Strong Cattle Prices Not Necessarily Good News09 May 2013
UK - Average cattle prices have broken through the £4/kg deadweight (dw) barrier with some producers achieving considerably more, according to Stuart Ashworth, Head of Economics Services, Quality Meat Scotland (QMS).
Among those producers achieving prices significantly above £4/kg/dw are those selling cattle with specific production or breed characteristics, such as organically produced or Aberdeen Angus.
“While this price breakthrough is welcome news for producers it continues to pile pressure on processors to push these costs through to the retail chain,” said Mr Ashworth.
Figures from the Office of National Statistics suggest that over the year to the end of March 2013, retail beef prices increased by an average 2.1 per cent , with rump and mince increasing 10 per cent while braising steaks and topside reduced in price.
However, surveys of retail butchers suggest that these changes may be a little understated, observed Mr Ashworth.
“While the responses from butchers supports an increase in mince price of around 10 per cent , they would also suggest that braising cuts also increased by around 10 per cent while rump and topside increased but at a slower rate of around 5 per cent ,” said Mr Ashworth.
“Nevertheless, when compared with the 8 per cent movement in farm gate prices from March 2012 to March 2013 and the 12 per cent increase over the 12 months to April, this does suggest retail butchers are struggling to pass on their increased costs to the consumer,” he added.
However it is interesting to note that among the cuts at the economy end of the scale, such as mince and stewing products, there has been greater movement in price than among the more high value cuts.
“This may, perhaps, be a result of demand created by horsemeat scandal concerns about processed burgers and ready meals containing mince, along with the general level of economic confidence among consumers,” said Mr Ashworth.
However, increasing farm gate prices must reflect a strong demand for the limited volume of beef reaching abattoirs, said Mr Ashworth. March slaughter statistics show a UK kill of prime cattle which is 6 per cent lower than last year which compares with a Scottish kill down by around 2 per cent .
“Added to reduced cattle availability is the fact that carcase weights have also fallen by 2 per cent .Combine the two and UK prime beef production was almost 8 per cent lower in March 2013 than one year ago.
“Although the number of cull cows reaching abattoirs has increased, they too are producing lighter carcases so cow beef, which represents about 18-20 per cent of all beef, has not filled the gap created by reduced prime beef production. While supplies improved slightly during April, they still struggled to match last year’s levels and historically cattle supplies tighten through May and June. There is then no respite from a tightly supplied UK market in the short term,” said Mr Ashworth.
While UK supplies of cattle remain tight, Ireland is beginning to see some increase in cattle volumes. Their total cattle kill in March 2013 was 4 per cent higher than last year, but like the UK, lower carcase weights meant the tonnage of beef produced was unchanged.
“In more recent weeks their slaughter volumes have increased further. From an Irish, and Scottish, farmer’s point of view the positive aspect is that this increased Irish supply has not lead to any reduction in farm gate price. Indeed the opposite has occurred and Irish prices have increased over the past month as demand for manufacturing beef is reported to be strong,” added Mr Ashworth.
In contrast elsewhere in Europe prime cattle prices are, at best, stagnating and in some regions of significant production, for example France, Germany and Spain, prices have fallen over the past month.
“As a result the UK and Ireland have some of the highest farm gate prices across Europe which will not make it easy to export beef to mainland Europe. Indeed the opposite may be true.
“However, with the exception of Poland, all the major beef producing states of Europe are seeing reduced production and, as a result, the European beef market also remains tightly supplied.”
TheCattleSite News Desk