Prime cattle prices saw a significant lift at Scottish abattoirs during the month of August, according to the latest Quality Meat Scotland (QMS) analysis.
The average R4L grade prices for steers and young bulls gained 16p/kg deadweight between the final week of July and the week ending August 27, while the average R4L grade heifer rose by 13p/kg.
“Following these increases, at an average of 371p/kg dwt, steers and heifers were around 2% more expensive than at the end of August 2015,” said Iain Macdonald, QMS Senior Economics Analyst.
According to Mr Macdonald, a look at the supply side of the market helps to shed some light on what is driving the movement in prices. During the four weeks to August 27, Scottish price reporting abattoirs handled 3% fewer prime cattle than a year earlier.
“This fits with BCMS data which indicates that at the beginning of July the number of cattle in the 24-30 month age category across GB was down by more than 2% on a year earlier.
“Although there was an increase of 1.5% in the 18-24 month age group, this was not significant enough to offset the decline in the older age group, and the pool of 18-30 month old cattle which will be the source of short term abattoir throughput fell,” he said.
However, the proportion of live male beef cattle in these age groups was below July 2015 levels. This perhaps reflected the selection of slightly younger male cattle for slaughter in response to market signals. This could also suggest that any short term recovery in slaughter numbers will come from heifers.
Falling carcase weights due to slaughter at younger ages will have added to the decline in supplies. This has already shown up in the Scottish slaughter statistics, with steer carcases averaging 1% lower than a year earlier in June and then 3% lower in July.
While the volume of domestic beef produced in July declined, retail demand increased offering further support for prices.
“The latest evidence from Kantar Worldpanel on retail purchases of prime beef cuts by GB households is more positive, with them buying 4% more beef than a year earlier in the 12 weeks to July 17. In the past four of these weeks volumes grew by an estimated 7.5% compared with a year earlier,” said Mr Macdonald.
As well as the retail market, the beef trade has also been helped by a weaker sterling exchange rate against the euro, he added. This will have been most important in markets for lower value products where price is key.
Sterling has fallen around 9% since the Brexit vote and is around 15% weaker year on year. This will have allowed home-produced beef to compete much better in price-sensitive markets both at home and on the continent.
“As a consequence, processors will have been able to achieve better carcase balance, helping total return from the carcase,” said Mr Macdonald.
This firm market environment looks likely to continue for a while yet as it will not be until the pool of 12-18 month old cattle begin to reach the market that GB cattle supplies are likely to move ahead of last year.