Supply and Demand Impacting Livestock Sector

The ruminant livestock sector is currently reacting in line with the basic economics rule of supply and demand, according to Stuart Ashworth, Head of Economics Services with Quality Meat Scotland (QMS).

“Across the UK and Ireland hogg supplies are greatly diminished on last year,” said Mr Ashworth.

“Bord Bia report the Irish lamb kill is down 25% on this time last year and since the turn of the year the kill has been 11% down.  Scottish auction markets and abattoirs similarly report current hogg throughputs 20 – 25% lower than last year.”

With Easter fast approaching there has been a modest increase in hogg numbers reaching the market, but with a lower number of hoggs carried into 2014, numbers are still struggling to match those of last year. 

“It is then not surprising that farmgate prices are continuing to rise in Scotland and also across the UK and Ireland,” commented Mr Ashworth.

With the exception of Romania, all the major European sheepmeat producing nations reported a smaller total flock at the turn of the year, meaning the supply of sheepmeat remains tight. 

“With Scotland, Ireland, Greece, Spain and France all reporting smaller ewe flocks in December 2013, the European supply situation will not improve soon,” commented Mr Ashworth.

This basic supply situation across Europe has led to a steady export demand but, with lower domestic production, UK sheepmeat traders have not always been able to benefit from this.

“UK exports of sheepmeat between November and the end of January fell year-on-year,” said Mr Ashworth.  “However, with lower deliveries from New Zealand, the volume of sheepmeat available in the UK over this period fell, underpinning price increase.”

With domestic production falling even further during January and February some supermarkets looked to increase supplies from New Zealand to meet demand. 

“New Zealand saw reduced production during January but February slaughter volumes have increased year-on-year,” said Mr Ashworth. 

“Nevertheless, strong demand from China and requests from Europe mean greater competition for New Zealand lamb. Their market is therefore benefiting, with New Zealand producers seeing prices some 20% higher than 12 months ago in local currency and 15% higher in sterling terms.”

Steady demand and limited supplies in the sheep sector are behind improving farmgate prices across Europe and in New Zealand.  This, observed Mr Ashworth, contrasts sharply with the cattle sector where farmgate prices have fallen since the turn of the year. 

“The fall in cattle prices is largely driven by increased cattle availability,” said Mr Ashworth. 

“Scottish abattoirs have, over the past month, slaughtered slightly more cattle than they did 12 months ago, while supplies in England have improved by a greater amount.”

With carcase weights also increasing, UK beef production in February increased by 1.5% year-on-year and will have increased further during March. 

In the final quarter of 2013 UK beef production had been around five percent lower year- on-year. Supplies in Ireland have increased even more rapidly with Bord Bia reporting an increase of 10% in their cattle slaughterings since the turn of the year.

“This turn around in production helps to explain the fall in producer price since the turn of the year,” said Mr Ashworth.

“However, while prime stock prices have weakened, store cattle prices are stronger than last year,” added Mr Ashworth. “Prices have been driven by lower numbers of cattle in the markets which reflects the lower level of calvings in the final quarter of 2012 and first half of 2013. This will impact on prime cattle supplies as the year progresses.”