Goodbye and good riddance: 2015 has been a year to forget for most farmers. The bright side has probably been the weather helping crops grow well and producing record harvests for many, which was just as well because crop prices tumbled.
To put this in to context, the value of feed wheat has fallen from around £130/tonne a year ago to around £105/t just before Christmas. This is a drop of nearly 20 per cent and with costs of production running at around £130/t it is not difficult to do the maths.
In the livestock sector, sheep farmers had a particularly difficult year as lamb prices fell away sharply in the spring and summer with many lambs being sold at around £60/head compared to £80-£90/head the year before. This has led to very challenging times which still remain with lamb prices now about 50p per kg lower than a year ago.
Beef prices became more stable in 2015 but that followed big price falls in 2014 and so some respite was welcome. But even so prices have eased with finished cattle prices currently down around 15p/kg compared to this time last year.
However, the headline grabbing news has been the sustained and dramatic fall in milk price which is keeping many dairy farmers under pressure. In this area we are luckier than some as very few of our farmers are signed up with the worst hit milk purchasers such as First Milk where their producers are receiving not much more than 17p/litre.
Even so, many of our local farmers are receiving only around 22 or 23p/litre which is well below the average cost of production, resulting in widespread financial problems.
But, unlike other agricultural sectors where the value of the product being produced is similar for most farmers in that sector, the price dairy farmers are paid for their milk varies widely, being dependent on the milk supply contract any particular farmer has been able to secure. As a result there are dairy farmers on supermarket aligned contracts who are still receiving around 30p/litre which is almost twice as much as those on the worst contracts.
This means that the fortunes of two seemingly similar neighbouring dairy farmers can vary widely but in reality the majority are not on the best contracts and are suffering badly. Unfortunately there is little sign that prices will improve dramatically in the short to medium term and so the gloomy theme of 2015 seems likely to continue in 2016.
The only ray of sunshine is the fall in other costs of production such as feed and fuel bills, but in many ways these simply reflect the worldwide fall in commodity prices across the board which are the main reason farmers around the world are feeling the pinch.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
A property blog written and authored by our specialist blogging team, discussing all and any matter relating to the residential, rural and commercial property markets.
Showing posts with label beef prices. Show all posts
Showing posts with label beef prices. Show all posts
Wednesday, 13 January 2016
Tuesday, 23 December 2014
The highs and lows of 2014
As 2014 draws to a close, now is the time to reflect on the highs and lows of the farming year which has proved to be a mixed bag.
The year opened with torrential rain and floods on the Somerset Levels which became international news, but as the rain stopped it gave way to one of the best periods of “growing weather” we have seen for some time. Arable crops generally yielded well, grass and maize grew strongly filling the silage clamps and barns with an abundance of good quality winter fodder.
Livestock also enjoyed the pleasant spring and summer and incredibly mild autumn, resulting in high milk production and beef cattle growing and fattening well.
However, good as the weather may have been, farmers have been buffeted by some extreme conditions on the commodity markets.
Beef farmers were the first to be hit as prices plummeted by around 20% in the first six months of the year. But since then, the market has firmed and the year ends with prices back by about 10% on a year ago with modest hope now emerging for a better 2015.
It was then the turn of arable farmers to feel the cold wind of falling world commodity markets as feed wheat prices slumped from around £170 per tonne in the spring to a low of around £100 per tonne in mid autumn. From there prices have thankfully improved somewhat, approaching £130 per tonne at the yearend.
However, the most unpleasant surprise of the year was the unexpected slump in milk prices which started reasonably gently, but in recent months has gathered pace with some dairy farmers now being paid as much as 10p per litre less than they were being paid at the start of the year. This remains a worrying situation and there will undoubtedly be casualties as the months go on and what is particularly worrying is that there does not seem to be an obvious end to this decline in milk prices.
Having said that, unlike other sectors, not all dairy farmers are suffering at the same rate because the price each farmer receives depends on the terms of the contract they hold with one of the numerous milk buyers in the market. This is demonstrated by the latest DairyCo data which shows the top monthly milk price offered in October was 36.7p per litre as compared to the bottom price of 24.98p per litre; a staggering difference for more or less the same commodity.
