August 2009 Archives

By Paul Spackman

The annual last-minute "bun fight" between British Sugar and the NFU is hotting-up again, despite hopes that a repeat of last year's protracted negotiations could be avoided.

The latest attempt to break the stalemate has come from the NFU, which called on growers to "show solidarity" for its position and attend a meeting next week in which it will discuss the next steps in securing a higher beet price for 2010.

Earlier this year the NFU opened the negotiations with a demand for £34.50/t, which British Sugar quickly called "unrealistic". Since then things have progressed about as well as an Australian Ashes tour and it may take more than next week's meeting to get British Sugar to budge.

Of course, if every beet grower in the country comes together in Peterborough on Wednesday (2 September) and all agree a common, reasonable 'asking price' then perhaps British Sugar will have no choice but to listen...

Six months ago, at its annual conference in Birmingham, the NFU launched its Survival Plan for British Dairying.

It was a timely publication, coming as the sector approached the end of another milk year with production waning and prices on the slide.

The Survival Plan set out a number of challenges - 35 in total - for the whole industry, in order to avoid a further "erosion of critical mass".

A lot has happened since then, but one thing has not changed - the exodus of dairy farmers continues. Latest figures from DairyCo show that 467 dairy farmers have quit since this time last year, taking the total number in England and Wales to just 11,700.

Milk prices have also continued to fall so that in June, the average British dairy farmer was getting 22.5p/litre, compared with 27p/litre last autumn.

On these grounds alone, it would be tempting to conclude that the NFU's Survival Plan has failed. But that would be premature.

For a start, the rate of contraction seems to have slowed, with just 3.8% of dairy farmers leaving in the past 12 months compared with a ten-year average of 6.5%.....

It always amazes me how two different journals can run the same story with such different interpretations.

Case in point is this week's report from the IGD, (or Institute of Grocery Distribution in its former guise), which is the latest survey tracking the performance of the organic sector during the recession.

According to the headline on food trade website talkingretail.com "Consumers are still supporting organic food".

The article goes on to explain that "nearly one in five of all UK shoppers are remaining loyal to organic food and drink, and are maintaining their expenditure".

Compare and contrast that upbeat message with our own interpretation. "Four out of five shoppers shun organic". According to our report, 10% of former organic shoppers have found alternative products, while another 8% are buying fewer products.

We're not by nature a miserable lot in the Farmers Weekly office. But I do believe our headline better reflects what is going on in the retail sector.....

At last the political pressure seems to be building to do away with the EU's ridiculous rules that outlaw any feedstuffs that contains even a trace of a non-approved GM product.

Just two weeks ago, a cargo of US soymeal was turned away by importers in Spain, following the discovery of traces of an unapproved GM maize variety. And further consignments had to be recalled in Germany.

The EU's highly convoluted approvals process means that the waiting list of GM products is increasing all the time. And is it grows, so does the risk of contamination with non-EU approved soya or maize.

This week's report from DEFRA and the Food Standards Agency sums up the problem well. It points to the fact that Brazil and Argentina currently supply 90% of the UK's soya market, and these two countries are dominated by GM varieties - over 90% in the case of Argentina....

Every cloud has a silver lining - even if it's a very dark cloud, full of water and preceded by an unseasonably chilly wind.

What am I talking about? The CLA's Rural Economy Index, of course.

According to the latest survey, for the second quarter of this year, rural businesses are growing increasingly confident about their future prospects.

The survey is based on a blend of rural businesses - farms, estates, rural surveyors, tourist-based activities, food service outlets etc.

According to the report, some 17% of the 100 companies surveyed said they felt their businesses would grow in the next six months, compared with just 12% who felt that in the first quarter of the year....

The National Beef Association has accused the beef trade of making a "serious miscalculation" in cutting finished cattle prices during July, and described the 18p/kg dw drop in prices as "hugely overcooked".

While not wishing to make enemies of the NBA, I would suggest that, if anything, it is their Press Release that is a little overcooked.

The "huge price plunge" they refer to actually amounts to just 6% over six weeks for the worst affected beef producers in the south of England, and a more modest 4.5% in the overall GB average R4L steer price.

Of course any drop in beef prices is disappointing. But 4.5% is small fry compared with the 26% drop in the price of feed wheat since the start of June, with growers this week harvesting crops worth just £84/t - way below the cost of production.

