January 2009 Archives

A quick glance at this week's farm income figures from DEFRA, and it seems that all is well with British livestock farming.

Total beef output grew by 27% in 2008 to almost £2.1bn as tighter supplies led to better prices. Costs rose too, but not so fast, generating increased profits.

British beef production also appears to have been relatively untouched by the recession. While there has been some down-trading to lower value cuts, this has been more than offset by the currency effects.

As a result, prices have held up well, with R4L carcasses hovering between 290p/kg and 300p/kg for most of January.

But things could turn quite quickly.

First, world demand is falling as the recession bites in many key importing regions, putting downward pressure on prices. Analysis by international consultants Gira suggests EU beef prices will fall about 8% this year.

Second, while this market weakening has already got under way in some parts of the world, UK prices have been protected by the weak £. Trying to guess which way it will go from here is risky, but I met some foreign exchange traders this morning who were confident that sterling would now recover.

 

So the bull run continues, with feed wheat quoted at £113/t ex-farm for February when Farmers Weekly went to press on Wednesday, up another £5 on the week.

That is fully £30/t more than in October 2008, rewarding those who decided to sit tight rather than panic-sell post harvest.

What is most encouraging is that this week's rally seems to have come about without the help of currency.

Sterling was more or less static against the euro in the first part of the week, at about €1.06, compared with its record low point of €1.02 at the start of the year. It then strengthened a bit further, reaching €1.08 on Thursday morning.

Despite this, grain prices have climbed over the past seven days, to some extent following an upturn in Chicago, but also driven by the presence of boats for loading at UK ports.

Whether the bull run continues, time will tell.

Mind you, not everyone will be regretting having sold earlier in the season - growers who committed some or all of their grain to the Gleadell's grain pool, for example.

 

Today's drop in Robert Wiseman Dairies' price to its milk suppliers has an air of inevitability about it, continuing the trend set by other major buyers in recent weeks and months.

Dairy Farmers of Britain, Arla, First Milk, Dairy Crest, Saputo, Wyke Farms, United Dairy Farmers - the list goes on. That Wiseman has followed suit is hardly a surprise.

What is surprising, however, is the size of the cut. At 2.2p/litre it is the biggest reduction any milk buyer has imposed on its suppliers in recent months.

In its Press Release issued today, Wiseman blames the slump in the price of cream. And to be fair, it was flagging this up as a potential problem back in September, when it published its interim results.

But, for a company that operates purely in the liquid end of the milk business, rather than the commodity end, a cut of this magnitude is still hard to fathom.

Latest figures from DairyCo show that retail prices for liquid milk remain buoyant, with a four pint polybottle averaging 153p. That's equivalent to 8p/litre higher than a year ago. Doorstep prices are also significantly higher at 58p/pint - a rise of 16% on the year.

 

The fortunes of farming during a recession got a decent airing on yesterday's Politics Show, on BBC1 in the South East.

The programme looked at how, historically, farmers tend to do quite well out of a recession, as currency weakens and commodity prices rise.

East Sussex NFU chairman Jeff Truckfield explained how, a year ago, his fat lambs were getting £27 a head. This year the best sorts were getting almost £80 a head, as their export values had climbed.

And farmer Peter Jervis from Pembury in Kent said there was plenty of optimism in farming as people still had to eat.

Grain traders are a pessimistic lot - at least, that presumably explains why they always seem to talk the market down, rather than up.

Last October, when ex-farm feed wheat had slid to £83/t, I asked a number of merchants what advice they would give farmers following 2008's difficult harvest. The resounding message was to "sell now", if not all of their crop then at least a decent whack of it.

Given the massive global harvest and the impending recession the market would only go one way, and that was down.

Since then, prices have climbed almost weekly, reaching £107/t this week - fully £25/t up on last October's low.

Of course, the collapse in sterling has been the main factor over that time, but not the only factor.