Retail price movements trail farmgate price movement

According to the latest market commentary by Quality Meat Scotland (QMS), recent updates from the Office of National Statistics (ONS) and various shelf-watch exercises show that many cuts of beef are retailing at lower prices than this time last year. 

Stuart Ashworth, QMS Director of Economic Services, explains that the movements in retail price, however, bear little relation to changes in farmgate prices.

“The ONS for example suggests that the average retail price for beef in December 2020 was 3.3% lower than in 2019, having been 3.1% higher in October.  In contrast the average retail price for lamb according to ONS was 1.5% higher in December having been 3-4% lower than a year earlier for most of the final third of the year.”

Prime cattle and sheep prices have been - and remain - considerably higher since mid-2020 than the previous year.  Scottish price reporting abattoirs show prime cattle prices currently 11.5% higher than a year ago and at this level prices are very close to exceeding the highest level for this time of year seen over the past decade in 2014.

Of the major beef producing nations of Europe, only the UK and Ireland report current farmgate prices higher than a year ago and current farmgate prices in the UK are only exceeded in Europe by Sweden and Greece.

Sheep prices, which dipped from the recent high of 264 p/kg lwt over the past fortnight, have stabilised in the current week and are some 15% ahead of this time last year. 

“European farmgate prime lamb prices are also generally higher than a year ago and the largest year on year increase is reported from Ireland, at 24%.  Prices in France, which has the highest prices in Europe with the exception of Croatia, are 9% higher than a year ago and despite the current challenges and costs of exporting, higher domestic farmgate prices in France, Belgium and Germany are creating some export opportunities,” said Mr Ashworth.

The relative rate of change in retail and farmgate price illustrates the complex nature of the red meat supply chain beyond the abattoir gate. 

“The movement in retail price quoted by the ONS refers only to fresh and chilled beef, it does not consider price movements for processed beef products nor the wholesale price of beef sold to out of home caterers and food manufacturers.

“What we do know though is that during the Covid crisis that butcher’s shops and multiple retailers have sold considerably more fresh and chilled meat to consumers as out of home catering has been significantly constrained and, in some cases, shut completely,” added Mr Ashworth.

Estimates from Kantar Worldpanel retail sales monitoring suggest that during 2020, 11% more beef and 4% more lamb was sold in retail stores.  Specifically, lamb sales in the last quarter of 2020, including the Christmas period, are reported by Kantar Worldpanel to have shown particularly strong year on year growth of more than 10%.

In short, retail sales of fresh and chilled meat on the high street are taking a bigger proportion of the fresh meat leaving abattoirs. 

“They are very demanding on the specification and presentation of the fresh meat they sell but as a consequence are considered to be a premium market and with a higher proportion of meat going to this sector total carcase revenue can increase and support farmgate prices despite little change in retail prices,” said Mr Ashworth.

When Covid restrictions are relaxed and demand returns from other sectors, such as not-for-profit catering like schools and colleges and commercial out-of-home catering, which are very sensitive to raw material prices, this may reduce demand in supermarkets. Consequently, the mix of ex-abattoir sales will change, and carcase revenue will change as well.

“In the medium term though, prime cattle and sheep numbers are likely to remain tight in comparison to last year and help to underpin current prices.  Additionally, firm prices across Europe and the forthcoming changes to border control and inspection measures for imported products that will be introduced over the next six months will limit the competitiveness of imported red meat,” concluded Mr Ashworth.