Reduced numbers and market adjustment cause of dip in Farmgate prices

According to the latest market commentary by Quality Meat Scotland (QMS), Scottish prime cattle producers are seeing the steady increase in farmgate prices of the past quarter beginning to run out of steam. Although the most recent prices have dipped by around 1p/kg dwt over the past week, the average Scottish steer deadweight price of 419.5 p/kg dwt prices are 7% higher than a year ago.

Stuart Ashworth, QMS Chief Economist, says that a dip in prices through September and October is not unusual. 

“Prime cattle prices have also eased back across many European markets with the EU average for prime male cattle drift 0.25% lower over the past week.”

The volume of prime cattle passing through Scottish abattoirs tightened slightly in the past week but is slightly higher than this time last year.  In contrast volumes reaching English and Welsh abattoirs over the past month have been lower than last year. 

“However, it is not clear what extent the influence of Brexit and Covid19 control measures limiting availability of abattoir workers is having on slaughter volumes rather than changes in the number of cattle reaching the market. 

“Overall cattle slaughterings across the UK during August were much lower than a year ago and despite some increase in carcase weights, the volume of beef leaving UK abattoirs is estimated by Defra to have been 7% lower than the same month last year which will have underpinned farmgate price,” says Mr Ashworth.

As Covid restrictions have reduced, the retail market for beef has been adjusting.  Recent data from Kantar Worldpanel suggest that retail sales of mince and burgers have fallen away as out-of-home catering re-opens.

“Retailers responded by dropping prices for mince for example, with the Office for National Statistics suggest mince prices are 6% lower than last year and 2% lower than the turn of the year.  There has, though, been some pass through of higher prices for steaks and roasting joints in retail outlets nevertheless, the ONS suggests that the average price of a basket of beef cuts has fallen 2% from a year ago but is 1% higher than the turn of the year,” explains Mr Ashworth.

Data from market analysts Urner Barry suggest that over the past six months wholesale beef prices reflect this retail price behaviour with rises in high value cuts like striploins, steak cuts and rib roasts, suitable for restaurants, but lower value cuts like topsides, silversides and cuts used for mincing under wholesale price pressure. Ex abattoir beef prices have not kept pace with farmgate prices.

International trade also has a part to play in the marketplace and the volume of beef on the domestic market says Mr Ashworth. 

“UK beef exports are slowly recovering from the disturbance caused by Brexit and Covid 19 and by June UK beef exports were reported to be ahead of the five year average for the month. Equally, though, imports have also regained lost ground. In June UK beef imports were higher than a year ago and slightly ahead of the five year average.

Ireland’s share of imports in June was 79% a slightly lower proportion than last year but higher than their long run average for June; over the first half of 2021 Ireland was the source of 80% of UK beef imports.  However, despite a net increase in imports during June the lower domestic production resulted in less beef on the UK market supporting farmgate prices.

Mr Ashworth notes that although GB calf registrations showed some growth through 2020 and into 2021, these animals will not reach abattoirs until late 2021 or into 2022.

“Consequently, the underlying short term supply prospect continues to be one that supports the current firm farmgate prices,” concludes Mr Ashworth