20th March 2015

Range of Factors Putting Pressure on UK Beef Prices

A range of factors, including exchange rate movements, is putting pressure on UK beef prices, according to Quality Meat Scotland (QMS).

The strengthening of Sterling is again leading to a widening gap with Irish and European prices, observed Stuart Ashworth, QMS Head of Economics Services.

“Despite Irish producers getting 6% more Euros from the market than last year, the UK price is 13.5% higher in Euro and so the gap has widened.  However, because of currency movements, while the UK price is around 2-3% lower in Sterling, Irish prices have fallen by 7-8%” said Mr Ashworth.

Data from January meat trade activity shows UK beef exports falling while imports - of which Ireland is the biggest supplier – increased, leading to a higher volume of beef on the UK market. 

“While some of this would have been used to refill the supply chain after good Christmas trade, once the supply chain was fully restocked pressure was exerted on market prices from a well supplied market,” he said.

Looking at the UK market, after a positive start to 2015, prime cattle prices have drifted downwards over the past six weeks or so.  The average price currently stands some two to three percent lower than 12 months ago, while the number of cattle being slaughtered is tightening up. 

“During February, Scottish abattoirs handled 3.8% fewer prime cattle than last year, compared with Northern Ireland at 2.5% fewer and England and Wales at 2% more,” stated Mr Ashworth.

“However, a bigger influence here is that carcase weights continue to be higher than last year, by around 1.5%. The result is that, despite the number of animals beginning to tighten, the volume of beef they produce is continuing to run ahead of last year.”  

Another challenge for the beef supply chain has been a slowdown in demand for manufacturing beef which, for example, affected trade for forequarters pulling wholesale prices down. 

A further challenge, pointed out Mr Ashworth, is the value of the non-edible fifth quarter products. 

“While hides prices are steady, the value of fat for tallow production has been hit by falling oil prices and is more than 30% lower than this time last year.  Other products for rendering, like bones, have also fallen in value by some £50 per tonne over the year.  Meanwhile, the cost of disposing of the remaining specified risk materials has in some cases more than doubled. All these price movements inevitably put pressure on slaughter cattle prices.”

At the moment, observed Mr Ashworth, demand side pressures are winning the perennial economic supply and demand equation. 

“However, the publication of December census information continues to show that short-term cattle supplies will come under pressure although continued growth in carcase weights could still offset this decline in slaughter numbers. 

“The English census reported 3% fewer one to two-year-old cattle, while Scottish holdings have 2.5% fewer cattle in this age group and Northern Ireland 3% fewer.  Across the whole of the European Union, Eurostat reports a decline of 1% in one to two-year-old cattle in December with declines of more than 3% in Ireland and Italy.”  

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