So, it has been a mixed year with generally good weather after a disastrously wet start but this has not been enough to offset the effects of falling commodity prices which will undoubtedly impact on farming profits in 2014. However, with oil prices also falling fast this should help reduce costs of production as we move in to 2015 thereby offsetting at least some of the effect of falling produce prices which have proved to be the dominant factor effecting farmers in 2014.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
The year opened with torrential rain and floods on the Somerset Levels which became international news, but as the rain stopped it gave way to one of the best periods of “growing weather” we have seen for some time. Arable crops generally yielded well, grass and maize grew strongly filling the silage clamps and barns with an abundance of good quality winter fodder.
Livestock also enjoyed the pleasant spring and summer and incredibly mild autumn, resulting in high milk production and beef cattle growing and fattening well.
However, good as the weather may have been, farmers have been buffeted by some extreme conditions on the commodity markets.
Beef farmers were the first to be hit as prices plummeted by around 20% in the first six months of the year. But since then, the market has firmed and the year ends with prices back by about 10% on a year ago with modest hope now emerging for a better 2015.
It was then the turn of arable farmers to feel the cold wind of falling world commodity markets as feed wheat prices slumped from around £170 per tonne in the spring to a low of around £100 per tonne in mid autumn. From there prices have thankfully improved somewhat, approaching £130 per tonne at the yearend.
However, the most unpleasant surprise of the year was the unexpected slump in milk prices which started reasonably gently, but in recent months has gathered pace with some dairy farmers now being paid as much as 10p per litre less than they were being paid at the start of the year. This remains a worrying situation and there will undoubtedly be casualties as the months go on and what is particularly worrying is that there does not seem to be an obvious end to this decline in milk prices.
Having said that, unlike other sectors, not all dairy farmers are suffering at the same rate because the price each farmer receives depends on the terms of the contract they hold with one of the numerous milk buyers in the market. This is demonstrated by the latest DairyCo data which shows the top monthly milk price offered in October was 36.7p per litre as compared to the bottom price of 24.98p per litre; a staggering difference for more or less the same commodity.
So, it has been a mixed year with generally good weather after a disastrously wet start but this has not been enough to offset the effects of falling commodity prices which will undoubtedly impact on farming profits in 2014. However, with oil prices also falling fast this should help reduce costs of production as we move in to 2015 thereby offsetting at least some of the effect of falling produce prices which have proved to be the dominant factor effecting farmers in 2014.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 9 December 2014
Elizabeth Truss blinded by last year's stats
Last week I read a news item released from a recent government report entitled “Making the food and farming industry more competitive while protecting the environment”
The headline was that, “The UK agricultural industry is going from strength to strength in its contribution to economic growth, with new statistics revealing that increased production and prices boosted farming income to £5.6 billion last year”.
It was stated that total income from farming rose by 15%, between 2012 and 2013 as the industry stepped up its output of top-quality food.
Environment Secretary Elizabeth Truss said, “These figures underline that food and farming really is a powerhouse of the UK economy. From potatoes to poultry, our farming industry is showing that it is leading the way in producing top-quality food that is desired across the world. Our farming sector employs over 400,000 people and their success is helping us deliver the government’s long term economic plan.
We know British consumers value British food but we want UK farming to be a world-leader, exporting quality products far and wide as well as thriving on the home front. Our push for better food labelling across Europe is just one of a host of ways we are working to help this crucial sector to grow and drive growth.”
However, I do hope that Elizabeth Truss understands that this rosy picture represents a “snapshot” from the past, before the world commodity markets took a nose dive plunging many farmers in to a very different situation today from that which existed only a year ago.
It is true that in 2013 commodity prices were reasonably high and the weather in the UK was certainly better than was experienced in the very wet summer of 2012. So in general farm incomes did rise in 2013, but 2014 has proved to be a very different scenario.
First the beef sector plummeted during last spring and summer which was followed by dramatic falls in cereal prices. Both these markets have made modest recoveries in recent months but the dairy sector is in freefall, with many farmers now being paid 8-10p/litre less for their milk than they were being paid in the spring.
So I trust Elizabeth Truss is not being blinded by last year’s statistics and that she has real grasp of the difficult situation which is affecting many farmers in the UK at present. There may be little that she can do about world market prices but there are things government should do to ensure the retail giants are prevented from passing cost savings down the food supply chain in an unfair manner so as to bolster their dwindling profits at the cost of primary producers.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
The headline was that, “The UK agricultural industry is going from strength to strength in its contribution to economic growth, with new statistics revealing that increased production and prices boosted farming income to £5.6 billion last year”.
