Stock sales 2016: Brexit has positive effect on trade

Political manoeuvrings rarely help the unpredictable business of making a profit from primestock, but the effect of the Brexit vote during 2016 actually benefited beef and sheep producers.

For those with prime lambs to sell, it turned a lacklustre start to the year’s trading into a season with an unprecedented upturn in early summer lamb prices.

The Brexit vote brought an almost immediate lift of £5-£6 a head and by August, the export-driven confidence had added about £15-£20 apiece to lamb values compared with 2015.

And it wasn’t to be shortlived. The buoyant market was sustained well into the autumn and only began to waver in early November.

One of the interesting features of this year’s lamb trade has been the unfaltering demand for heavy lambs, despite the fact producers are consistently told by marketing gurus not to take lambs to top weights.

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“When the real glut of lambs usually happens in late summer the heavies are the first to take a big hit – but not during 2016,” says Mark Richardson of Harrison and Hetherington.

“Producers were consistently getting £80-£90 for heavyweight 50kg lambs in July and August, but we were hearing that Smithfield never had enough lambs so it was a classic case of supply and demand.”

But was the autumn dip in price connected to the heavy lamb bonanza?

“The strengthening pound had an effect on lamb prices, but we saw a lot of lambs that were being kept to heavier weights – 45-50kg – suddenly hit the market late in the season.

“Despite the late autumn trade was still strong for the best export lambs and in mid-November we were seeing the best Beltex-crosses making £109 apiece,” adds Mr Richardson.

Dairy trade

Dairy farmers faced a deeply complex year. Even the unexpected vote to leave the Europe Union couldn’t manage to bring any solace to bear on those grappling with low milk prices.

The grim start to the year for milk producers was never more evident than in the sale rings, where black-and-white milking cattle struggled to sell.

Weak waves of confidence triggered by slight improvements in producer prices brought short-term lifts in demand for dairystock, but then suddenly there was a marked upswing in late autumn.

West Country auctioneer Derek Biss of Greenslade Taylor Hunt describes 2016 as “a year of experiences”.

“We began the year with a really terrible trade for dairy cattle. It was probably the worst trade we have seen for many years and it lasted well into the spring.

“But the lack of supply did result in prices lifting in mid-summer and by November we were seeing a fantastic trade. So it has been a year full of just about everything. It came to an end with prices almost back to where they were a year ago,” says Mr Biss.

Across the UK, the best dairy heifers that sold for £1,400-£1,500 in February were hitting £2,000 at some centres by mid-November. In the last two months of the year the price of in-milk cattle increased by about £200 a head.

The year saw a massive kill of dairy cows, many coming from small herds leaving the milk sector and opting for slaughter rather than the added costs of sale.

Auctioneers say the effect of the “cow kill” and fewer numbers of calved heifers coming on to the market kick-started demand.

“There is light at the end of the tunnel for UK dairy farmers, there is no doubt about that, but the anticipation that milking cattle will get dearer in the new year brought dairy farmers back to the ringside to try to snap up cattle ahead of any further price increases.

“You only have to look at the number of dairy cows there are in the system to realise they aren’t capable of producing the milk that’s wanted,” adds Mr Biss.

And with the late-season increase in demand came a clear preference among buyers for cows rather than heifers.

Auctioneers say 2016 has been a year when micro-management of herd costs has become the norm. Many producers have switched over to buying more productive cows rather than fresh heifers.

Meg Elliott of Bagshaws agrees that 2016 has “been a year of extremes” in the dairystock ring.

“When the trade improved in late autumn we could get up to about £2,000 for the best heifers. There is still a real shortage of cash, but after such a dismal year, when averages were barely at £1,000, we are at least seeing more demand.”

Pedigree dairy cattle

Although there were few major offerings of pedigree dairy cattle during the year, the trade at regular fixtures held up fairly well.

Glyn Lucas of Harrison and Hetherington says milk producers were still prepared to pay about £200 more for pedigree calved heifers.

“It wasn’t a big premium, but buyers were looking for value for money and pedigree heifers were giving them more guaranteed production as well as health status.

“In fact, the health status issue really came to the fore during the year and we saw buyers taking a much keener interest in buying cattle with health accreditation.”

Prime beef

The effects of the Brexit vote was certainly keenly felt in the prime cattle sector, according to Kent-based auctioneer Peter Kingwill of Hobbs Parker.

“Its effect on the exchange rate was instant for the lamb export trade, but not quite as direct in the beef sector. It made the imported beef product considerably more expensive and disrupted the plans of those who had intended to rely on imported beef rather than home-produced stock.

“So we have seen a shortage of manufacturing beef and it has kept the market up for beef cattle and kept supplies moving, particularly for cow beef and overaged beef,” says Mr Kingwill.

The beef trade during the latter part of 2016 has been better than expected and was described by one auctioneer as being “reasonable, but not exceptional”.

“The typical autumn prices of £3.30-£3.50/kg compared with £3.20 and lower in the spring – but in those early months of the year there were some pundits suggesting prices could go as low as £3/kg,” says Mr Kingwill.

“But the year ended far less gloomy than predicted and there is a little more confidence among finishers.”

Bruce Walton of Hopes Auction Company at Wigton, Cumbria, says 2016 continued to highlight the lack of competition for prime cattle. “The meat sector is in the hands of fewer and fewer buyers and last year yet again confirmed that trend.

“It was a very tricky year of ups and downs for finishers until the late autumn – but even then prices started to wobble a bit,” says Mr Walton.

2016 was the year when finishers were told they had to produce lighter-weight prime cattle – and it saw some leading abattoirs call for optimum specification weights of 380kg.