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United Kingdom Agribusiness Report Q4 2009Published by: Business Monitor International Published: Sep. 16, 2009 - 68 Pages Table of Contents
AbstractThe UK's large livestock and dairy sector has been going through a tough time for the past couple ofyears. Producers struggled with rapidly rising input costs through 2007 and 2008 as the cost of feed andfuel soared. This was followed by a fall in demand as the UK economy fell into recession. In June of thisyear, Dairy Farmers of Britain (DFOB), one of the UK's largest dairy companies, went into receivership.The co-operative at its peak produced around 10% of the UK's total milk output and had 1,800 members.Through the first half of the year, DFOB lost around half its member farmers as its financial difficultiesmeant it was unable to pay its farmers a competitive price for their milk.Even before the downfall of DFOB, many dairy farmers had been struggling. The number of UK dairyproducers has been falling consistently this decade. From August 2008 to August 2009 alone, the numberof dairy farms fell by 3.5%. The average size of farms has been increasing as smaller, less efficientplayers have left the business and larger farms have expanded. The average herd size grew by more thana third from 2000 to 2008 while the average area of dairy farms in England rose by almost 30%. Despitethis, there has still been a large fall in the size of the UK's dairy herd this decade. Some of the fall in cattlenumbers has been compensated for by increases in milk yield, but milk production has still fallen thisdecade. The collapse of DFOB will have seen another wave of smaller producers leave the sector. Many DFOBfarmers who could not immediately find a new buyer for their milk had to accept a milk price form thereceivers which was less than half the prevailing average farmgate price for milk. For already indebtedfarmers, this will have made leaving the sector a more attractive option. While there will be more hard times to come through the end of this year, in the longer term we expectthe fortunes of Britain's dairy farmers to recover. The drawdown in dairy herds in major dairy producerssuch as the US in response to the collapse in world dairy prices should see production fall in the comingyears. As the world's economy returns to growth, we expect to see demand for dairy products rise again,particularly in the emerging markets of Asia and the Middle East. This should boost prices for farmers.Meat producers have also had a difficult time recently. Production of poultry, pork and beef all fell in2008. The poultry sector is another industry which has seen consolidation this decade. The averagemargins on broiler production are as little as GBP0.019 per bird according to the Department forEnvironment, Food and Rural Affairs (DEFRA). This makes it very difficult for smaller producers tocompete. The introduction of the EU Broiler Welfare Directive in 2010 will likely accelerate the rate atwhich smaller operators leave the sector as the capital investment needed to meet the new regulations istoo much to be economical. The directive, which sets out laws for the treatment of broiler chickens, has re-sparked debate over batterychicken production in the UK. Animal welfare charities such as the RSPCA are calling for DEFRA toimpose tougher regulations than the EU directive mandates. Specifically, the RSPCA wants to see a lowermaximum density for stocking broilers than the 42 kilograms per meter squared set down in the directive.Predictably, UK poultry operators are strongly against this, claiming it will negatively affect their costcompetitiveness relative to producers in the rest of the EU and will lead to no gain in the welfare ofchickens. At the time of writing, DEFRA was still considering whether to set the maximum stocking levelat 42kg/m2 or at the lower level of 39kg/m2. A decision is expected at some point in H209. WhateverDEFRA decides, other points in the directive such as the control of temperature and ventilation will leaveless modern farms needing to invest in upgrading their facilities Get Full Details About This Report >> |
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