The latest deadweight All Steer price was 480.9p per kg for the week ending 20th July; some 13.2p per kg above the same week in 2023.  This is despite increased cattle slaughter numbers and import levels.  But prices have been supported by good consumer demand and strong cattle values in Ireland and other European markets.

Furthermore, going into the second half of 2024, a reduction in supply, especially in the final quarter of the year, should help to maintain or even lift prices further.  In the latest AHDB Market Outlook, prime cattle slaughter is forecast to rise by 1% in 2024 to 2.06m head.  However, once slaughter levels so far this year have been accounted for and populations updated for the latest BCMS figures, cattle availability in the 4th quarter is expected to be lower than a year ago.  In addition, prime cattle slaughter is forecast to be down a further 3% in 2025 to 1.99 million head.  Cow slaughter for 2024 has been revised to 604,000 head, down 1% from 2023 and by a further 1% in 2025 as the breeding herd continues to contract.

Taking the above into account the AHDB is forecasting UK beef production to total 903,000 tonnes in 2024, up 0.3% compared to 2023.  However for 2025, this is expected to decline by 2.6%, driven by the decline in the breeding herd.

In terms of the breeding numbers, the 1st December figures showed the UK dairy herd stood at 1.84 million, down 0.5% on the year, meanwhile the suckler herd declined by 4.4% to 1.33 million head.  The total UK breeding herd was 2% down on the year; the steepest annual decline since 2009.  Suckler cow margins have been under pressure for many years and a change in agricultural policy is making businesses assess their options.  Strong beef prices are likely to incentivise culling.  UK cow slaughter numbers were only down 0.3% in the 1st half of 2024, however BCMS data reveals there has been an increase in slaughter out of the beef herd.  In addition to this, growth in heifer kill has actually been the main driver behind increased prime cattle throughputs.  Whilst this means an increase in supply in the short-term, this will result in a fall in the number of females in the breeding herd going forward.

Profitability figures from our Friesian Farm model are shown in the table below.  This is a notional 220+ cow business in the Midlands with a milk contract on a constituent basis.  It has a year-round calving system, like much of the UK industry, but it is trying to maximise yield from forage.  The figures are for milk years – April to March.

The 2022/23 year was a very profitable one for most dairy farms.  Milk prices rose to unprecedented levels and. although costs went up a lot as well, many dairy farmers made record profits.  During the 2023/24 year milk prices declined considerably.  With costs ‘sticky’ on the way down, the business only broke even from its farming activities.  The decline in the BPS in England can be clearly seen.  For 2024/25 however, this farm has gone into the SFI.  This adds a useful amount to the bottom line (although there are costs to the scheme which are included in the farming margin).  Milk prices are firming but there is a question over how far and fast any rises may be.  Overhead costs drop for 2024/25 – this is due to cheaper fuel and electricity, but also due to unusually high contract costs during the previous year.  A strong recovery in profitability is forecast for the current year.

The final column is our first forecast for 2025/26.  An improving dairy market outlook sees the milk price up 1ppl.  Variable costs have remained fairly stable over the last couple of years and we forecast them just rising with a normal level of inflation.   Forecast overhead costs would have fallen for the year but the farm has budgeted to make some long-term investment in slurry storage.  We can clearly see the level of BPS declining, but together with the SFI payment the total is currently still more than support received in 2019/20 – a reminder that the costs of undertaking the actions to be in SFI (i.e herbal leys) are much higher than the BPS, but these have been accounted for in the farming margin.  Overall, however, the budget for 2025/26 shows some good returns – but it should be remembered that a lot can change in 18 months.

The Scottish Government has confirmed that a maximum calving interval requirement will be introduced for the 2025 Scottish Suckler Beef Support Scheme (SSBSS).  To recieve the hedage payment next year, cows will only be eligible if their calving interval is 410 days or less (or if it is the cow’s first calf).  The move is to increase the efficiency of the Scottish beef herd (and help reduce emissions).  The Scottish Government states that the interval could be reduced in future years – but by no more than 10 days per year.  Farming organisations were arguing for a more lenient threshold.

