Farmgate prices remain firm despite continued tightening of UK beef supply

According to the latest market commentary by Quality Meat Scotland (QMS), farmgate prices for prime cattle remain firm in Scotland. Approaching the levels seen in April and May, prices remain some 8.5% higher than a year ago and up 3% from the recent low point at the start of June.

Reduced slaughter numbers during June is a result of both a reduced number of cattle available and also disruptions caused by processing staff self-isolating because of Covid control measures. This, combined with a slight fall in carcase weights, resulted in domestic beef production during May and June in the UK falling more than 3% compared to a year earlier. 

Stuart Ashworth, Chief Economist for QMS, explained that domestic supplies are also influenced by the balance of international trade. 

“Trade data is not yet available for June,” said Mr Ashworth. “But data available to the end of May show UK exports of beef have recovered strongly from a low point in January, and, during April and May, accounted for some 12.5% of UK ex abattoir beef volume.”

During May, exports recovered to be only 4% lower than a year ago compared to the 40% decline in exports seen over the first quarter of 2021. 

“However, it must be recognised that exports in the first quarter of 2020 were not affected by Covid control measures across Europe nor the challenges of Brexit on export administration and logistics,” said Mr Ashworth.

Beef imports during April and May are reported to be little changed from the same period last year and make up around 20% of the beef available on the home market. However, there is now greater emphasis on frozen beef imports which increased more than 60% on the year over April and May.  In contrast fresh and chilled imports during April and May compared to a year ago are down 25%.

“Imports from Poland increased during April and May and accounted for 9% of all imports, less than 2% of all supplies, offsetting some of the fall in imports from Ireland.  Nevertheless, 73% of imports to the UK came from Ireland in April and May with a further 7% from the Netherlands,” said Mr Ashworth.

The net effect of these trade patterns and production was that the volume of beef on the UK market during April and May was 1.5% lower than in 2020 offering support for farmgate prices.  

Mr Ashworth notes that the relaxation of Covid restrictions has begun to impact the wholesale market for beef and hence the value of a broken down beef carcase to the abattoir operator or butcher.

“Analysis by market data company Urner Barry show rising prices over the past couple of months for those beef cuts that are most attractive to restaurants for example striploins, fillets and rib roasts.  In contrast lower valued cuts suitable for mincing and dicing have seen little movement in wholesale price over the past quarter.  Retail prices are showing similar patterns with mince and diced products retailing at a lower price than twelve months ago but roasts and sirloin steaks seeing some modest increase,” said Mr Ashworth.

Nevertheless, the positive moves in the wholesale and retail market do not match the level of increase in farmgate prices over the past twelve months.

“Indications from BCMS  data are that the number of slaughter cattle over 18 months of age currently on GB holdings is smaller than it was twelve months ago and consequently the supply of cattle to abattoirs will remain tight in the short term helping to underpin prices,” he concluded.