Key Statistics: Monthly Update January 2014

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1 A briefing for members on the latest agricultural statistics and economic indicators from NFU Economics. In this issue Farm Business Income Pigs Cost of Production Milk Production Beef and Veal Production Farm to Retail Price Spreads Inflation Economic Indicators Feed prices Farm Business Income Defra has released Farm Business Income (FBI) forecasts for 2013/14 (the year ending February 2014), with weather conditions again impacting on farm businesses. The chart below presents these forecasts and actual FBI data for 2011/12 and 2012/13. Ave /farm 120, ,000 80,000 60,000 40,000 20,000 Trends in Farm Business Income (FBI) 2011/ / /14* 0 Cereals General cropping Dairy Cattle & Sheep Cattle/sheep (LFA) Specialist pigs Specialist poultry Source: Defra, Farm Business Income (Lowland) Forecasts. *2013/14 figures are only projections and are subject to revisions. Mixed In summary:- Cereal farms average incomes set to fall 28 per cent according to FBI forecasts. Dairy farms average incomes forecast to almost double in 2013/14 to 101,000 Wet conditions in 2012 prevented drilling of autumn crops, leading to increase in lower yielding spring sown crops for 2013 harvest (2013 produced the lowest wheat harvest since 2001). In additional record harvests around the world lead to falling prices. Increased income primarily driven by higher milk prices which have risen by 14 per cent compared to previous year. Input costs expected to increase, particularly for feed as late cold spring of 2013

2 Grazing livestock farms average income in 2013/14 forecast to increase by 33 per cent on LFA farms (to 26,000) and 15 per cent increase for lowland grazing livestock farms (to 19,000). Specialist pig farms average income for 2013/14 forecast to increase by 90 per cent to 78,000. Specialist poultry farms average incomes forecast to increase by 10 per cent (to 103,000) delayed turnout and increased purchased feed requirements. Production increased in 2013 compared to 2012 especially later on in the year. Increases largely driven by increased output from the sheep enterprises reflecting higher values for store and finished lambs and increased numbers as stock held over from previous year were bought to market. Data for finished pig prices indicate an average increase of 9 per cent whilst input costs have risen only slightly. Feed prices, which represent around half the total costs on these farms, are expected to remain similar to previous year despite fall in cereal prices. This is due to much higher feed prices in first half of year and firmer soya prices for most of year. Higher output from both broiler and egg laying enterprises is forecast to be partially offset by increase in feed volume. NFU Comment Poor weather conditions hit all farm businesses in 2012/13 and we saw a 30 per cent decrease in average profits as costs spiralled and output fell. The forecasts indicate some sectors are showing signs of recovery, but even with increases in income across the beef and sheep sector, profitability still falls some way short of 2011/12 levels. There s good news for pig and dairy producers with year on year increases of 90 per cent and 96 per cent respectively - the dairy sector reversing the trend seen in 2012/13 when incomes fell by 40 per cent. Although improved planting figures bode well for the upcoming harvest, incomes for arable producers are estimated to fall further, linked to lower commodity prices and the UK s lowest wheat harvest for over a decade. It is vital we have viable and successful farming businesses at the foundation of our agri-food sector. Some exceptional climatic challenges have dampened performance in the short term, but the forecasts show the resilience of our industry and demonstrate how some sectors are making steps towards recovery. Pigs Cost of Production

3 Million Litres Latest provisional estimates from AHDB/BPEX show that the cost of GB pig production was again little changed in January. The average cost for the month is estimated at 146.3p/kg. Although this is around 2p lower than the estimate for December, this can largely be attributed to the heavier carcase weights in January. Although wheat prices have eased somewhat in recent weeks, this hasn t yet fed through into compound feed prices, meaning that underlying costs have been little changed since September. The current situation is in marked contrast to a year earlier, when production costs reached a record high of 173p/kg. Last January, the DAPP averaged just over 159p/kg, around 10p below its level early this year. With both prices having moved in favour of producers, a loss of 11 per pig has been transformed into a positive margin of around 18 per head. Nevertheless, the high costs last year emphasise that the profitability of the sector remains vulnerable to any future shocks in global cereals or oilseeds markets; therefore a sustained period of profitable production is required to consolidate this current position. Milk Production 1,300 1,200 1,100 1, UK Milk Production Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2011/ / /14 The provisional volume of wholesale milk delivered to UK dairies during December 2013 was 10.7 per cent higher than the same period in 2012, at 1.15 billion litres, 112 million litres higher than December Cumulative production for the first nine months of the current milk year of 9 billion litres is 326 million litres higher than in the equivalent period in 2012/13. Beef and veal production UK beef production in 2013 fell by more than 4 per cent year on year to total 843,500 tonnes. A reflection of the fundamental tight supply situation, the total number of prime cattle slaughtered at UK abattoirs during 2013 fell 2 per cent on the year to 1.93 million head. In addition, the UK adult cattle kill for 2013 fell 5% on the year to 608,000 head. Carcase weights also fell year on year, due to high feed costs in 2012 and poor weather limiting grass growth in spring 2013.