The Laying Hen Housing for Health and Welfare Grant is now open for applications.  The online checker is available until 18th September 2024.  In summary, the grant is available for laying hens and pullets.  Funding is available to replace or upgrade existing laying hen or pullet housing (a ‘comprehensive’ project) or to add a veranda onto existing laying hen or pullet housing (a ‘veranda-only’ project).  Further information can be found in our article of 15th May (see https://abcbooks.co.uk/laying-hen-housing-grant/).  The full guidance can be found via https://www.gov.uk/government/publications/laying-hen-housing-for-health-and-welfare-grant-round-1?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=a52ce90e-e81f-42d6-9c5b-585cd240140b&utm_content=daily

Both the EU-Spec SPP and APP experienced big losses in the week ending June 8th.  The SPP fell by 1.2p per kg for the week to 210.2p per kg.  The size of the fall was unexpected; since the turn of the year the price hasn’t swung more than 1p per kg either way.  Some of the fall was clawed back in the most recent week ending 15th June when the EU-Spec SPP gained 0.4p per kg.  This takes it to 12p per kg less than at the same time in 2023 and 3.3p per kg below where it was at the beginning of 2024.  On the Continent, the EU Reference price is just over 20p per kg lower than the equivalent UK reference price, which is within the typical range.  These prices are disappointing for producers, especially as throughputs are low.

In terms of throughput, Defra’s latest data shows UK clean pig slaughterings in May down 10% on the year at 783,000 head, resulting in production falling by 8.9%, as carcass weights on average are heavier.  However, the AHDB estimates GB slaughterings are marginally up for the week ending 15th June compared to the previous week and 1,500 head up on last year, but this was from a low base; some 27,500 less than in 2022 for the same week.

Low demand for pork is however the key reason for subdued prices.  According to Kantar, pork is one of the few proteins to experience a decline in retail demand over the 12 weeks to 12th May.  Whereas total pigmeat retail value increased by 2.3%, the volume of sales declined by 2.1%.  All other proteins increased volume sales over the same period, except beef which fell marginally by 0.4%.  Retail volume sales of pork have been in a constant slow decline over the last 18 months; this is due to shoppers buying less per shopping trip.  Pork is seen as less tasty than beef and lamb and harder to cook than beef or chicken.  Furthermore, despite being one of the cheapest proteins in the supermarket per kg, year-on-year it has seen one of the biggest increase in retail price, rising by 4.5% compared with lamb, which actually fell by -3.1% and poultry which increased but by a lessor amount, 3.1%.  Only beef retail prices experienced a larger increase, up 5.5%.  The result is that the gap between primary pork and primary chicken prices has widened.  Back in August 2022 the 12 week rolling primary pig price was just 51p per kg higher than primary chicken prices, but at its widest in September 2023, this rose to £1.34 per kg.  The gap has narrowed a little and stands at about £1 per kg.

Further analysis by Kantar reveals over 60% of pork volume losses are from shoppers switching to other proteins.  The biggest volume losses are from older and younger shoppers where the cost of living crisis is hitting hardest.  And for those holding out for BBQ demand, sausage demand apparently peaks in May!  However, it the weather is good over the summer this should help sales.  A promising area is the growth in demand from foodservice which has seen a 6.5% rise, but because over 86% of pork volumes are through retail, overall demand is in decline -1.5% on the year.  The AHDB is forecasting this trend will continue for the rest of the year with total pork volumes down by -2% compared with 2022 and -4% with 2019.

The AHDB has revised it’s GB milk production for the 2024/25 season down since its previous forecast in March.  The Levy body is now forecasting delivery figures to total 12.2 billion litres, 1% less than the previous milk year, in its latest forecast in June.  GB deliveries in the April and May totalled 2,205 million litres, 1.5% (33m litres) less than last year.  But the AHDB is expecting production to be slightly up on 2023 in July and August, when high temperatures in June impacted grass growth.  But after that, production is forecast to decline unless there is a significant movement in price.  According to BCMS the GB milking herd has remained stable at 1.64 million head in April.  The reduction in production is therefore down to lower yields.

Defra’s latest farmgate milk price for April 2024 was 37.21p per litre; this compares with 39.45p per litre in April 2023, but recent announcements surrounding milk prices have been positive (see below) and will provide a bit of stimulus to increase production.  However, for price rises to continue, the demand will need to be there.  China is one of the major drivers of the global dairy market, but according to the latest report from Rabobank, China’s dairy imports in 2024 are expected to decline by 8% year-on-year.

GB production is also likely to remain constrained.  Although input costs have eased over recent months they remain historically high.  In addition, forage quality is likely to have been affected by the cold spring and straw costs will be higher due to the lower arable area and more spring cropping this year.  All these increases in costs will make producers reluctant to push for production unless we experience a significant increase in farmgate prices.

Latest farmgate milk price announcements as from 1st July include;

• Barbers has announced a 1.03p per litre increase which takes its standard litre price to 41.28p per litre
• Producers supplying First Milk will receive a 0.8p per litre increase which will take their maufacturing standard litre to 40.3p per litre
• Wyke Farms are up by 0.7p per litre to 41.06p for their manufacturing litre and Belton Farm is increasing its standard litre by 1p to 39.3p per litre
• Meadow Foods has announced a 1.5p per litre which takes their price to 38.5p per litre.