Outlook More Promising for Beef Farmers After Difficult Start to 2015

Beef farmers have had a difficult start to 2015, driven by a combination of factors some of which are outwith producers’ control, according to Stuart Ashworth, Head of Economics Services with Quality Meat Scotland (QMS).

However, the coming months look more encouraging for beef producers as the supply and demand pendulum starts to swing back towards farmers.

“We know the availability of prime cattle in Scotland, UK and Ireland will diminish so, in the next quarter, we expect to see the volume of cattle arriving at abattoirs slow down.  It is likely we will then see some firmness in the market for the beef producer,” said Mr Ashworth.

Looking back at the situation over recent months, Mr Ashworth said a complex range of factors had been influencing the market, based around the basic building blocks of supply and demand.

“What has happened is the volume of cattle has been starting to fall, resulting in  Scottish and UK abattoirs handling fewer prime cattle, although this has been slightly offset by an increase in cow slaughterings.  For  example, during March Scottish abattoirs handled seven percent fewer cattle than a year ago and in England and Wales the numbers were down two percent for prime stock but unchanged overall.

“However, the price has also continued to fall, reflecting the fact that cattle are being slaughtered at heavier weights. As a result, although the number of cattle being slaughtered has reduced, the volume of beef produced over the first quarter had increased by one percent.”

One very significant factor has been the impact of the strength Sterling, observed Mr Ashworth. This has meant that it has been difficult for processors to export, while at the same time imports have become more attractive.

“Over the first quarter, exports of UK beef have reduced by around 2500 tonnes while imports have increased by about 4500 tonnes,” he said.

“Add to that the increase in domestic supply and we find that the market has been working with around eight per cent more beef than a year ago.”

That would not have been a problem if consumption had been strong but, while it has improved for some cuts, it has not been enough to absorb the extra supply.

“Some cuts have been selling better than others but the product which is not selling well has been building up in processors’ chills and has had to find a market in the manufacturing trade which has been proving sluggish,” added Mr Ashworth.

“This explains why we have seen a slide in farm gate prices and why some of our producers have been facing an extended period to get cattle to market.”

However, looking forward he said the outlook was looking more promising for beef farmers.

“We know from BCMS data that the volume of cattle set to come forward as prime stock over the next six to nine months will diminish further and the same scenario is expected in Ireland,” said Mr Ashworth.

“This will mean the abattoirs will be able to manage the sale of less popular cuts out of their cold stores and the whole supply and demand balance will come closer together.”