Livestock traders more optimistic for dairy, beef and sheep prices in 2015

No livestock sector escaped having to take a large dose of the market’s most bitter medicine during 2014 as farmers producing beef, lamb, pigmeat and milk were all hit by low prices.

But as UK livestock producers endured the full impact of world market forces last year, are there better times ahead in 2015?

Number crunching market analysts – as well as those at the sharp end of the job of actually buying and selling livestock – admit it’s becoming increasingly difficult to predict future trading conditions with any real confidence let alone estimate market prices.

But while so many far ranging and often hitherto unimaginable influences come to bear on our livestock values – and the horsemeat scandal springs to mind as one – there’s nothing like a genuine market shortage to ratchet up demand.

BEEF

Simple though it may be, it’s precisely a shortage situation that’s probably going to help put more cash into beef finishers’ pockets in the year ahead.

Eblex is in no doubt that supplies of finished cattle are going to be much tighter during 2015. But its analyst Debbie Butcher says no one is prepared to predict actual prices as a result of fewer cattle coming on to the market.

“We can’t predict what price finished cattle prices will be in terms of p/kg, but we can pass on the messages we glean from the market and hope that producers can use those signals to help them market their cattle more effectively,” she says.

However, Eblex does acknowledge that tighter supplies of cattle on the home market – and also in Ireland – will put the UK finished cattle price in a much more positive position than it was during 2014.

And unlike the pre-Christmas trade of 2013, which delivered little in the way of any seasonal bonuses to finishers, 2014 followed a more traditional upward trend. And it’s this improvement that will, hopefully, herald the start of a steady lift in prime cattle prices.

If there is a marked reduction in the number of prime cattle on the market in 2015 – combined with what EBLEX describe as “robust” exports and a lower tonnage of imported beef – the scene would appear to be set for a more stable UK beef market.

In its beef analysis for 2015, Eblex says there is an improved possibility of firmer prices but much will depend on consumer demand.

Finishers start the new year with a little more optimism, but remain well aware that their primary source of supply – the suckler herd – is one of the most vulnerable sectors of UK livestock production.

As suckler cow numbers continue to decline and fewer beef-bred calves are available to finishers, so their value will increase. While finishers hope to see their end price increasing, it looks likely to be at a time when the “raw materials” needed for their business start to take a bigger slice of their profit.

Auctioneer Robert Whitelaw of Hexham Auction Mart in Northumberland says the beef sector has to recognise that every part of the production chain needs to make a margin – from the suckled calf producer to the abattoir and even the processor.

“Unless there is a fair price earned all the way along the line the chain will break down. Current calf registrations suggest the number of finished cattle available in 2015 is not showing any increase.

That’s what’s going to have the biggest impact on the prime cattle market,” says Mr Whitelaw.

SHEEP

Prime sheep market pundits are cautiously optimistic about producer prices in 2015.

With the end of year improvement in returns – and auction marts in some parts of the UK experiencing a shortage of prime lambs in late autumn – some believe new year hogget prices will waste no time in gathering pace ahead of their traditional late spring upswing.

More lambs were slaughtered in September 2014 than in the same month in 2013. The figure of 1.12m was 1% up on the year and may hold a clue to why tight supplies were reported in late October.

Wholesalers were certainly mopping up big numbers of lambs in a pre-Christmas buying spree – all of which could help kick-start January’s hogget trade.

The 7% increase in the lamb price in Australia and New Zealand – as a result of shorter supplies – will hopefully have the desired effect and deter imports to the UK. Lamb exports from the UK are expected to remain good but producer prices – both during the immediate hogget selling season and beyond – will have much to do with consumer trends.

And it’s important not to underestimate the effect of higher priced beef in 2015, which could encourage consumers to switch to lamb.

As 2014 was drawing to a close, those gearing up to supply the prime hogget trade were spending confidently on store lambs with prices having crept up by around £10 a head during November.

And while these sheep would be coming back on to the market as prime hoggets, there was an expectation that the higher hogget values usually reserved for late season selling may come sooner in 2015.

Exeter-based auctioneer Russell Steer of Kivells and Husseys was upbeat about the prospects for sheep producers in 2015.

“We were selling the first of the season’s ewes with lambs at foot in late November and the trade was very good with prices up to £220 for couples. This is a trade that’s usually a good barometer for the coming year.

“Our pre-Christmas store lamb trade was also very strong. A lot of prime lambs were sold at lighter weights during the main lamb selling season of 2014, and even those producers who usually have later lambs to sell have found the ample autumn grazing pushed their lambs on a lot faster – and they sold them.

“We were selling around 1,600-1,700 store lambs every week in late autumn with buyers keen and confident,” said Mr Steer.

But he did have one concern about the year ahead: “A lot of Suffolk and Texel-cross Mule ewe lambs have been retained as potential breeding sheep – but a lot were not of the best quality. We may see some of these cashed-in to kill in the spring if the hogget price is good enough to leave a margin.

“But if they end up being tupped it could reduce the demand for good shearlings next summer and autumn that have been bred for the job.”

DAIRY

Dairy cattle prices had probably bottomed out by the end of 2014, according to Greenslade Taylor Hunt auctioneer Derek Biss.

“The £2,000 heifers had dropped to around £1,750-1,800 while the £1,600-1,800 are back to £1,400. I don’t think prices will fall any further during 2015, but we’re seeing a change in the way dairy farmers are buying.

“There’s plenty of people looking for a couple of cattle at sales as replacements, but they are not looking for 10. I think we’re seeing consolidation rather than expansion,” reckoned Mr Biss.

But he was confident the buyers for the very best cattle were still there and prepared to hit the £2,000 level.

“We’re not seeing any rush to disperse herds in 2015, so I think prices will settle at the levels they were at by the end of 2014 and hold at that because of supply and demand, which should retain an even balance.

“Prices should hold, certainly during the first few months of the year, because of the seasonally lower numbers of dairy cattle available. But I don’t think we’ll see any dramatic downturns or upturns in dairy cattle values in 2015,” added Mr Biss.

PIGS

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There are around 11,000 pig farms in the UK but while the number continues to fall there has been a 5% increase in the number of larger units running over 1,000 pigs.

So will bigger businesses be able to withstand the markets pressures expected during 2015?

There was a larger than forecast fall in the UK pig breeding herd, but an increase in productivity led analysts to predict an increase in pigmeat output in the year ahead. Low EU prices are expected to trigger an increase in imports, according to Eblex.

With the EU average pigmeat price at its lowest level in October since 2011, forecasters acknowledge a lot has to change on the global pigmeat market in order to improve UK producer’s returns in 2015.

Slaughterings across the EU look like staying on a par with 2014, but forecasters say the real driver for improved prices will be an upswing in consumer demand for pork.