The Rural Bulletin - 7 December 2017

Welcome to our commodity markets blog, offering an insight into the key trends across the main agricultural sectors.

November has been a relatively stable month across the board, despite fluctuations in currency. However, the quiet period marks the calm before the storm as markets prepare themselves for a surge in the run-up to Christmas. We take a look at some of the most significant developments below.

Cereals

November was a relatively slow month for grain trade with average feed wheat prices struggling to move out of the £135/t bracket. Merchants have pegged this as “Christmas coming early” for the markets – meaning many farmers have been reluctant to sell – keeping trade relatively flat. In contrast, UK ex-farm feed barley values hit their highest monthly average price since May 2014. Strong export demand during the summer and increased usage of barley in compound feeds supported prices, taking the average monthly price to £123.90/t – up £2.30/t on the previous month and £9.30/t year-on-year.

Oilseeds and pulses

Oilseed rape prices started the month on a high, hitting the £318.10/t mark – the highest price seen since early September – however, values tailed off at the latter end of November as downward pressure on the Mattif futures reduced prices. Driving this was a combination of reduced palm oil prices on the back of surplus supplies and the continued arrival of Argentinian biodiesel into Europe. Looking forward, the 2018 harvest is expected to see a recovery in OSR area – taking it above 600,000ha for the first time in three years.

Beef

Finished cattle prices gradually rose during November amid increased activity in the run up to Christmas – with demand at this time of year favouring prime cattle for producing seasonal roasting joints over cow beef.

UK beef and veal production increased in October, totalling 77,900t tonnes – up 14% month-on-month. In the year to date, production is running at just 1% lower than the same period last year at 731,300t tonnes.

Sheep

Sheep prices stayed relatively stable across November, though deadweight prices found support towards the end of the month. The welsh lamb crop recorded a 17 year high as the number of lambs under one year old on farm totalled 4.9m in the June census – a 4% rise year-on-year. UK Sheep meat production in October increased by 7% compared to the previous month to 24,700t tonnes.

Pigs

November pig prices in the UK remained relatively flat with little movement in APP values across the month. A similar picture was seen in EU markets as weaner prices fell behind year earlier levels, however markets are expected to stabilise slightly in the run up to Christmas.

After peaking in the third quarter of 2017, global pork export prices are now on a downward spiral following reduced demand.

Milk

UK farmgate milk prices continue to recover with many processors holding their prices in the build up to Christmas. However, with the news this month of cuts to January prices, many are preparing for the start of a declining market.

Müller have slashed 1.5ppl off the price paid to its direct farmers in January on the back of declines in the butter and cream markets. While the fat markets have previously been supporting milk price rises, the shift is likely to cause others to follow suit.

Poultry and eggs

Turkey production has soared in the first nine months of the year with total output between January-September up 9% year-on-year to 122,000, and seasonal demand it expected to push this figure even higher in the remainder of the year.

Wholesale egg prices in the UK hit new highs during November on the back of reduced EU supplies and the market going seasonally short ahead of Christmas.

Potatoes

GB potato production in 2017 was up 15% year-on-year, at 6m tonnes - its highest level since 2011 – according to the first provisional estimate. Increased production was based on a planted area of 122,799ha – up from the previous estimate of 120,897ha, and based on 98% of planting returns as opposed to 60% for the earlier estimate. Values moved slightly across the month, however, surplus supplies largely kept a lid on prices.