It was stated that total income from farming rose by 15%, between 2012 and 2013 as the industry stepped up its output of top-quality food.
Environment Secretary Elizabeth Truss said, “These figures underline that food and farming really is a powerhouse of the UK economy. From potatoes to poultry, our farming industry is showing that it is leading the way in producing top-quality food that is desired across the world. Our farming sector employs over 400,000 people and their success is helping us deliver the government’s long term economic plan.
We know British consumers value British food but we want UK farming to be a world-leader, exporting quality products far and wide as well as thriving on the home front. Our push for better food labelling across Europe is just one of a host of ways we are working to help this crucial sector to grow and drive growth.”
However, I do hope that Elizabeth Truss understands that this rosy picture represents a “snapshot” from the past, before the world commodity markets took a nose dive plunging many farmers in to a very different situation today from that which existed only a year ago.
It is true that in 2013 commodity prices were reasonably high and the weather in the UK was certainly better than was experienced in the very wet summer of 2012. So in general farm incomes did rise in 2013, but 2014 has proved to be a very different scenario.
First the beef sector plummeted during last spring and summer which was followed by dramatic falls in cereal prices. Both these markets have made modest recoveries in recent months but the dairy sector is in freefall, with many farmers now being paid 8-10p/litre less for their milk than they were being paid in the spring.
So I trust Elizabeth Truss is not being blinded by last year’s statistics and that she has real grasp of the difficult situation which is affecting many farmers in the UK at present. There may be little that she can do about world market prices but there are things government should do to ensure the retail giants are prevented from passing cost savings down the food supply chain in an unfair manner so as to bolster their dwindling profits at the cost of primary producers.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 28 July 2014
Milk prices are dropping
Despite the beautiful weather, there are clouds overhead as far as many farmers are concerned. Milk purchasers are dropping their milk price, the value of arable crops continue to fall and beef prices, although they appear to have stabilised, are still around 20% down on the price achieved a year ago.
Milk prices appear to be falling because of increased production here in the UK and falling dairy commodity prices across the world. Dairy farmers have certainly seen reasonably good returns in the last 18 months or so but the tide appears to have turned; for instance Dairy Crest has announced a 1.1p per litre reduction on their standard price from 1st September while Arla has announced a 0.94p per litre drop from August.
Arable farmers appear to be facing even tougher times as grain markets continue to fall. There are a number of factors affecting such prices which include a general expectation of heavy crops this harvest and strong sterling which is making British exports less competitive. There is talk of lower yields in the US where some crops have been hit by drought which may reverse the fall in prices but to counter that the Russian grain harvest is forecast to increase. But, at present it appears to be the supply side of the market which is outstripping demand, hence prices are depressed.
As far as the beef sector is concerned, significant losses have already been made by some beef fattening units which bought expensive “store” cattle a year or so ago and now those cattle are ready for slaughter, the finished beef price has fallen to such a level that farmers are unable to recoup the cost of feeding the animals over the last year.
However, there is cautious optimism that the price of beef has at least levelled out and there are the odd signs that prices may start to gently improve but this is not a moment too soon for most beef farmers, who like arable farmers in particular, will find 2014 a very testing year.
Whether we are entering an era of lower commodity prices is not clear; we hear many people talking about the need to feed more mouths across the world and how this should provide a secure future for farmers, but this has not been borne out by the experience of many farmers over the last year or so. What seems clear to me is that farmers must become used to large fluctuations in world commodity markets and as a consequence they will need to make good use of their profits in the good years in order to survive the lean ones.
Milk prices appear to be falling because of increased production here in the UK and falling dairy commodity prices across the world. Dairy farmers have certainly seen reasonably good returns in the last 18 months or so but the tide appears to have turned; for instance Dairy Crest has announced a 1.1p per litre reduction on their standard price from 1st September while Arla has announced a 0.94p per litre drop from August.
Arable farmers appear to be facing even tougher times as grain markets continue to fall. There are a number of factors affecting such prices which include a general expectation of heavy crops this harvest and strong sterling which is making British exports less competitive. There is talk of lower yields in the US where some crops have been hit by drought which may reverse the fall in prices but to counter that the Russian grain harvest is forecast to increase. But, at present it appears to be the supply side of the market which is outstripping demand, hence prices are depressed.
