Looking ahead – optimistic future for the markets

Ask any commodity analyst to come up with a forecast – not necessarily within the agricultural sector – and you can guarantee that the first thing he’ll do is start weighing up the previous year’s trends.

If this analyst was trying to make a living within the livestock industry, it’s likely he’d be out of business pretty soon.

The livestock sector simply doesn’t do trends – and it doesn’t take an analytical wizard to realise that. Look back over 2007 – a job best done with a glass in your hand – and it’s soon clear we had a classic year in terms of the huge unpredictability that lurks threateningly beneath the surface of our increasingly fragile livestock sector.

So let’s not even try to imagine there’s anyone out there – expert, pundit or guru – who can look ahead into 2008 and confidently predict what’s going to be the best bet for those whose livelihood depends on earning an income from livestock.

In a year that hit many producers harder than in the darkest and more protracted foot-and-mouth crisis of 2001 – and further breaches in bio-security by DEFRA cannot be ruled out – we are now faced with the impact of bluetongue disease.

And while birdflu may not directly hit mainstream livestock producers, it’s a threat that may well undermine uninformed consumer confidence in the industry.

Add to all of that the rocketing price of animal feed and it’s little wonder few of those movers and shakers within the livestock sector who were canvassed for their opinions for the purpose of this article were reluctant to comment. And many of those that did were understandably vague in their predictions.

Fortunes never looked like being made from the conventional trading of stock during 2007.

Looking forward

But with the unexpected F&M outbreak, unprecedented wet weather and the emergence of bluetongue, can we now expect that all the gremlins are out of the cupboard? Do we now, at least, know what we’re up against?

If the answer to both these questions is yes, then that may well be the only positive outcome of 2007.

But not all the surprises were grim ones. Few betting men would have placed a large stake on the likelihood that the decade of depressed milk prices previous crippling the dairy sector would have been brought to an abrupt halt. Nor would they have guessed that producers would be getting almost 30% more for their milk.

The meteoric turnaround in the fortunes of dairy farmers – tempered though it is, in part, by the rise in feed prices – is undoubtedly going to be the livestock sector’s success story of 2008. Or is it?

While the best milk producers are heading towards margins of £2000 a cow as conventional milk prices scale the 30p/litre mark – and organic milk looks set to hit the heavenly realms of 40p/litre and beyond – the price of dairy cows and calved heifers is rocketing.

Good news for sellers, not so good for buyers and rather worrying for auctioneers. Auctioneers’ order books are bulging as farm-to-farm trading (made even more difficult under bluetongue zoning) seeks to overcome the dearth of cattle going under the hammer. But finding any cattle to satisfy demand isn’t proving easy.

Entries at the main monthly dairy sales held in the north west and south west are declining and the UK’s leading auctioneers of pedigree cattle report few fixtures booked for 2008.

Good in-calf heifers are now at the £2000 level. That’s more than enough to dole out if you’re running a flying herd. The tables have turned and now it’s the cows and not the cash that’s in short supply.

The early part of 2008 isn’t expected to hold any big upturn in prime beef prices – in fact it’s expected that late-bought store cattle that would traditionally have been sold by Christmas will come onto the market in bigger numbers than we normally see in January to March.

Beef producers will agree that keeping a lid on costs of production is a primary target. Lowering maintenance costs of suckler cows – even out-wintering where possible – is the big challenge. While the topic it has fired some interest in more traditional cow types that can bring cost-saving benefits through native breed traits, the bravehearts of the beef world will be turning even more towards performance figures as a way of trying to improve the way cows breed and milk and the way calves grow and finish.

Sheep producers took a battering in 2007 and the early months of hogget trading in 2008 appear to hold little in the way of encouragement. Desperately low lamb prices deterred the marketing of big numbers of lambs in the run up to Christmas and there’s growing concern that quality is suffering as a consequence.

The export market remains a lifeline to the UK sheep sector and while it’s going to take time to re-establish the volume of trade needed, over-weight hoggets that don’t meet export specification will only prolong the agony of low returns to producers.

In the midst of the marketing chaos that hit sheep farmers in October and November, there was little time to make life changing decisions and as a result tups were turned out as normal.

That must not be taken as an indication of the UK sheep sector’s blind commitment to carry on regardless. Far from it. What happens during 2008 – in terms of the impact of bluetongue and on market prices – will be the deciding factor for many sheep farmers. Any assumption by the government that the sheep sector has licked its wounds and is now getting back to normal would be foolhardy to say the least.

Jonathan Barber

Norfolk farmer Jonathan Barber, who wears many hats within the sheep industry, adheres to that view, although he remains confident about the long term future of the UK sheep sector.

“Much depends on what happens in the year ahead – both for commercial sheep farmers and those with pedigree flocks breeding rams for commercial use.

“Huge numbers of prime lambs are still being produced from poor quality rams. We need to see more prime lamb producers improving the growth efficiency of their lambs by using sires with proven performance figures behind them.”

But with fears that lambing percentages could be down this year as a result of bluetongue, the anticipated exit from sheep production caused by lower returns and the swing towards corn may set the scene for higher prices from summer onwards. But it’s no surprise no one is making any firm predictions at this stage.

Breeding sheep values hit rock bottom in autumn 2007, but hill farmers in northern England – where more than 200,000 North of England Mule gimmer lambs are bred each year – are reckoned to have turned out just as many Bluefaced Leicester tups as usual.

Several leading auctioneers of North of England Mules are confident gimmer lamb values will return to a proper level in 2008. This is another sector of the sheep industry whose future hangs on the outcome of the 2008 autumn sale season.

Regular buyers who have relied on this supply of breeding sheep to maintain their businesses should be aware of the precarious nature of this source of flock replacements should prices remain in the doldrums.

Despite the rocky road of 2007 it’s not that long ago 122,000gns was paid for a Texel tup lamb and the first six-figure deal put a 100,000gns price tag on a Limousin bull.

While we’re unlikely to see such mind-blowing spending in 2008, if we were to consult an analyst to make one forecast about next year’s livestock sector I think he’d say it could be a year of balanced recovery and not one of rash investments.

But then who can predict anything when it comes to livestock?