Arable
Arable land Last season’s exceptional yields left the UK with a larger exportable surplus. Exports have picked up pace since the new year, largely due to sterling weakening against the euro, however a large carryover is likely, which will suppress prices during the harvest period. Globally, grain stocks are high and early forecasts suggest that they will remain high but falls are anticipated later on in 2016/17. Lower fuel and fertiliser prices continue to help offset lower output prices. Demand remains strong for quality land and equipped holdings, especially from farmers looking to spread their costs over local located blocks. Bidders for FBT land are being more realistic, and paying much more attention to budgeted costings than perhaps previously.
Dairy
Low world prices and weakened international demand continues to affect the UK dairy sector, where prices have now been in the 23-25ppl range for a year. Many non-aligned liquid contract holders will be selling milk well below the cost of production. The Global Dairy Trade auction on 3 May showed a 1.4% decrease in the GDT price index, following a 2.1% increase on 5 April and a 3.8% increase on 19 April. Overall, the index is 19% below its October 2015 level. We are still seeing a number of producers take the decision to cease production especially if facilities require investment. There is still good demand for well-equipped holdings; rents for FBT holdings remain strong as some farmers see this as an opportunity to expand.
Beef and sheep
Farmgate beef prices remain under significant pressure from oversupply, however recent weakening of sterling against the euro has helped the competitiveness of UK product in the EU. Sheep meet production has declined, monthly slaughtering in October to February was all lower than a year previously; but numbers on the ground are higher suggesting a sharp increase in the number of old season lambs remaining to be slaughtered. The breeding flock has not reduced in size so another large lamb crop can be expected so demand will need to rise to maintain current prices. The mild winter should favour the production of quality forage and help keep next winter’s ration costs low. We expect reasonable demand for productive lowland units but there will be downward pressure on rents linked to extensive/ environmental grazing lettings, especially where stocking rates are limited.
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