As far as the beef sector is concerned, significant losses have already been made by some beef fattening units which bought expensive “store” cattle a year or so ago and now those cattle are ready for slaughter, the finished beef price has fallen to such a level that farmers are unable to recoup the cost of feeding the animals over the last year.
However, there is cautious optimism that the price of beef has at least levelled out and there are the odd signs that prices may start to gently improve but this is not a moment too soon for most beef farmers, who like arable farmers in particular, will find 2014 a very testing year.
Whether we are entering an era of lower commodity prices is not clear; we hear many people talking about the need to feed more mouths across the world and how this should provide a secure future for farmers, but this has not been borne out by the experience of many farmers over the last year or so. What seems clear to me is that farmers must become used to large fluctuations in world commodity markets and as a consequence they will need to make good use of their profits in the good years in order to survive the lean ones.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 8 July 2014
News from the 'Beef Summit'
Last week saw DEFRA’s Farming Minister, George Eustice chair a so called “Beef Summit” with a view to dealing with the desperate situation the British Beef Industry finds itself in. In the last year beef prices have plummeted by around 20% which is posing very real problems to beef farmers, particularly those who “finish cattle”.
What is interesting to note here is that most farmers who finish cattle, purchase animals, called “store cattle”, from other farmers usually by auction at livestock markets. Here it is argued there is fair and open competition and thus the price paid represents the true open market value of the livestock purchased.
However, once the animals have been fattened they have to be sold to the dwindling number of abattoirs who in turn sell the majority of meat to the big supermarkets. It is this processor/retailer section of the food chain where the “market” becomes much less transparent. Thus many beef finishers are finding themselves having to compete for stock in the open market and then having to sell at “fixed” prices to abattoirs without any transparent competition in the system.
It was issues such as this that stimulated the beef summit where representatives from farming organisations, processors and retailers met in Westminster to discuss the problems facing beef farmers. The outcome of the meeting was that representatives from the farming unions and the British Meat Processors Association (BMPA) will meet over the summer to discuss a code to increase transparency.
The code will cover how trading terms, abattoir specifications and penalties are communicated to beef producers. This represents one of the areas of concern facing farmers but the retail sector is also another big issue where the perennial problem of clear labelling and fair pricing of meat is important.
Farmers appreciate that markets do go up and down but if supermarkets truly want to retain beef production in this country they need to work with the industry to give some certainty as to what prices are likely to do over a period of time.
To some extent supermarkets such as Waitrose are doing this and have recently announced that they will hold prices at no less than 345p/kg for their producers through to October. Tesco has also started a promotion of beef although from the advert I have seen includes British and Irish beef which illustrates the problem of labelling where nothing ever seems as transparent as it should be – will it be British or Irish beef that you actually have on your plate?
So it seems that although some progress has been made and that a code of conduct will be a good thing, there is a lot more still to be done before British beef farmers will feel they are at least being treated fairly by the processors and retailers that dominate the food chain “upstream” from the farm gate.
What is interesting to note here is that most farmers who finish cattle, purchase animals, called “store cattle”, from other farmers usually by auction at livestock markets. Here it is argued there is fair and open competition and thus the price paid represents the true open market value of the livestock purchased.
However, once the animals have been fattened they have to be sold to the dwindling number of abattoirs who in turn sell the majority of meat to the big supermarkets. It is this processor/retailer section of the food chain where the “market” becomes much less transparent. Thus many beef finishers are finding themselves having to compete for stock in the open market and then having to sell at “fixed” prices to abattoirs without any transparent competition in the system.
It was issues such as this that stimulated the beef summit where representatives from farming organisations, processors and retailers met in Westminster to discuss the problems facing beef farmers. The outcome of the meeting was that representatives from the farming unions and the British Meat Processors Association (BMPA) will meet over the summer to discuss a code to increase transparency.
The code will cover how trading terms, abattoir specifications and penalties are communicated to beef producers. This represents one of the areas of concern facing farmers but the retail sector is also another big issue where the perennial problem of clear labelling and fair pricing of meat is important.
