Agricultural Quarterly Update Oct-Dec 2023

Brown&Co’s market update provides an overview of commodity prices for 2023. It also provides an overview of points to consider going forward into Spring 2024, which include Environmental Schemes, Basic Payment Scheme / De-linking, and New Agricultural Policies. Tom Holliday, Agricultural Business Consultant.

The Brown&Co Agricultural Update Report reviews the previous financial quarter, highlighting the changes in market prices and trade patterns of commodities during the period.

This quarter analyses the cereals, oilseeds, milk, and meat prices, as well as input prices such as fuel, fertiliser, and feed.

• Pork prices continue to remain strong compared to last year, however dipped to a low of 214.7 pence per kilo this quarter.
• Defra farmgate milk prices increased to 37.03 pence per litre.
• Lamb prices have continued to decrease on average this quarter. However, they are still 32.18 pence per kilo deadweight (R3L), higher compared to the same time last year.
• Beef prices increased compared to the previous quarter with a peak of 484.8 pence per kilo deadweight.
• Cereal & Oilseed prices have remained relatively stagnant with a sharp drop in Feed Wheat prices at the start of the quarter.
• Fertiliser prices have remained largely settled for this quarter.
• Crude Oil and Red Diesel prices have decreased this quarter but started to increase again at the end of December.

To read the full update click the link below:

Points to Consider 2023

Environmental Schemes
- The Sustainable Farming Incentive (SFI) 2023 offer officially opened on the 18th September in a “controlled rollout”. As of the 4th January 2024 the offering for SFI has been significantly expanded with an average 10% increase in payments across the Combined Environmental Land Management (CELM) schemes offering.
- There are 50 new actions planned to be made available in 2024 under SFI – these should be available to be added into current SFI agreements.
- The payment rates for Countryside Stewardship and SFI agreement holders will increase as of 1st January 2024.
- Countryside Stewardship capital grants remain open for applications. Funding is available for items such as fencing, hedge laying and other yard works such as concrete.

Basic Payment Scheme
- Cross compliance officially ended on the 31st December 2023. However, farming and land management regulations still apply.
- The Basic Payment Scheme ended in 2023 and Delinked payments are expected to start from 2024 onwards.

New Agricultural Policy
- The BPS lump sum exit scheme has now closed for applications. Farmers have until the 31st May 2024 to provide evidence that they have transferred out their agricultural land.
- The third round of the Defra Future Farming Resilience Fund service is now available, providing business, environmental, planning and development advice to farmers across England and is funded by Defra. Brown&Co continue to be a provider of the service up to 2025, register your interest for Defra Future Farming Resilience Fund

UK Weather

October was unseasonably warm predominantly for the first half of the month achieving more than 8°C above average for the time of year. Scotland received an exceptional amount of rainfall and had an ‘atmospheric river’ event which resulted in 64.1mm of rainfall, which made it the wettest two-day period on record. Storm Babet brought prolonged and heavy rainfall for much of the UK, which resulted in serious flooding events in many areas.

The first half of November was predominantly stormy and unsettled. There were high winds experienced from both Storm Ciaran and Storm Debi. The storms also added to an extremely wet autumn with 30 to 50mm of rain falling on many parts of England and Northern Ireland. Despite this, rainfall totals were close to average across much of England. The northerly airflow at the end of the month presented some hard frosts and wintry precipitation. Temperatures for November were close to average.

The colder period at the end of November extended in December with some significant snow disruption across the north of England. By the 9^th and 10^th of December storms Elin and Fergus brought milder temperatures but very disruptive wet and windy conditions. Temperatures were above average across all of the UK excluding northern Scotland with the highest daily minimum temperature on record for Christmas day recorded at 12.4°C at Exeter Airport and East Malling, Kent.

Harvest 2024 Outlook

The continued wet weather leading on from harvest 2023 have led to extremely challenging autumn drilling conditions. Some crops that did manage to get established have failed due to the unforgiving wet conditions, and many haven’t managed to establish any winter crops to date.

