June 2011 Archives

The wholesale dairy commodity market is largely maintaining its strong tone with UK butter prices reaching record levels at £3,800/tonne in June. Concerns over EU butter stocks going into the autumn, coupled with competition between export and domestic markets, saw the UK butter price increase by £350/t, or 10%, over the month.

The bulk cream price also increased in June by £100/tonne (5.9%) to £1,800/tonne, said DairyCo in its Dairy Market Update. However skimmed milk powder and Cheddar prices did not move.

While EU milk production rose by 2.8% in January to April 2011, output in New Zealand is expected to be up by 15% between January and June compared with 2010. Strong import demand from Russia and China in the first three months of this year soaked up extra production, helping to keep the market firm.

After years of negotiations, it looks like British pork products could soon be heading to China.

Attempts to open the Chinese market -estimated to be worth up to £40m a year - began in 2004, but were interrupted by the 2007 foot and mouth outbreak.

Negotiations reached a milestone last November when business secretary Vince Cable and ministers from the Chinese quarantine inspectorate signed an export health certificate agreement. Half a dozen UK plants have now been formally granted export health certificates after a recent visit to the UK by the Chinese premier.

“Pork and pork product prices are currently at record levels in China. We have a fantastic opportunity to improve returns from selling all parts of the pig,” BPEX Chairman Stewart Houston said.

China is the world’s biggest pig meat market, producing 46m tonnes a year and consuming more than that. So-called “fifth quarter” products can command a premium there, despite being of limited value in the UK.

“This is much needed as pig prices in this country still lag behind the cost of production caused by continuing high feed costs and other rising input prices,” Mr Houston said.

A change in the way stocktaking valuations are made could have big tax implications for  farming businesses, warned speakers at the Central Association of Agricultural Valuers’ annual conference last week.

Moves to adopt International Financial Reporting Standards for stocktaking valuations would mean moving to a ‘fair’ basis which meant a market value, rather than the current cost or deemed cost basis. This will become the standard for medium sized companies (£6m-plus turnover) from 2013. It would feed into tax returns, accelerating profits which were not banked profits, said CAAV secretary Jeremy Moody.

The IFRS already applies to quoted companies and could apply to all farm businesses within five years or so.

Tesco has introduced a new code of practice for its group of dedicated dairy farmer suppliers.

The supermarket says the code is simpler than the traditional list of standards and will help farmers benchmark performance against others in the sustainable dairy group (TSDG) as well as educate consumers about milk production.

Farmers are required to record information on a purpose-built database for 17 “absolute standards” and 15 “measures for improvement”, covering areas such as animal health, welfare and environmental practices.

“The TSDG farmers have already engaged in milk recording and mobility scoring for the past four years, and this next stage enables farmers to develop their own ways of achieving these measurable targets, through innovation, benchmarking and sharing best practice,” Tesco director of dairy, Sean McCurley said.

It was welcomed by TSDG farmer chairman Will Hosford. “The unique way Tesco has set the milk price for the past four years has meant we have the confidence to invest in infrastructure on our farms which will help us improve our standards.”

Bare land prices in England rose by almost 7% to in the year to the end of June, to an all time high of £6,156/acre according to Knight Frank’s head of rural property research Andrew Shirley.

The figures are based on known sales plus valuations and also show that there was a rise of 2.8% in the second quarter. Mr Shirley tentatively suggests that things may be levelling out now. 

“Demand has increased by 10% over the past 12 months but supply is increasing too.” More than half (55%) of purchasers were farmers, 24% were lifestyle buyers and 17% institutions.

Well done Milk Link! The farmer owned milk processor came back from the Highland Show with a clutch of nine cheese awards - four golds, four silvers and a bronze.

Its Welsh creamery, Llandyrnog, carried off the supreme champion award for Cadog Mature Cheddar as well as winning the best Cheddar and best non Scottish Cheddar titles. Lockerbie Creamery collected best Scottish Cheddar with its mild cheddar and reserve champion for its unsalted butter, then a further gold and three silver awards. Milk Link’s Devon-based Taw Valley Mature Cheddar won a silver and Cadog Extra Mature Cheddar a bronze.

Pig and poultry compound feed manufacturer ABN has bought Exeter-based Uffculme Feed Mill.

ABN managing director Simon Heath said the acquisition, which is subject to regulatory approval by the UK competition authorities, would improve the company’s ability to service an expanding customer base in the southwest.

“For the last several years, we have been investing in our ability to deliver quality nutrition products to the entire UK pig and poultry supply chains, and this is just another step in that direction for our business.”

Financial speculators have come into the firing line again, this time from NFU Scotland.

The union has backed calls for greater regulation to curb the damage speculation is having on agricultural commodities markets. It highlights the Chicago wheat futures markets where, it says, traded volumes are now forty six-times the actual amount of wheat produced in the world each year.

