7th August 2015
Range of Factors Influencing Farmgate Price Movements
Recent months have seen considerable swings in farmgate livestock prices and the past few weeks have been a particular rollercoaster ride for the livestock market.
Prime cattle prices climbed strongly between May and late July but have cooled in the past fortnight. Prime sheep prices having fallen steeply during July, have rebounded in the first week of August. Pig prices in contrast have been more stable, but at levels well below those of 12 months ago.
According to Quality Meat Scotland’s Head of Economics Services, Stuart Ashworth, there are many factors affecting prices.
“We have seen considerable movements in the prices for cattle and sheep and one starting point – when looking for explanations for this volatility – is the volume of animals reaching abattoirs,” said Mr Ashworth.
“In the past couple of weeks the volume of cattle handled by price-reporting abattoirs increased slightly, with the exception of young bulls, and prices have slipped 1.5%. Nevertheless, at current levels, stock availability in Scotland is still around 3% lower than 12 months ago compared to around 9% down in mid-June.”
Although better supplied with steers, and despite prices falling slightly in recent weeks, prime cattle prices remain 6 -7% higher than last year.
A similar slide in price has occurred in England and Wales. Meanwhile, trade data suggests that beef imports trailed year-earlier levels during May and, despite struggles in the export market, UK total beef supplies began to tighten, offering support to domestic producer prices.
“What the current beef trade is suggesting, therefore, is that the market is very volume sensitive which in turn suggests that retail demand remains fickle with a small increase in production quickly cooling prices,” observed Mr Ashworth.
“In the short term cattle availability can be greatly influenced by cattle growth rates and the small increase in numbers may reflect the rate at which cattle have grown over the past two months.
“Nevertheless, the wider expectation is that prime cattle supplies will remain below year earlier levels for a further three to four months.”
The volatility of the prime lamb market is harder to explain, said Mr Ashworth. Auction market throughputs of SQQ lambs over the past couple of months have been consistently 15 - 18% lower than last year.
“In contrast, GB lamb slaughterings in June were reported to be 3.5% higher reflecting two peculiarities - a longer tail of hoggs than normal and a higher number of heavy lambs that fall outside the SQQ by being over 45 kg liveweight,” he said.
These two features will, stated Mr Ashworth, have weighed on the overall trade, which has seen prices slide, as will the continued strength of sterling. In the most recent week the number of heavy lambs has diminished slightly, but they still account for more of the total lamb sales in auction markets than at this time last year, and the SQQ average price has risen.
“Despite the many factors affecting market returns that are outside the control of producers, what the current market conditions bring sharply into focus is the importance of producers putting forward livestock to the market that best meet the needs of their buyers. This will help to minimise the impact of the other factors influencing the market.”