The challenging outlook for harvest 2024 has led many farmers to review the rotation and many are looking at underpinning income and de-risking the business with the Sustainable Farming Incentive. Others are focussing efforts on alternative spring crops or late sown winter crops.

According to the AHDB Early Bird Survey (EBS), the regional planting intentions for harvest 2024 are showing a 3% reduction in UK wheat area at 1.66 Mha and a 19% fall in Oilseed rape area at 317 Kha. However, there is an anticipated 4% rise in the total barley area at 1,179 Kha, which is largely due to the increased spring barley area (11% increase). There is also an expected 8% increase in oat plantings at 180 Kha compared to harvest 2023.

Climate & Carbon

The COP28 climate summit was held by the United Arab Emirates (UAE) between 30th November and 12th December 2023, which was the first time the Global Stocktake (GST) will provide an assessment of progress since adopting the Paris agreement. The summit noted that parties were off track in terms of meeting the Paris Agreement goals.

COP28 closed on the 12th December 2023 with an agreement that starts the “beginning of the end” for the fossil fuel era. This summit was the first time that countries mentioned transitioning away from fossil fuels. There was also recognition that there wasn’t enough funding going to developing nations from developed nations to assist with the transition away from fossil fuels, the actual detail was relatively limited, and the agreement did not set out any amounts that developed nations should be paying. The stocktake also recognised the science which suggests global greenhouse gas emissions must be reduced by 43% by 2030 compared to 2019 levels to limit global warming to 1.5°C.

The third quarter of 2023 saw total UK energy production decrease by 8% compared to the same period last year. Renewable electricity generation increased by 7% on the same period last year due to a 5% increase in capacity and more favourable weather conditions. Renewable generation has outpaced the fossil fuels share for the fourth consecutive quarter.

Supply Chain

As of December 2023, global wheat production is forecast to be up, although it remains below last year’s record. The estimates for production in Australia and Canada have been raised but are still down 37% and 7% respectively based on the prior year volumes.

The Global stocks were raised fractionally in December 2023 but still remain at the lowest levels since 2015/16.

Consumer Behaviour

According to the Deloitte Consumer Tracker, consumer spending on essential items fell in quarter 3 of 2023, as prices were starting to ease. However, despite the reduced pressure on essential spending, consumer spending remained cautious and the overall increase in discretionary spending was marginal. In addition to this, consumers are still showing signs of recessionary behaviours and that 47% of consumers say they have seen a fall in the amount of money they have left at the end of the month. As a result of this, there has been a notable increase in trading down (36%), buying more goods on promotion (31%) or making use of loyalty schemes to save money (29%).

The annual inflation rate in the UK slowed down to 3.9% in November 2023, which is the lowest rate since September 2021. This announcement came as a shock as forecasts predicted a level of 4.4% in November.

Livestock Markets

Pork

The Standard UK Pig Price (SPP) has declined week on week to an average price of 218 pence per kilo deadweight (p/kg/dw) for this quarter. The EU price has shown a similar trend but with steeper declines in price and consistently below the UK price.
Total pig meat exports for October 2023 were 27,140 tonnes, which was down by 1,320 tonnes compared to 2022 exports. Pig meat imports for October 2023 sat at just over 70,000 tonnes, which has grown in all categories except bacon, which saw a 255 tonne decline. EU imports continue to remain competitive due the lower price point.

Dairy

The farm gate milk price has shown a small level of recovery in the later months of 2023 with 37.03 ppl achieved in October.
The revised AHDB GB milk production for the 2023/24 season is expected to reach 12.22 billion litres, which is an overall reduction of 1.3%. This decline can be largely attributed to the production declines experienced in Autumn 2023. The longer-term changes in production are partially being driven by yield reductions due to the stubbornly high input costs and continued pressure on farm gate milk price.
The wet autumn of 2023 has meant a large proportion of the UK dairy herd had to be housed early, which is adding further pressure on inputs and labour.

To discuss any of the issues in this article please contact your local office