“The unwelcome entry of significant financial resources into the futures markets has brought increased volatility to markets and contributed to price spikes,” NFUS president Nigel Miller told the Royal Highland Show.

“To combat this, there is a need for greater structure to be given to the futures markets so they do the job intended which was to allow those in the food supply chain to hedge their risk and plan forward.”

With all the talk of tighter consumer spending and discounting by supermarkets, it was encouraging to hear that a new farmers market is starting up next week.

The Dumfries farmers market will run on the first Sunday in every month, with the first one taking place next weekend (3 July). Top marks to the group of seven local producers who got together to set it up - fingers crossed it’s a success.

As one of the organisers Sarah Burchell said, “Why shop global when you can shop local?”

If you’d like to go along to it, head for the car park at Tarff Town and Country, Lockerbie Road. You can find a directory of certified UK farmers markets at http://farmersmarkets.net/

A 40% increase in exports helped Scottish meat processors increase their total turnover by 15% year-on-year during 2010 to around £930m.

The figures, revealed in Quality Meat Scotland’s Scottish Red Meat Industry Profile 2011, are an encouraging sign, but do not indicate profitability, QMS head of economics Stuart Ashworth said.

Increases in wholesale retail values have not been enough to offset higher raw material and energy prices, he said. With the five largest abattoirs in Scotland handling more than two-thirds of the slaughter of cattle, sheep and pigs, throughput remains an important driver of profit.

There was a 4% increase in the number of cattle slaughtered in Scottish abattoirs in 2010, but sheep throughputs fell 2.5% and pigs were down another 3%, on top of a 12% fall the previous year.

Yorkshire based specialist agronomy business Phoenix Agronomy has joined Frontier Agriculture.

Wetherby based Phoenix has annual sales of £8m and will remain an independently managed division of Frontier, headed by current directors Paul Power, Nigel Foster and Charles Dunford.

This latest move continues Frontier’s growth through acquisition - the company already has 85 agronomists and brought Turriff based Grampian Crop Services into its portfolio on 1 March this year as a trading division. It also bought the precision fertiliser application business SOYL in 2009.
 

Long term prospects for UK cereals growers are still positive but higher input prices and the effects of drought may put short term pressure on cashflows, warned Lloyds TSB’s agriculture director Gareth Oakley at last week’s Cereals event.

He called on farmers to discuss requirements with their bank manager sooner rather than later. “There may be particular problems for growers who committed to sell large volumes of their crops forward. If they do not grow enough grain then they may be forced to buy in expensive stocks to cover their commitments.”

Short term issues could be addressed either by early discussions with cereal buyers to agree a strategy to deal with any problems or managed through cash flow if banks were involved early enough and understood that an action plan was in place.

Standing straw auctions begin from 30 June in Herefordshire and Welsh border counties with Sunderlands & Thompsons, which expects to sell about 2,000ha  (5000 acres) of standing wheat, barley, rape and bean haulm this season.

The first sale at Dymock, Gloucestershire will see 92ha (227acres) of wheat, barley and linseed straw go under the hammer on two farms, testing buyers’ expectations of the coming harvest.

Most of Herefordshire has escaped the severe drought conditions seen in East Anglia and many crops look in good condition, though generally grain yields may be down by 10 to 15% and volume of straw may be variable this year, says the firm.   

Supply shortages are expected to hit hardest in the straw market this year - the British Hay and Straw Merchants’ Association reports that hay crops have generally been good, with some bumper crops in the north.

Russia’s significance within international grain markets was really brought home to me when I recently met a group of Russians in the UK for an event organised by DuPont and the Elite Farmers Trading Company.

It’s the scale and production potential that’s really impressive. One such example was a company farming 330,000ha (250,000ha in cropping this year) in the more fertile central region. They reckoned winter wheat yields were typically 3-5t/ha, but could be significantly improved to levels similar to the UK with better varieties. Extrapolate that kind of yield improvement across the vast areas involved potentially means a lot more grain.

But, nothing is ever straightforward. Russia, perhaps more than many other countries, is subject to dramatic weather variations, with water being the main limiting factor. Annual rainfall in the area above was around 550mm and autumn-sown crops have to be in the ground by the end of September to give them chance to establish before the winter.

Irish food and agri-business Origin Enterprises is to buy the fertiliser division of Carrs Milling for £19m.

CM Fertilisers is based in Scotland and northern England and provides branded specialist fertilisers, plus integrated nutrient management systems to the arable, grassland, horticulture and forestry sectors.

Origin said the acquisition, which is subject to shareholder approval, would strengthen the group’s existing position in the UK. Origin Fertilisers already has several sites in the UK involved in the blending and distribution of agricultural fertiliser.

