AHDB milk forecasting forum

AHDB Market Intelligence

https://ahdb.org.uk/dairy-markets

1 September 2021

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The small print

Contents

• Key topics:

• Inseminations, calf numbers and herd structure

• Covid-19 update

• Calving patterns

• Feed update and impact on production

• Milk forecast

• 2022 peak milk production

• Compositional quality

Inseminations, calf numbers and herd structure

Inseminations• Estimates based on Genus monthly

figures adjusted by AHDB annual

survey results

• Figures show sales of straws – not

usage

• 12 months to Mar-21:

• 45% beef, 35% sorted, 20% dairy

• Sexed semen accounted for 64% of

dairy semen sales in year to Mar-21

• Shift to sexed was particularly

strong in second half of 2020

Expected dairy replacements• Estimates of the number of 0-6 month

old females based on insemination data

• Historically, actual number has been in line with projections

• But, from April 2020 actuals have been

above our estimate

• Conception rate improvements will

have helped drive this lift

• Insemination data suggests a

significant increase over the coming

year

• Does not necessarily lead to an

increase in the herd size – just a

reduction in the average age

Deadweight prices at record high

• Deadweight cow prices continue to

rise

• Currently 295p/kg

• Been above 290p/kg for 7 weeks

Quick calculation:

Rise in youngstock numbers

+ Rising feed costs

+ Record high cow prices

= Clear out time?

Age structure of the herd• Movement in herd by age group

• Overall annual drop in milking

herd at July was 1.9%

• Majority of decline has come

from the 4-6 year olds

• Big increase in youngstock

numbers

• 6% more 0-6 and 6-12 month

olds compared with July 2020

Retention rate

• Retention of cows over 6 month

period

• We seasonally adjust because

Oct always high and Apr always

low – allows us to see trends

easier

• Retention rates rose through

2020 but have flattened off in

2021

• Retention rates are higher for

younger animals

• Increase in proportion of

youngstock in the herd naturally

gives an increase in overall

average retention rate

Herd size expectation• AHDB projection of number of cows in

the GB dairy herd

• Based on predicted youngstock

numbers (from insemination data) and

3 year average retention rates

• Expectation that milking herd will be

around 1.64m by Jul 2022, down 0.8%

yoy

• Herd decline expected to flatten off due

to higher youngstock numbers

• Adjusted expectations following last

forum to include increased culling

levels – but rising youngstock numbers

keep pushing up the future herd

Calving patterns

Calf registrations by calving system

• Based on calf registrations with BCMS

• Groupings done based on:

• Block: 80% calvings in 4 month

window

• Dual block: 90% in 2 x 4 month

windows

• AYR: flat profile of calvings (+/-5%)

each month for 10, 11 or 12 months

• Non-defined: not included in above

• Suggests:

• 19.6% block calving

• 43.8% AYR

• 36.6% drop between definitions

Apparent lift in births to dairy dams

• Big lift in births registered in the

spring for 2021

• Jan-Jun 2021 births totalled 712k

head, up 26k head (4%) on the

five year average

• Shift in profile of calvings seen in

2020 continues in 2021

• Registrations of pure dairy male

calves fell by 8% (9k head) on

the year (article)

Contribution to monthly calvings

• Block calvers 19.6% of annual calf

registrations

• Peak months for block calving as % of

all registrations

• 37% in February

• 34% in March

• 30% in September

• 25% in August

Feed market update: where are prices heading?Megan Hesketh, Cereals & Oilseeds Analyst

01 September 2021

New crop UK prices following global wheat.

140

150

160

170

180

190

200

210

220

£ / t

on

ne

UK feed wheat Nov 21 Paris Milling wheat Dec 21 Chicago wheat Dec 21

Supply concerns - strengthening prices

Tightening global wheat

Canadian spring wheat crop

Russian wheat crop

US wheat crop

US maize

SA maize

Biofuel demand

Other factors to think about for

feed grains…

Where are ex-farm prices currently?

£202.30 £202.50 £203.20

£193.40

£201.30 £200.70 £200.10

80

100

120

140

160

180

200

220

240

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

£ / t

on

ne

2020/21-2021/22 ex-farm feed wheat price

10-yr range Average monthly ex-farm price 2021 10-yr average Average monthly ex-farm price 2020

UK cereals - 2021/22 S&D more balanced

1,265

1,045

253

792

169

345

1,624

803

343

461

158

273

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Wheat Total barley Winter barley Spring barley Oats Oilseed rape

Th

ou

sa

nd

he

cta

res

Provisional Arable area figures for England

Jun-19 Jun-20 Jun-21

• Winter cropping back

• Wheat area returning to normal levels

• Barley area down to previous levels

• Oats and pulses growing as OSR takes a back seat.

Harvest progress - to 24 August

3.3 – 3.5 t/ha

4.8 – 8.5 t/ha

5.7 – 6.1 t/ha

6.9 – 7.1 t/ha

8.0 - 8.4 t/ha46%

100%

26%

30%

92%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Winter wheat

Winter barley

Spring barley

Oats

Winter OSR

Barley supply vs. demand

4 4

4 6

4.22 5

-

1

2

3

4

5

6

7

8

9

2016 2018 2019 2020 2021* 5-yearaverage

Pro

du

cti

on

(m

illi

on

to

nn

es

)

UK barley production prospects not back as much as area

Winter Barley Spring Barley

Production down 13% year-on-

year, less than planted area due

to better yield prospects.