Furthermore, a slight fall in the beef price is not unexpected at this time of year, just as the upturn that has been underway in the live trade for a couple of weeks and now seems to be benefiting the deadweight sector follows a normal seasonal trend....

My recent blog on "Which is best - co-operative or private company" seems to have touched one or two raw nerves - I should have expected nothing less!

The blog posting pointed to the table in the recent Robert Wiseman Dairies annual report, showing how much a 1m litre/year dairy farmer would have got selling his milk to a variety of buyers.

Not surprisingly, the analysis by milkprices.com put private companies at the top and co-ops at the bottom. It claimed that, over the 15 years since deregulation, a Wiseman producer would have got £56,000 more than the next best private company and £262,000 more than the worst performing co-op.

One of the three co-ops mentioned in this report was quick to get in touch to offer what might be termed "a different interpretation". The key points from a lengthy missive included:

Monday mornings are never my best time and, reading through the weekend's accumulation of grain market reports has done nothing to lift my mood.

All the talk is of falling prices. Frontier says the trend is "very negative" as the reality of big crop yields and lack of exports weigh on the market. France, it notes, is set for an even bigger wheat crop than last year at 38m tonnes.

Glencore also points to "yields, yields and more yields", not just from the grain powerhouses of France and Germany, but also places like Latvia, Estonia, Lithuania, Denmark and Sweden - all of which compete for exports with the UK.

Gleadell Agriculture, meanwhile, points to the continuing recovery of sterling against the euro and the dollar, which is making UK grain even harder to shift on international markets.

And after falling £6/t in the second half of last week, London wheat futures are down again this morning (Monday) at £97.50 for November....

Which is best when it comes to buying milk - co-operatives or private companies?

A quick glance at the latest DairyCo league table in this week's Prices and Trends section of Farmers Weekly would suggest that it is the latter.

As Wiseman, Arla and Dairy Crest all push for promotion, co-ops such as Milk Link and First Milk continue to languish in the bottom half.

League tables like this are often criticised for providing just a snapshot of the market at any one point in time. That is not fair criticism as the table is ranked according to the 12-month rolling average rather than the size of the latest milk cheque.

But if you are looking for a longer term perspective, then the recent annual report and financial statement from Robert Wiseman Dairies sheds some very interesting light.

In a section called Partnerships that Perform, it sets out a table prepared by milkprices.com which shows how much money a dairy farmer producing 1m litre/year of 4% butterfat, 3.3% protein milk, would have earned over the past 14 years...

In the first blog I ever posted back in January, I referred to the HGCA's weekly Market Report and, in particular, their summary of factors affecting the grain markets.

At the time, I noted, the number of factors described as "bullish" had outnumbered the number of factors described as "bearish" by two-to-one for each of the previous six weeks.

It was not an exactly scientific way of analysing the market, but looking back now I see that the spot feed wheat market did continue to climb, reaching £113/t in February. Thereafter, it traded in a band of about £100-£110/t, before peaking again at £114/t in early June.

But since then, things have taken a significant turn for the worse, with feed wheat losing over £20/t in a matter of weeks as the old season runs into the new.

This too has been reflected in the HGCA's weekly Market Reports, where the number of "bearish" factors identified has outnumbered the number of "bullish" factors by two-to-one for each of the past eight weeks....

Recent news of price cuts by two of the country's leading milk buyers, First Milk and Milk Link, must come as a bitter blow to those who are on the receiving end, but are not altogether unexpected.

I've mentioned several times in this blog in recent weeks that the end of the dairy downturn is not yet in sight, despite the recent price rise by Robert Wiseman Dairies and the better performance at the last United Dairy Farmers milk auction.

  The first was entirely down to the better cream price for liquid processors since March, and the second was due to the shortage of milk in Northern Ireland. Both were specific responses to specific circumstances.

The 3.4p/litre First Milk price cut is also pretty specific - only affecting former Dairy Farmers of Britain members whose milk First Milk is now either sending for butter/powder production, or selling to a depressed spot market.

While describing the 18.65p/litre these farmers are now getting as "completely unsustainable", even the NFU acknowledges that it is cheap milk bought by others that has undermined the market....