Farmers appreciate that markets do go up and down but if supermarkets truly want to retain beef production in this country they need to work with the industry to give some certainty as to what prices are likely to do over a period of time.
To some extent supermarkets such as Waitrose are doing this and have recently announced that they will hold prices at no less than 345p/kg for their producers through to October. Tesco has also started a promotion of beef although from the advert I have seen includes British and Irish beef which illustrates the problem of labelling where nothing ever seems as transparent as it should be – will it be British or Irish beef that you actually have on your plate?
So it seems that although some progress has been made and that a code of conduct will be a good thing, there is a lot more still to be done before British beef farmers will feel they are at least being treated fairly by the processors and retailers that dominate the food chain “upstream” from the farm gate.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 30 June 2014
Potential threats to farmers as the British Economy strenghtens
As the British economy strengthens this may pose threats to farmers because it is likely the pound will strengthen and interest rates will rise.
The strengthening pound is a particular threat for two reasons; first because it will impact on the value of European support payments which are defined in Euros and converted to pounds before being paid to farmers and second because it will make exports less competitive and imports comparatively cheaper.
The exchange rate in particular has been identified in recent years as one of the most important factors influencing the profitability or otherwise of British farmers and for livestock farmers in particular the receipt of European support can often make the difference between profit and loss.
These livestock farmers are also potentially vulnerable to the impact of increased imports which have been implicated in the recent slump in beef prices as beef is being imported from destinations such as Ireland and Poland. As a result the value of beef cattle in this country have fallen by approaching 25% in the last 6 months or so which is posing a serious threat to many livestock farmers.
This has lead to criticism being directed at farming leaders where many farmers feel the National Farmers Union (NFU) has not been doing enough to “beat the drum” for British beef producers. But the NFU has explained it has been encouraging the public to buy British beef and to back the “Red Tractor” logo.
The Red Tractor logo was introduced in 2000 in the wake of the BSE crisis to give the public confidence in British produce. The Red Tractor is a food assurance scheme which covers production standards developed by experts on safety, hygiene, animal welfare and the environment amongst other things. The Red Tractor logo means the food or drink has met these responsible production standards and is fully traceable back to independently inspected farms in the UK.
The NFU are also highlighting where supermarkets have not made enough effort to differentiate between British and Irish beef. But, the Chairman of the NFU Livestock Committee has admitted it has been incredibly difficult to gain traction on this due to the combination of an over-supplied market and soft demand for beef in this country which is giving the retailers the chance to ‘drive down’ farmgate prices.
However, NFU President Mr Meurig Raymond said that, “Confidence, particularly among beef finishers, is at rock bottom. This is a crisis. It is our top priority,” He added that, “Next Tuesday’s beef summit, hosted by Farming Minister George Eustice, would be an opportunity to reinforce these messages and encourage DEFRA to promote beef exports.”
So it appears a lot is hoped of this high level meeting next week but it remains to be seen what effect political influence will have on market forces and the often obscure world of the meat industry from the predominantly Irish owned abattoirs to the supermarket dominated retail sector.
The strengthening pound is a particular threat for two reasons; first because it will impact on the value of European support payments which are defined in Euros and converted to pounds before being paid to farmers and second because it will make exports less competitive and imports comparatively cheaper.
The exchange rate in particular has been identified in recent years as one of the most important factors influencing the profitability or otherwise of British farmers and for livestock farmers in particular the receipt of European support can often make the difference between profit and loss.
These livestock farmers are also potentially vulnerable to the impact of increased imports which have been implicated in the recent slump in beef prices as beef is being imported from destinations such as Ireland and Poland. As a result the value of beef cattle in this country have fallen by approaching 25% in the last 6 months or so which is posing a serious threat to many livestock farmers.
This has lead to criticism being directed at farming leaders where many farmers feel the National Farmers Union (NFU) has not been doing enough to “beat the drum” for British beef producers. But the NFU has explained it has been encouraging the public to buy British beef and to back the “Red Tractor” logo.
The Red Tractor logo was introduced in 2000 in the wake of the BSE crisis to give the public confidence in British produce. The Red Tractor is a food assurance scheme which covers production standards developed by experts on safety, hygiene, animal welfare and the environment amongst other things. The Red Tractor logo means the food or drink has met these responsible production standards and is fully traceable back to independently inspected farms in the UK.