Source: Defra, AHDB, ADAS

*Estimate

Demand Supply

Exports to resume

Rebounding H&I demand

Feed ration usage

Winter yields above average

Winter area up

Where now?

Wheat Barley

• Global supply concerns – tight S&D

• Strong EU demand as competitive pricing.

• SA maize/feed grains may look tighter than expected.

• LT - neutral

• Demand to remain strong

• Discount to wheat remains strong

• Follow wheat up

• Capped gains through need to

remain competitive for exports.

NB – Price indicators based on current market dynamics.

Oilseeds – market drivers

Rapeseed - 2021/22 tight S&D for EU

Price of % of protein in meal

£6.74

£7.92

4

5

6

7

8

9

10

£ / t

on

ne

Cost by % of protein rapemeal (34%) Cost by % of protein soyameal (48%)

Where now?

Rapeseed

• Tight global supply – EU, Canada

• Strong crush margins/demand

• Continued pressure in the UK from

CSFB.

• Soyabeans/biofuel direction – LT neutral

NB – Price indicator based on current market dynamics.

Soyabeans

• US crops yields not yet known

• Some Chinese demand

• Biofuel mandates under question

• SA crops – La Niña?

Feed impact on milk production

Grass growth and silage

• Strong start to 2021 for grass

growth

• Fell back due to cold spell and

then extended dry period

• Strong growth since middle of

May

• Question is – how good is the

quality?

Silage quality

• Rapid drop off in ME and crude protein levels from mid-May, when growth rates increased

• Crude protein was down on 5-year average from March to June. Jumped up in July

• ME significantly below 5-year average in June and July

Feed prices

• Concentrate feed prices have

been rising steadily

• Based on average payments

recorded

• Straight prices used to extend

timeline

• Big increases expected, but

timing is questionable –

depends

Milk to feed price ratio• Historically we’ve seen drop in

milk production when MFPR

drops below 1.15

• Difference between calculated

and actual

• Feed costs typically account for

40% of cash costs

• Silage quantity seems to have

caught up, but quality

questionable

• Feed costs likely to be the main

challenge for remainder of the

year

Covid-19 update

Dairy retail consumption

• Big step up in retail sales across all dairy

categories in 2020

• Cooking from scratch helped butter, cream

and cheese

• Milk saw strong volume growth

• As a staple, dairy was expected to do well

in 2021, and is doing so

• Milk forecast to be up 6% v 2019, but

down slightly (0.1%) v 2020

• Retail sales expected to be lower than

exceptional 2020

• 2022 expected to be down against 2020

and 2021, but still up on the baseline year

(2019)

Consumption outlook

• Expect shift of consumption from retail to Out of Home (OOH) through 2021

• OOH still expected to be well below pre-pandemic levels (Covid cases, shifting

work patterns and lower consumer spending)

• Shift from retail to OOH could swing demand back to imports

Other key challenges

• Cardboard shortage

• Plastic/packaging cost increases

• Fuel price increases

• Labour availability – EU Exit and Covid impacts

• HGV drivers

• Processing staff

• Warehouse staff

• On-farm

Current milk forecast

National milk yields

• Currently use yield uplift of 2.3%

per annum in forecast

• Previous average was 1.5%, but

recent years have been at the

higher level

• Yields followed 2.3% projection

quite closely Jan-Jun 2021

• Closer to 1.5% line in July but both

projections are very close at that

time of year

• Lower July production potentially

an outlier due to weather

• Peak reached on 8 May at

37.96ml/day

• June forecast 12.58bn litres for

21/22, +0.3%

• Currently running below forecast

• Quickest drop from peak for at

least 10 years

• Last year’s drop was more gradual

because of spring curbing

• Production over most recent 2

months (14 Jun-14 Aug) was 23.6m

litres below what was forecast

GB milk production – June forecast 2021/22

GB milk production – June forecast 2022/23

• Current forecast goes through to

June 2022

• 3,365m litres for Apr-Jun 2022

would be 24m litres above

spring 2021

• September forecast (when

published) will take us through

to September 2022

Peak milk production

• Highest milk production day over

the last decade was 38.0ml on 23

April 2019

• Current forecast predicts 38.2ml

to be reached in May 2022

• Estimates put processing

capacity at 38.24ml pre-Covid

• However, we have seen capacity

increases mainly due to sites

expanding since then

3 year milk production forecast (March ‘21)

• Published before latest amendment to 2021/22

• 3 year forecast predicts 12.75bn by 2023/24 – that’s an extra 210m litres versus last year

• Driven by higher youngstock numbers, but smaller proportion expected to get into milking herd

• Drop in milking herd is <2% per annum versus yield rises of 2.3%

What will we do with the extra milk?

• With milk production expected to

rise, what will happen with the milk?

• Historically we’ve seen:

• Liquid share falling

• Cheddar share rising

• Yogurt share rising

• Milk trade increasing

• Expectations based on historic

trends and UK’s net importer status

• Will need assets on the ground to

deliver

Compositional quality

Latest butterfat vs forecast• Butterfat content was running

high in early 2021

• Above forecast so far this

season

• Starting to drop off in June-

July 2021

• Forecast based on

improvement trend over last 5

years

Latest protein vs forecast• Protein content was

consistently above forecast

April-June

• Latest defra data shows just

3.24% protein for July

• Lowest protein content since

July 2018 (3.21%)

• Forecast based on

improvement trend over last

5 years

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