The continued easing of prime cattle prices this week is a source of concern to farmers keen to maintain cash flows, according to Stuart Ashworth, Head of Economics Services with Quality Meat Scotland (QMS).
This week has seen a 2p/kg dwt fall in the average price for steers across the whole of the UK while the heifer price has fallen more slowly - down 0.8p/kg dwt in Scotland and by 0.4p/kg dwt in England and Wales.
While overall current average Scottish prices are 7% - 8% lower than 12 months ago, Mr Ashworth emphasised it was important not to be misled by average prices which can disguise the nuances of the market place.
“A look at some of the more detailed grade prices, for example, shows a lower decline in Scottish prices for R4L grade cattle, the industry benchmark, than for all steers. Indeed for some categories of heifers the price increased on the week,” said Mr Ashworth.
The reason these nuances occur, he said, is that the prices reported are the average for all the cattle in the grade or of that gender.
“This means that a lower delivery of some grades of cattle, or a change in proportion of heavier carcases from one week to another within the category, can influence the average of that group of cattle. This factor is particularly relevant given the increased price penalties for carcases over 420 kg in recent weeks,” Mr Ashworth said.
Mr Ashworth also pointed out that seasonal variation in the Scottish premium is a normal trend. The premium can vary by as much as five percentage points over a calendar year with the lowest premium typically seen in late winter/spring and the highest in the autumn.
A review of historic data for carcase weights in Scotland and the rest of the UK shows that Scottish-slaughtered animals are generally heavier than the UK average, he observed. Carcass weights have also been increasing more quickly in Scotland than across the UK as a whole over the past five or six years.
“Consequently, the average Scottish price is more likely to be influenced by the price of heavy cattle than across the UK as a whole. Indeed in late autumn the difference between a Scottish average price and the England and Wales market price widens.
“This can be explained by the switch in autumn as supplies of older heavier animals born 28 to 30 months previously run out and younger, lighter animals, born 18 to 20 months previously, arrive at abattoirs in greater numbers,” he added.
While increased supply of cattle of different market specifications put forward for slaughter can influence the variation in average market prices, so too can retail demand.
“Kantar Worldpanel market research data shows retail demand for prime cuts of beef to be slightly lower than a year ago.
“This means that larger volumes of beef will need to be sold into other markets or held in cold stores. These alternative markets are currently even more competitive than the multiple retailers, although the current relative weakness of Sterling will be making imported beef more expensive than last year. Nevertheless, the pressure ex-abattoir is for wholesale beef prices to ease to clear the market,” said Mr Ashworth.
As producers seek to respond to the market signals for them to reduce carcase weights, they are trying to sell more cattle than they would perhaps otherwise want to at this time of year, suggested Mr Ashworth.
The prevailing sluggish demand for product means abattoir operators are reluctant to take extra cattle, which is leading to some queues developing. This inevitably leads to cattle becoming heavier before they are delivered to an abattoir which compounds the vicious cycle of being out-of-specification and further compromises the farmers’ selling price.