Market Commentary: Farmgate prime cattle prices continue to reach new heights

According to the latest market commentary by Quality Meat Scotland (QMS), farmgate prime cattle prices continue to be at the highest level for more than 20 years, and have risen 25% compared to a year ago.

Stuart Ashworth, Director of Economic Services for QMS, said that after an initial dip as the market rebalanced, prices have climbed steeply since the introduction of Covid control measures restricted people’s movements over a year ago.  

“Prices are also firmer across Europe with Irish prices 18% higher when quoted in Euro – 17% when quoted in Sterling – than a year ago and the average steer price across the EU being 16% higher. This does mean, though, that the UK premium over Irish prices has widened considerably from around 12% a year ago to the unusually high level of 18%.”

Covid restrictions on work patterns, school, and leisure and recreation completely changed the way that consumers bought and used meat and estimates by Kantar Worldpanel suggest that retail sales of fresh beef over the twelve months since Covid control measures were introduced increased by almost 10%.

“Clearly, sales in other outlets dropped as consumers had to take more responsibility for preparing their own meals.  As consumers became more confident in their meal preparation skills, they also changed the balance of cuts they bought for example buying less mince and more roasting joints and steaks.  Equally, there was greater interest in ready to cook dishes and marinaded products.

“Consumers were also willing to spend slightly more per kg on the meat they bought, typically around 5% more although roasting joints and mince failed to reach this level of retail price increase.  Nevertheless, this increase in volumes sold through the high street and higher retail prices does not raise the retail revenue as quickly as the farmgate price has risen,” said Mr Ashworth.

Lack of out of home eating is also a contributory factor to a decline in beef imports over the twelve months to February 2021 which fell some 7%.  Exports also fell, by 23%, as global markets adjusted to the changing consumer market behaviour.

A feature of the past twelve months has been the reduced supply of cattle reaching UK abattoirs and in the twelve months to the end of February ex-abattoir production of beef was 1.5% lower than in the previous year.  However, the changes to trade meant that the net new supply of beef in the UK was little changed.

“Over the next two to three months, the consumer market will change again both domestically and international although the speed of change will vary between nations.  The re-opening of out of home eating and, hopefully, in the medium-term events will mean the way consumers buy meat will change back towards pre-Covid patterns.

“Equally, in the short-term some consumers will have reserves of cash they have not spent on commuting to work or leisure and recreation activities.  It remains to be seen, though, whether this will allow out of home meal providers to pass through the higher meat wholesale prices they face compared to a year ago or the effect of the return of out of home eating has on the use of imported meat.  It also remains to be seen what the legacy of at home eating and new or relearnt culinary skills is on retail demand and the balance of cuts sold among high street butchers and multiple retailers,” said Mr Ashworth.

In the short term, Mr Ashworth acknowledges that BCMS data indicates a continued tightness of prime cattle supplies, a situation that is unlikely to materially change until the autumn, which will continue to underpin domestic farmgate prices as the supply chain adjusts to the relaxation of Covid restrictions,