Cattle Prices Stabilise as Supply and Demand Balances

After a somewhat volatile year so far, prices for prime beef cattle have now settled at a level very similar to that of 12 months ago, according to the latest market analysis by Quality Meat Scotland (QMS).

Over the first half of the year, per kilogramme prices were typically three per cent lower than in 2014, but were as much as six per cent lower during May. They rebounded strongly through June and July to be typically six per cent higher than last year.

“This market volatility can be attributed to a number of factors,” said Stuart Ashworth, QMS Head of Economics Services.

“Certainly for the first half of the year the UK market was well supplied with beef,” commented Mr Ashworth. “In early 2015 both the number of cattle reaching abattoirs and their carcase weights were higher than 12 months earlier.

“Despite carcase weights remaining high, by spring the quantity of beef available from UK abattoirs fell below year-earlier levels and was much lower during June,” added Mr Ashworth.  “Tonnages increased substantially during July and remained higher during August.” 

When adjusted for trade, UK supplies of beef were higher during January and February, lower from March to June and then higher again in July.  Meanwhile Kantar market research data shows consumer demand for beef has remained similar to last year throughout 2015.

According to Mr Ashworth, the general trend in farmgate price does reflect the movements in the basic supply and demand equation - sliding in a well-supplied market and rising in an undersupplied market. 

“The short-term management of stocks of beef in cold stores, however, will limit the speed of price movement,” observed Mr Ashworth. 

“So, although new supplies fell below last year’s levels in the spring, short term supplies were influenced by the rundown of cold store stocks and producer prices continued to slide.

“By mid-May the much lower new supplies and lower volumes in cold store helped to chase producer prices higher.”

Equally, he said, during July new supplies, adjusted for trade, were higher than a year earlier and farm gate price started to fall back.  Also acting as a coolant on prices has been a decline in the values of fat and hides sold by abattoirs.

Nevertheless, according to Mr Ashworth, the rise in farmgate prices through August and September suggests that the supply and demand balance has become more equal.

“Indications of slaughter volumes during August and September suggest fewer prime animals reaching the market although cull cow numbers remain ahead of last year,” observed Mr Ashworth.

Historic retail sales data points towards a general increase in purchases of beef through the autumn followed by firm demand through to the spring of the year. 

“The weakening of Sterling in recent weeks makes imported beef less competitive and enhances export competiveness,” said Mr Ashworth. 

“Our main overseas supplier, Ireland, is expected to see slaughter supplies tighten through the autumn - their June census data shows a decline of around 10% in the number of cattle over two years old and a three per cent decline in the one to two years old age group.  English census data shows a similar pattern.”

“It is not until the under one year age group that both Ireland and England show increases in stock numbers,” commented Mr Ashworth. 

“Therefore, the short term prospects for the beef producer remains one of firm prices.”