4 Farm to retail price spreads percentage of beef retail price received by producers Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec In 2013, beef producers received on average 58 per cent of the final retail price of beef, up 4 percentage points on the share received in Farmgate and retail prices both increased on year earlier levels. However, the increased share came as a result of the 13 per cent increase in farmgate prices more than offsetting a 6 per cent rise in the average retail price. Over a longer period of time producers share of the final retail price has moved up significantly, for all of the previous decade it was below 50 per cent percentage of pork retail price received by producers Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec The share of the pork retail price received by producers was little changed in December, based on retail prices collected by AHDB/BPEX. Farmgate prices were slightly lower than the previous month, with retail prices also easing marginally. As a result, producers received 43 per cent of the final price, about 1 per cent more than a year earlier. Over the whole of 2013, producers received an average of 42% of the retail price, up from 40 per cent in percentage of lamb retail price received by producers Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source, During 2013, lamb producers received, on average, 53 per cent of the final retail price of lamb. This is up slightly from the 52 per cent received during However, it is lower than the share recorded in both 2010 and 2011 when the producer received, on average, 55 per cent and 56 per cent respectively. The increased share came as both farmgate and retail prices rose on year earlier levels, farmgate prices rising 4 per cent year on year and the average retail prices increasing by 2 per cent. As usual the seasonality of farmgate prices, combined with the relatively stable nature of retail prices, meant that there was considerable variation across the year. From a low of 43 per cent in January, the producer share reached 62 per cent of the final retail price in June before dropping off, being down to 51 per cent by December. More in-depth analysis of market issues, including slaughterings, trade, consumption and census data, plus coverage of international markets and supply forecasts, is provided in the Eblex monthly Cattle and Sheep Market Update. If you would like to subscribe free of charge please contact emma.whitlock@ahdb.org.uk.

5 Inflation Notes re methodology:- Consumer Prices Index (CPI) annual inflation, the Government s target measure stood at 2.0 per cent in December, down from 2.1 per cent in November, It is the first time inflation has been at the government-set target of 2 per cent since November The annual rate of food price inflation also fell from 3 per cent in November to 2.1 per cent in December (the largest downward contributions coming from fruit and meat, these were partially offset by an upward contribution from prices for bread & cereals). The rise in the price of food for this time of year was the smallest it had been since Food prices, overall, rose between November and December 2013 as they do between these months in most years. The rate of the rise was smaller than between the same two months in 2012 and was the smallest it has been since The CPI rose by 0.4% between November and December 2013, compared with a rise of 0.5% between the same two months in The 1-month movement was therefore 0.1 percentage points lower this year compared with last year. This led to the CPI 12-month rate falling from 2.1% in November to 2.0% in December. Also of note:-the overall price increase for gas and electricity in December 2013 was slightly larger than the rises a year earlier resulting in a small upward contribution to inflation. The NFU have committed to communicate a range of Key Labour Market Indicators following the abolition of the Agricultural Wages Board (AWB). The CPI along with the other indicators was used regularly by the Agricultural Wages Board (AWB) in determining annual pay increases in the minimum rates of pay for agricultural workers, prior to the abolition of the AWB. NFU post AWB guidance is available here.

6 The FAO food price index (FFPI), which is a measure of the monthly change in international prices of a basket of food commodities (meat, cereals, oils and fats, dairy and sugar) averaged points in December 2013, nearly unchanged from November, as a sharp increase in dairy prices and firming meat values largely balanced out a steep decline in sugar quotations and lower cereal and oil prices. Over the full 2013 year, the Index averaged points, down 1.6 per cent from Economic Indicators The unemployment rate for September to November 2013 was 7.1 per cent of the economically active population, down 0.5 percentage points from June to August There were 2.32 million people unemployed, down 167,000 from June to August Second estimates indicate that GDP increased by 0.8 per cent in Q compared with Q In Q GDP as a whole was estimated to be 2.5 per cent below the peak in Q The UK economy grew by 1.9 per cent in 2013, its strongest rate since 2007, according to the Office for National Statistics (ONS). First estimates indicate that GDP increased by 0.7 per cent in Q compared with Q Despite this, a fact sometimes lost in the wider media coverage is that In Q GDP as a whole is still estimated to be 1.3 per cent below the peak in Q From peak to trough in 2009, the economy shrank by 7.2 per cent.

7 Feed Prices s per tonne Feed Wheat Feed Barley Maize Gluten Rapemeal Soyameal Brazilian Soyameal HI Pro Sunflowermeal Pelleted Wheat Data from Defra, HGCA Price comparison for 04 th January relate to prices on 28 th December