Market Report: Spring 2016

Welcome to our collection of items of news and interest from the last quarter and review of the previous year.


During the last quarter, the annual RPI for all commodities fell but, bucking the trend, overall RPI increased slightly by 0.4% to 1.2%. The biggest fallers were pork and fish (down 5.1% and 3.6% respectively) with dairy down 1.5%, beef down 0.7% and cereals hardly moving at all, down 0.2%.

Looking at the year as a whole, the graph reflects the instability of all the commodity markets tracked versus the relative stability of overall RPI. Versus this time last year, whilst still volatile, the range of movement is less than that of 2014 and predominantly negative – that is to say, both peaks and troughs mainly falling below the zero mark. Beef is the only commodity to show an increase between December 2014 and December 2015 – only 0.2% – with all others falling between 2.3% (cereals) and 5.7% (dairy). Overall RPI fell by 0.4%.


There is no let up for beef farmers in their search for profitable margins in 2016. With a moderate increase in supply forecast together with a favourable pound, pressure on prices is a real possibility. To mitigate this, there may be easing of some production costs such as cereal price, availability of straw and forage with cheaper fertiliser and fuel (Andersons farm business consultant, Jack Frater) but margins will continue to be tight and extremely testing to deliver. As with any business, tackling the fixed cost base is the key driver with those managing the lower cost base delivering the better returns. So, for example, outwintering, making better use of grass to extend the grazing season and even strip grazing forage crops can help. No surprises there, but a consistent message in this column is the need to develop efficient, sustainable and long term businesses that are better able to absorb the peaks and troughs of the markets and supply. (Farmers Weekly)


Relatively strong beef supply in UK and Ireland may pull prices downward during 2016 but economic and political instability will no doubt play their part.


We have oft commented upon the challenging relationship between retailer and farmer, especially within the dairy sector, with the two not always happy bedfellows. However, news of Waitrose’s pledge to require farmers to graze their dairy herds outside for a least 100 days a year appears to be a move welcomed by both sides. Clearly, from an animal welfare perspective this is a significant statement and commitment from Waitrose which builds upon their already strong track record and confirms it as a Tier One leader in the global Business Benchmark on Farm Animal Welfare for the second year running. However, that aside, it is the relationship cemented between Waitrose and the ‘Waitrose Dairy Farmers Group’ that makes these decisions like these all the more credible and sustainable. More working models like this both in and out of the dairy sector please! (FarmingUK)


No let up for the UK diary market as with farmgate prices predicted to be as low as 10p per litre! (Westland Daily Press)


The pork industry is looking for comprehensive and coordinated support from across the whole food chain to address a potential serious contraction in the UK national pig herd. Current over supply from the EU, the lingering impact of the Russian embargo and strong sterling is resulting in imported pork being typically 20-30p cheaper than that produced in the UK with farmers losing up to £10 for every pig they sell. With this in mind the sector’s lead organisations (AHDB Pork, Assured Food Standards, British Pig Association, National Farmers Union Scotland, National Pig Association, Pig Veterinary Society and Quality Meat Scotland) have, for the first time, joined forces to tackle the issue. They are calling upon all the key players including processors, independent butchers, foodservice, retailers, consumers and pig farmers themselves to each play their part in supporting the common cause and not exploit the current circumstances for solely their own benefit. Joined up thinking for longer term, sustainable gains has to be the way forward we think! (Farming UK)


After a significant drop at the end of 2015 the outlook for pork remains dismal as over supply and the Russian ban impact take their toll – a grim 2016 ahead.


More than a fifth of English waters will fall under marine conservation following the designation of a further 23 ‘marine conservation zones’ (MCZ) by DEFRA. Now totalling 50, the area covered by the MCZs will be similar to the size of Wales, or 13 times the size of London! There has been a caution welcome from The National Federation of Fishermen’s Organisations (NFFO) highlighting that safeguarding the areas is the first step, but it will be the management and measures taken that will make the difference in protecting the vulnerable species and the environment. However though, it is balancing the needs of the protection with the needs of the current fishing fraternity that provides the challenge – the needs of today versus tomorrow. Both are essential and it is therefore paramount that one is not sacrificed entirely at the expense of the other. Good to see conservation and sustainable fishing at the top of the agenda and promoting healthy and constructive debate.


The drop in the price of oil to its lowest for 12 years will filter through, eventually, to prices – too early to say when and by how much.


The numerous images of floods we have seen during the winter months, wreaking havoc on homes and their families, have taken their toll too on many arable areas across of the UK, leaving waterlogged fields and sodden soils. Within this landscape, it is difficult for plants to root and winter cereal growers may need to use extra feeds and growth regulators to combat this and promote high yields. Testing the soils this month (February) to establish the crops’ nutritional needs before deciding which ‘additive’ approach to take is key to delivering the best chance of success (ADAS).


The picture for 2016 has yet to be fully assessed but very comfortable grain stocks look to keep downward pressure on prices.


Eggs …

So, 28 years after the infamous interjection by a then junior health minister, Edwina Curry, that “most of the egg production in this country, sadly, is now affected with salmonella”, experts are now saying that runny eggs are safe! The Advisory Committee on the Microbiological Safety of Food (ACMSF) now advises that vulnerable groups such as pregnant mothers or the elderly can eat lightly cooked or even raw eggs – providing they carry the red ‘lion’ brand (as highlighted in last quarter’s report). Good news for the egg!