The NFU are also highlighting where supermarkets have not made enough effort to differentiate between British and Irish beef. But, the Chairman of the NFU Livestock Committee has admitted it has been incredibly difficult to gain traction on this due to the combination of an over-supplied market and soft demand for beef in this country which is giving the retailers the chance to ‘drive down’ farmgate prices.
However, NFU President Mr Meurig Raymond said that, “Confidence, particularly among beef finishers, is at rock bottom. This is a crisis. It is our top priority,” He added that, “Next Tuesday’s beef summit, hosted by Farming Minister George Eustice, would be an opportunity to reinforce these messages and encourage DEFRA to promote beef exports.”
So it appears a lot is hoped of this high level meeting next week but it remains to be seen what effect political influence will have on market forces and the often obscure world of the meat industry from the predominantly Irish owned abattoirs to the supermarket dominated retail sector.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 11 June 2014
Market trends for the price of farm commodities
Looking at market trends for the price of farm commodities when compared to a year ago does not make for particularly happy reading. The Farmers Weekly magazine publishes these figures each week and when compared to the prices achieved a year ago most commodities are significantly down.
I have written about beef prices before which have fallen sharply. The price quoted in the Farmers Weekly for last week was 345p per Kg deadweight which is down 50p per Kg on the price achieved this time last year although in this area I am reliably informed that one would struggle to achieve 325p per kg in this area. This indicates that the price being achieved for beef across the country varies significantly and we do not seem to be well placed in this area to achieve the highest prices.
These low prices have stimulated the Farmers For Action (FFA) group to launch protests at meat processing plants in the Midlands where there is concern about the amount of Polish beef being imported and processed in this country.
However, it is not only beef which has seen prices fall in the last year. Arable crops have also dropped sharply in value with Winter Wheat down from £180/tonne to £147/tonne and oilseed rape down from £380/tonne to £268/tonne. At today’s prices, profit margins for arable farmers are likely to be squeezed hard although on the reverse side of this particular coin, this should mean the cost of cereal based feed stuffs for livestock will fall.
In contrast lamb prices have remained steady while milk prices are well ahead of those being achieved this time last year but the trend in milk price is now distinctly downwards as the industry is hit by a number of milk purchasers cutting their farmgate milk prices.
For example, Dairy Crest has cut its liquid milk price by 1.25p/litre from July and Arla has dropped it direct-supplier price by 1.5p/litre. Similarly, earlier last week First Milk reduced its manufacturing contract price by 1.15p/litre.
All these price cuts have come on the back of falling world dairy commodity prices where Fonterra’s Global Trade Auction saw prices fall by 4.2% on 3rd June which is the eighth drop in a row for these auctions. Having said that, cheddar cheese prices rose by 8% and skimmed milk powder by 2.1% and so although milk prices are falling sharply at present there is hope they will stabilise and not fall to the desperately low prices which were witnessed two years ago which forced farmers to take direct action, blockading milk processing plants across the country including here in Somerset.
So what can we read in to all these “tea leaves” – well probably not a great deal other than the fact that markets do go up and down and farmers are exposed to the vaguaries of world markets now more than they have been at any time since the end of the Second World War. Therefore in order to survive, successful farmers will always need to keep their costs under control so as to make money in the good times and survive the hard times because market volatility is most definitely here to stay.
I have written about beef prices before which have fallen sharply. The price quoted in the Farmers Weekly for last week was 345p per Kg deadweight which is down 50p per Kg on the price achieved this time last year although in this area I am reliably informed that one would struggle to achieve 325p per kg in this area. This indicates that the price being achieved for beef across the country varies significantly and we do not seem to be well placed in this area to achieve the highest prices.
These low prices have stimulated the Farmers For Action (FFA) group to launch protests at meat processing plants in the Midlands where there is concern about the amount of Polish beef being imported and processed in this country.
However, it is not only beef which has seen prices fall in the last year. Arable crops have also dropped sharply in value with Winter Wheat down from £180/tonne to £147/tonne and oilseed rape down from £380/tonne to £268/tonne. At today’s prices, profit margins for arable farmers are likely to be squeezed hard although on the reverse side of this particular coin, this should mean the cost of cereal based feed stuffs for livestock will fall.
