21st December 2012

QMS Market Commentary: Christmas Market Boosts Beef and Pig Prices

Beef and pig producers have seen strength in the Christmas market with beef, in particular, proving to be markedly resilient to the economic climate. Prices have risen to 10 p/kg dwt (2.7%) since the beginning of November while the pig price has improved 1% over this period.

However, Stuart Ashworth, Quality Meat Scotland’s Head of Economics Services, pointed out that despite this improvement in price, prime cattle supplies have remained below last year’s levels as cattle are proving slow to finish.

“Latest slaughter statistics from across the UK show the extent to which cattle supplies are being squeezed. The prime kill is 5% down during November and 7.5% down over the year to the end of November.

“This level of decline across the UK, when set against the slightly higher volume of calf registrations in 2010 (compared to 2009), and the average age at slaughter continuing to be 21 to 22 months, suggests some backlog of cattle on farms going into 2013.

“Almost half of the decline in slaughtering is accounted for by heifers some of which may have been retained for breeding. Nevertheless, there remains a strong likelihood that there are more cattle to come onto the market over the next few months than has recently been the case,” added Mr Ashworth.

“Indeed, the number of young bulls reaching abattoirs has started to increase almost exactly twelve months after the number of pure bred dairy bull calves registered with BCMS began increasing.”

While there is some possibility of an increased supply of cattle, it must still be recognised that on the basis of calf registrations, the current supply is likely to remain some 10% below the levels seen before the introduction of de-coupled support payments in 2005.

However, whilst cattle producers have seen a seasonal price improvement, lamb producers have not.

“Prime lamb prices have fallen approximately 5% since the start of November,” said Mr Ashworth.

“In the past fortnight lamb marketings have matched, or slightly increased over, the same period last year. Until then, lamb supplies had been running well below last year’s levels.

“Between June and the end of November, the UK lamb kill has been over 550,000 head lower than last year. This suggests a higher carryover of hoggs into 2013 than last year.”

For most of the past six weeks the price of lambs has been falling at the same time as availability has been lower. This suggests, said Mr Ashworth, a weakness in demand, poorer quality lambs reaching the market or a combination of the two.  There is some evidence from deadweight reporting abattoirs that the quality of lambs is lower than this time last year.

Meanwhile demand is coming under pressure. Export trade statistics take some time to come through, but trade in October is reported to be 22% lower than in 2011 suggesting the export market is challenging.

Despite the lower slaughter numbers, a greater volume of lamb is remaining on the home market and the trade statistics show a small increase in imports during October.

“Despite lower levels of lamb marketing in the UK, the overall market remains well supplied so prices are being pressured both by issues of demand and quality,” said Mr Ashworth. “A further complication on the lamb market is the much lower price on offer for sheepskins in comparison to last year.”

Positive news is that Kantar market research data suggests that retail sales of lamb are improving although retail price is under pressure.

“Latest information from the Office of National Statistics suggests lamb prices have not significantly changed from last year compared to beef being almost 7% more expensive and the overall retail price index being 2.9% higher than last year,” said Mr Ashworth.  “These relative movements are improving the competitiveness of lamb on the home retail market.”

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