Carrs Milling will hold a general meeting to approve the transaction on 13 July 2011.

Emails suggesting you are due a tax rebate are fake, warns HM Revenue & Customs, which currently only makes contact in writing by post with those due a tax refund.

HMRC is alerting taxpayers to a surge of fake ‘phishing’ emails sent out by fraudsters in the run-up to the tax credits renewal deadline. These inform the recipient they are due a tax rebate, providing a click-through link to a cloned replica of the HMRC website.

Credit or debit card details are then requested and victims risk having their bank accounts emptied and personal details sold on to other criminals, warns HMRC.

Tax credit renewal forms were first sent out in early April and since then more than 46,000 phishing emails have been reported by customers. During the same period HMRC has helped shut down more than 150 scam websites.

“We don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently,” said a spokesperson.

In a market that moves on every bit of news, the discovery of a locust problem in southern Russia might have been expected to push prices up by more than the £1.25/t rise seen by mid day Wednesday on London’s feed wheat futures market.

France and Kiev based analyst Agritel reports that more than 77,000ha (190,000 acres) have been treated with pesticides but that the Department of Agriculture considered that this measure was not sufficient.

Meanwhile the Ukrainian 2011/12 grain export forecast has been cut to between 15m and 18m tonnes, from the previous figure of 19m to 20m tonnes. The latest Russian crop forecast from Russian Grain Union sees a 2011/12 grain crop of 80 to 93m tonnes, leaving the door open for those exports but still all weather dependent.

“With the major five exporters (US, Argentina, Australia, Canada and EU) holding only 44m tonnes of wheat, or 24% of the total stock, the world needs all of the total export potential from the Former Soviet Union (26.3m tonnes), and any signs of export restrictions from this region will ignite further buying speculation,” says Gleadell managing director David Sheppard in his Cereals event market report.

Meat South West is calling on producers and others to back a bid for EU Protected Geographical Indication (PGI) status for beef and lamb from the West Country.

If approved by the European Commission, beef and lamb meeting certain criteria would be badged as West Country and promoted on the basis of the unique rearing environment associated with the region, says MSW.

Beef and lamb would have to be from stock born, raised and finished in Cornwall, Devon, Somerset, Dorset, Gloucestershire or Wiltshire to qualify for West Country labelling under PGI and diets must be at least 70% forage.

The project is supported by EBLEX and producers and others have 12 weeks in which to respond to a consultation document at http://www.euprotectedfoodnames.org.uk/News/tabid/158/Default.aspx . Comments should be sent to Irene Bocchetta ADAS, Woodthorne, Wergs Road, Wolverhampton, WV6 8TQ, or email Irene.Bocchetta@adas.co.uk
 

Weather problems and changes in consumption of wheat could see the coming grain year end with stocks at considerably lower levels than official estimates have so far put them.

US Wheat Associates President Alan Tracy stressed to those at the International Grains Council’s annual conference in London that his figures were possible rather than predicted but that end of season world wheat stocks in 2011/12 could drop to 162m tonnes, which is about 20m tonnes lower than the latest USDA and IGC forecasts. 

Lower production accounts for most of this but wheat use may also be several millions tonnes higher than previously forecast.

US corn (maize) stocks could fall to just 11m tonnes, which would leave the all important ‘stocks to use’ ratio at just 3.4%, or lower than two weeks’ supply. 

If arable land at £10,000 an acre in the UK is too steep for you, how about an estate the size of Kent for US$10/acre? Savills is about to launch the sale of Estancia Punta del Agua in north west Argentina with a guide price expected to be in the region of US$10m.

At around 400,318ha (989,186 acres) and sitting on a national route connecting major ports on the Pacific and Atlantic coasts, soils on the Estancia range from naturally fertile silt in the north and centre to more sandy soils in the south.

The area is soon to benefit from significant power supply improvements, is crossed by three main rivers and sits on one of the largest aquifers in Argentina, providing huge irrigation potential, says Stephen Hall of the firm’s Lincoln office.

As the debate about whether speculators are fuelling volatility in futures markets rumbles on, it was interesting to hear from someone at the forefront of it all this week.

NYSE Liffe’s Peter Blogg told the DairyUK-DairyCo conference that, contrary to media headlines, futures markets were fundamentally driven by physical grain trading, rather than money-grabbing speculators.

He reckoned 80% of the soft agricultural commodities futures and options business was from those involved in physical markets, such as producer co-ops, food and feed manufacturers. While investors such as hedge or pension funds were not handling physical product, they were essential to add liquidity in futures markets, he said.

This liquidity was something that was still lacking from the Skimmed Milk Powder futures contract launched last year, with limited interest so far. “It’s been a pretty slow start, but I expect interest will grow over time, especially as more people become familiar with, and use, other futures contracts, such as feed wheat.”