In contrast lamb prices have remained steady while milk prices are well ahead of those being achieved this time last year but the trend in milk price is now distinctly downwards as the industry is hit by a number of milk purchasers cutting their farmgate milk prices.
For example, Dairy Crest has cut its liquid milk price by 1.25p/litre from July and Arla has dropped it direct-supplier price by 1.5p/litre. Similarly, earlier last week First Milk reduced its manufacturing contract price by 1.15p/litre.
All these price cuts have come on the back of falling world dairy commodity prices where Fonterra’s Global Trade Auction saw prices fall by 4.2% on 3rd June which is the eighth drop in a row for these auctions. Having said that, cheddar cheese prices rose by 8% and skimmed milk powder by 2.1% and so although milk prices are falling sharply at present there is hope they will stabilise and not fall to the desperately low prices which were witnessed two years ago which forced farmers to take direct action, blockading milk processing plants across the country including here in Somerset.
So what can we read in to all these “tea leaves” – well probably not a great deal other than the fact that markets do go up and down and farmers are exposed to the vaguaries of world markets now more than they have been at any time since the end of the Second World War. Therefore in order to survive, successful farmers will always need to keep their costs under control so as to make money in the good times and survive the hard times because market volatility is most definitely here to stay.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Monday, 12 May 2014
Falling beef prices - serious concern for the livestock sector
The fall in the beef price being received by farmers is becoming a serious concern for the livestock sector.
Over the last few years beef prices have steadily risen peaking at over £4/kg deadweight but in the last six months in particular this trend has reversed and as a result many beef farmers are facing significant losses.
The price of beef has dropped by over 10% during the last twelve months while the price of beef on the supermarket shelves continues to stay firm or edge upwards which is causing British beef farmers significant concern.
This time last year the average price of a “standard steer” was £404p/kg which compares to a price of £362p last week and the price quoted by abattoirs to farmers continues to fall week on week.
What this means in real terms is that an beef animal weighing say £350kg deadweight will be worth £150 less this year than last year and because the margins on beef production are very low at the best of times, it seems likely beef fattening units in particular are going to face some significant losses over the coming months.
Indeed without support payments from Europe most livestock farmers in this country would simply not make a profit anyway and with such payments looking likely to reduce as we move in to the future many beef farmers will have to seriously examine the viability of their business model.
The problem is not helped by the fact that the retail outlets are dominated by the supermarkets which always brings in to question whether there is a fair market place between the many small farmers and the few big retailers. This is exacerbated by the fact that the number of abattoirs in this country is also dwindling, which further impacts on a farmer’s ability to influence the price they can achieve.
It is also interesting to learn that many of the abattoirs are owned by Irish firms and whether this influences the amount of Irish beef which is imported in to this country is open to question. Having said that Irish beef farmers are also struggling and so it may just be the low price of Irish beef which is influencing imports.
But what is clear is that on the supermarket shelves, British beef is often sold alongside Irish beef with no obvious distinction. Accordingly the NFU has called on retailers to stop mixing British and cheaper Irish beef on their shelves and to consider promotions to reignite consumer demand.
Over the last few years beef prices have steadily risen peaking at over £4/kg deadweight but in the last six months in particular this trend has reversed and as a result many beef farmers are facing significant losses.
The price of beef has dropped by over 10% during the last twelve months while the price of beef on the supermarket shelves continues to stay firm or edge upwards which is causing British beef farmers significant concern.
This time last year the average price of a “standard steer” was £404p/kg which compares to a price of £362p last week and the price quoted by abattoirs to farmers continues to fall week on week.
What this means in real terms is that an beef animal weighing say £350kg deadweight will be worth £150 less this year than last year and because the margins on beef production are very low at the best of times, it seems likely beef fattening units in particular are going to face some significant losses over the coming months.
Indeed without support payments from Europe most livestock farmers in this country would simply not make a profit anyway and with such payments looking likely to reduce as we move in to the future many beef farmers will have to seriously examine the viability of their business model.
The problem is not helped by the fact that the retail outlets are dominated by the supermarkets which always brings in to question whether there is a fair market place between the many small farmers and the few big retailers. This is exacerbated by the fact that the number of abattoirs in this country is also dwindling, which further impacts on a farmer’s ability to influence the price they can achieve.
