Market Challenges Continue Amidst Lockdown

With lockdown restrictions in the UK set to continue for at least another three weeks as the coronavirus outbreak is tackled, the challenges of the red meat supply chain become a little more certain in the short-term, according to the latest market commentary by Quality Meat Scotland (QMS).

As a consequence of lockdown, considerable issues have been faced within the red meat supply chain beyond the farmgate. 

According to Stuart Ashworth, Director of Economics Services with QMS, staff self-isolating and 2m self-distancing rules have led to lower productivity in the slaughter and processing sector. However, levels of self-isolating are stabilizing or reducing as early self-isolators return to work, although some others go off.

“Slower production and process lines does lead to the prospect of a lower ability to handle animals, with a knock-on effect that animals will begin to back-up on farm,” said Mr Ashworth.

Many small or medium-sized wholesale businesses in the supply chain with significant parts of their trading coming from the foodservice sector and schools, have seen that part of their business dry up leaving them at risk of outstanding accounts not being paid. 

“While some have been able to adapt and introduce on-line or phone ordering with home delivery, this has been of limited respite as the volume of sale per mile travelled is much reduced,” said Mr Ashworth.  “Equally, it has reduced demand from this sector of the chain for red meat.”

The loss of sporting and leisure events has also impacted on many foodservice businesses. While take-away food businesses can operate, some remain closed because of the difficulty of social-distancing in kitchens. These challenges threaten the financial sustainability of some small and medium-sized businesses in the red meat supply chain.

However, some businesses have seen growth.  “High street butchers, particularly those offering home-delivery, convenience stores and multiple retailers have seen growth in grocery demand,” said Mr Ashworth. 

“Although, even here, this demand has been volatile with big surge in the early stages, followed by a slower demand more recently with some multiple retailers reporting food sales in the past week below their normal expectation for this time of year.” 

The diversity of cuts purchased has changed with retail sales of mince increasing, while other cuts, for example roasts, have been more stable meaning a higher proportion of retail sales are mince. 

“In some cases, this has led to retailers reducing the range, if not volume, of meat products on the shelves,” said Mr Ashworth.

“Nevertheless, without out-of-home eating the demand for roasts and steaks overall has been reduced affecting the options and revenues for abattoirs.”

All the above challenges are also being faced across Europe, so while export markets remain open, demand is more limited which also affects options for the wholesaling of red meat.

According to Mr Ashworth, these supply chain issues have led to pressure and volatility in farmgate prices. 

“The initial confusion over exports contributed to significant fall in prime sheep prices as stocks of sheepmeat overhung the market,” said Mr Ashworth. 

“However, reduced numbers reaching the market and the approach of Easter led to some recovery of prices. Post-Easter, the number of prime sheep presented to the market remains significantly lower than previous weeks and some stability of price is apparent,” he added.

In contrast, and despite abattoirs handling fewer cattle, prime cattle prices have come under pressure over the past fortnight as the balance of cuts entering the retail market has changed. 

“Prime cattle prices have also come under pressure across Europe with the average price sliding nearly 3% since Easter led by falls in Italy, the Netherlands, Ireland, Denmark and Austria,” said Mr Ashworth. 

“Similarly, Coronavirus measures have impacted prices in other parts of the world, for example, over the past week US farmgate prices for cattle fell 5% and pig prices fell even further as some processing plants shut down due to staffing issues,” he added.