Prime Cattle Prices Stabilise as Market Becomes More Balanced

The imbalance between supply and demand appears to be easing, helping to stabilise prime cattle prices, according to Quality Meat Scotland (QMS).

Stuart Ashworth, QMS Head of Economics Services, said that in the week ending 23 May, Scottish price-reporting abattoirs handled almost eight per cent fewer cattle than last year and English and Welsh abattoirs nearly four per cent fewer.

In terms of prime cattle arriving at price-reporting abattoirs in Scotland, numbers have been lower than last year consistently since February.  However, prices had fallen steadily between March and mid-May, reflecting weak demand.

“The stabilisation of prime cattle prices and a modest increase for some grades suggests that the demand side of the equation has now firmed.

“Delays in getting cattle into abattoirs are reportedly shortening, suggesting that processor requirements have picked up.  Nevertheless, producer prices remain some four per cent lower than last year having fallen ten per cent since the turn of the year,” said Mr Ashworth.

This decline in stock numbers supports the information on calf registrations in 2013 from BCMS, he said.

“The 2013 year saw miserable spring weather have a telling effect on mortality and calf growth and also impacted on cow condition at mating for the spring 2014 calf crop.  This evidence suggests that this tightness of supply, compared with last year, will continue for the next six months or so.” 

This same data shows the current population of cattle under one-year-old to be higher than last year, observed Mr Ashworth. So, as these cattle reach 18 months of age towards the end of 2015, abattoir supplies will inevitably recover. 

“Looking further into the future, calf registrations for the first quarter of 2015 show a nine percent growth in GB, taking them to the highest level for three years. “

It is not just UK prime stock numbers that are tightening. In Ireland over the past couple of weeks prime stock slaughterings have been almost 10% lower than last year. 

Alongside this change in stock availability, Irish farmgate prices have also steadied, he said. Forecasts from Bord Bia continue to suggest that the Irish kill during 2015 as a whole will be more than 100,000 head lower than in 2014. 

Across Europe as a whole, forecasts for beef production in 2015 show cattle availability down 0.5% but with UK and Irish production being well down, the market dynamic will change on the European stage.

Comparing producer prices around Europe highlights the challenge of exchange rate movements for UK prices and their impact on relative producer returns. 

“Irish prices in Euros, for example, are around six percent higher than 12 months ago. Indeed in most of the major beef producing countries of Europe producer prices are currently higher than last year,” stated Mr Ashworth.

“The exception is France where producer prices are around three per cent lower. When UK prices are compared in Euro terms they too are higher than last year, by around six per cent, despite the Sterling price being lower. 

“The UK market then continues to look attractive to European beef traders at current exchange rates.  However, even factoring in the exchange rate challenge, the scenario with Irish and UK supplies tightening, is that we are seeing the supply and demand pendulum swing back in favour of producers.”

Mr Ashworth pointed out that the retail market still has a highly influential role to play. 

“The very competitive supermarket environment in the UK, which is seeing familiar names losing market share and profitability, will not encourage these businesses to push consumer prices higher. 

“Indeed, consolidated beef retail prices are reported by the Office of National Statistics to have fallen by around two per cent between February and April although individual cut prices will have moved at a different rate. 

“Despite the reported greater consumer propensity to go shopping in recent weeks, their willingness to accept higher retail prices remains muted.”