It is also interesting to learn that many of the abattoirs are owned by Irish firms and whether this influences the amount of Irish beef which is imported in to this country is open to question. Having said that Irish beef farmers are also struggling and so it may just be the low price of Irish beef which is influencing imports.
But what is clear is that on the supermarket shelves, British beef is often sold alongside Irish beef with no obvious distinction. Accordingly the NFU has called on retailers to stop mixing British and cheaper Irish beef on their shelves and to consider promotions to reignite consumer demand.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Wednesday, 7 May 2014
The British bull market on the turn...
The bull market in British Agriculture may now be on the turn. As the wider economy starts to improve commodity prices look as though they are easing.
As predicted a few weeks ago, milk prices are beginning to fall – whether this is due to falling world markets or supermarket milk prices wars is not clear, but this week alone we have seen Arla drop their milk price by 1.27p/litre while Muller Wiseman has dropped its price by 1.6p/litre and First Milk by 2p/ litre from 2nd June.
Similarly beef prices are easing. The deadweight price for beef has dropped to around 355p/kg which is over 40p/kg less than a year ago while beef prices in the supermarkets have continued to increase, reducing the proportion of the retail price received by farmers from 60% this time last year to just over 51% today.
As far as arable farmers are concerned, wheat prices have also fallen from around £190/t a year ago to under £165/t today and oilseed rape prices by £70/t, from £374/t a year ago to £304/t today.
So it seems all sectors are feeling a chill breeze although it has to be remembered prices are falling from record levels in some instances. Even so one begins to wonder whether we are beginning to see a trend in reduced agricultural commodity prices as the world economy starts to pick up in the wake of the dramatic events of 2007/08 which shook the financial industry to its core.
It is often said that the agricultural economy is counter-cyclical to the wider economy and so after seven years of famine in the latter, maybe we are about to enter a similar period in the former. This may be being alarmist but there is definitely a feeling that we have seen the best of commodity prices for the time being.
This is also a reflection of the fact that the price farmers receive for their produce in this country is now very heavily influenced by world commodity markets. For instance the political instability we have seen in the Ukraine in recent months has to an extent bolstered the price of wheat as traders in world markets have reacted to fears that these troubles may impact on the supply of wheat from the Ukraine which is one of the world’s significant wheat producing areas.
So, a farmer’s profitability is only in part dictated by their skill in animal and crop husbandry or their general business acumen; it is the state of world markets and the vagaries of foreign exchange markets which is likely to have as great if not greater influence on the success or otherwise of a farming business.
As predicted a few weeks ago, milk prices are beginning to fall – whether this is due to falling world markets or supermarket milk prices wars is not clear, but this week alone we have seen Arla drop their milk price by 1.27p/litre while Muller Wiseman has dropped its price by 1.6p/litre and First Milk by 2p/ litre from 2nd June.
Similarly beef prices are easing. The deadweight price for beef has dropped to around 355p/kg which is over 40p/kg less than a year ago while beef prices in the supermarkets have continued to increase, reducing the proportion of the retail price received by farmers from 60% this time last year to just over 51% today.
As far as arable farmers are concerned, wheat prices have also fallen from around £190/t a year ago to under £165/t today and oilseed rape prices by £70/t, from £374/t a year ago to £304/t today.
So it seems all sectors are feeling a chill breeze although it has to be remembered prices are falling from record levels in some instances. Even so one begins to wonder whether we are beginning to see a trend in reduced agricultural commodity prices as the world economy starts to pick up in the wake of the dramatic events of 2007/08 which shook the financial industry to its core.
It is often said that the agricultural economy is counter-cyclical to the wider economy and so after seven years of famine in the latter, maybe we are about to enter a similar period in the former. This may be being alarmist but there is definitely a feeling that we have seen the best of commodity prices for the time being.
This is also a reflection of the fact that the price farmers receive for their produce in this country is now very heavily influenced by world commodity markets. For instance the political instability we have seen in the Ukraine in recent months has to an extent bolstered the price of wheat as traders in world markets have reacted to fears that these troubles may impact on the supply of wheat from the Ukraine which is one of the world’s significant wheat producing areas.
So, a farmer’s profitability is only in part dictated by their skill in animal and crop husbandry or their general business acumen; it is the state of world markets and the vagaries of foreign exchange markets which is likely to have as great if not greater influence on the success or otherwise of a farming business.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Subscribe to:
Posts (Atom)