Chicken … 

We live in a world where fact and fiction live side by side and differentiating between the two is not always easy. Statistics often underpin the convincing case that sway us one way or another but, as we know from our days in the classroom – they can be difficult to interpret and wholly misleading! In the food industry they figure high in much of its press reporting whether in the movement of prices or supply; or the demonstration in the efficacy or safety of an additives. In this case, the use of antibiotics in the chicken industry has come under scrutiny and the statistics are causing the controversy. Data from the British Poultry Council (BPC) says there was a drop of 28% in overall usage of antibiotics between 2015 and 2014. Counter to this, unpublished data from the BPC, highlighted in an investigation by the Bureau of Investigative Journalism, claims an increase in the use of fluoroquinolones in the industry of 59% in the last 12 months. Although this now appears to relate to the variance between 2014 and 2013. Confused? Well, you can be forgiven to being so. We like to know the facts – if only we knew which ones they were!

Lamb …

Continuing two themes found elsewhere in this quarter’s report (retailer relationships and production costs), British sheep farmers are being invited by one of the nation’s major retailers, Tescos, to be part of a trial, the first of its kind, that will look at lamb’s ‘costs of production’ for the meat. Collecting data over 12 months across a variety of production systems, all factors influencing cost will be assessed and, if successful, the model will be the first to address the volatility in the UK lamb market – led by a UK supermarket. In addition, Tesco are also looking to secure a successful future by ensuring at least 25% of the group will be represented by farmers under the age of 35. Let’s hope this builds some lasting, trust based foundations that can be replicated elsewhere.

BREXIT – que faire?

Whatever side of the political spectrum you sit, come voting day the choice will not be yours alone and we will all have to live with the consequences delivered by the views of the majority. So, we need to prepare for either eventuality and plan for what might happen should the worst case (or best depending on your viewpoint!) occur.

As ever, there are views and statistics to support them a plenty on both sides of the coin and you can take your pick as to which you believe. However, one thing we can be sure of is that there will be changes should we collectively decide on what is now known as the ‘BREXIT’ but what will they be and what do we need to do to accommodate or exploit them?

According to the Fish Site, Westminster would have to renegotiate all its trade deals with both Europe and third countries. Professor Allan Matthews from Trinity College Dublin, speaking at the AHDB (Agricultural and Horticultural Development Board) Outlook 2016 conference, says this would mean “a complete change in policy, but the shape of trade and agriculture in the UK would be unknown” and any new deals could come at a high cost. Wyn Grant of the University of Warwick and the Farmer-Scientist Network, in a comprehensive report considering the agricultural implications of an EU exit can see no benefits to British farmers in the event of a ‘yes’ vote. The assessment is not helped by the recent statement by Environment Secretary, Liz Truss at the Oxford Farming Conference that there is no “Plan B” should we throw our toys out of the proverbial EU pram. If the future is bleak – what can we do?

Well, we can assess the all those business factors impacted by our EU membership: markets, sales, subsidies, taxes, labour, red tape and more. For each one we can then consider “what if” and “how much” and then prepare for the worst and hope for the best – after all, we will be unable to influence much ourselves – this will be up to our erstwhile leaders and politicians to negotiate.

When all said and done though, what we can say is that an EU exit will mean an extended period of uncertainty which in turn will likely mean changes in our trading patterns – costs and revenue. What we can and must do (and should be doing anyway) is making our businesses as robust and as sustainable as possible – working as a unified team across the whole supply chain – in order to mitigate whatever negative impacts come our way. Oh, for a quiet life!


A new and innovative way has been found to turn bread into dough – of the cash variety! And this isn’t in a bakery, but a brewery. Using a slice of fresh surplus/unwanted bread from bakeries, delicatessens and the like, a bottle of Toast Ale is brewed by the Hackney Brewery. The idea has been developed and brought to market by Tristram Stuart, founder of the food waste charity, Feedback, and it is to this great cause that all profits are returned. Feedback reports that 15 million tons of food are wasted across the UK every year and it aims to halve this by 2030 – with bread as the major culprit (at least 24 million slices) this initiative should help them on their way to this target. The chances of success should be enhanced too with Jamie Oliver and Hugh Fearnley-Whittingstall already amongst the brew’s celebrity fan club. What a great idea that wins at every level!


Looking back over the past year we have looked to share those stories that highlight the plight and opportunity – both human and economic – facing the sector we represent and care deeply about. For us it has always been about building a robust, long term and sustainable future that all parties can share. This requires an openness, trust, transparency and sensible collaboration throughout the supply chain to make this happen and all our stories and comments have reflected these views.

What will change in 2016? Well, very little actually. Our values remain as do our objectives and we will continue to promote those campaigns that will make a difference and support those struggling to meet the fickle and changing expectations of the UK population in ever increasingly difficult circumstances.

One such initiative is what is being hailed as the UK’s First Universal Food Traceability Scheme. Developed by Gloucestershire farmers, ‘Happerley Passports’ will provide the link between farmer and consumer through the farmers’ ability, using a unique traceability code, to capture the whole provenance story of their food (at the point of production) and then allow the consumer to ‘unlock’ that story at the point of purchase – wonderful! Of course, this requires trust and collaboration from all the partners down the supply chain but what a goal and a major step forward in our quest for a truly transparent journey from farm to plate.

Let’s hope this bodes well for a progressive 2016 – in or out of the EU!

One final point to mention is the dramatic drop in the price of crude oil – highlighted from our Mintec graph (right) – which will undoubtedly have an impact on those core supply chain costs of fuel and transport. As ever, it will take time to filter through to prices but as we know – it always seems to be slower on the way down, but quicker on the way up!