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Beef investigation: Supply and demand mismatch set to limit sector recovery

The beef sector has been struggling in recent months with low prices, but what are its prospects for the future?

 

Cedric Porter and Ewan Pate investigate. 

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BEEF INVESTIGATION: Supply and demand mismatch set to limit sector recovery

There has been a welcome increase in beef prices over the last few weeks, but there are fears a distorted market will limit gains.

 

One area of concern is the volume of lower-priced dairy bull calves weighing on the market. Moves to ensure male calves are not disposed of mean more are being reared.

 

There is a market for the export of calves, but this is almost saturated and the trade could be banned if the UK leaves the EU.

 

From the beginning of January 2021, all calves produced on the 2,300 dairy farms supplying Arla will have to be reared, although that can be by other farmers.

 

Any farmers who do dispose of calves before the eight-week cut-off date will be identified by the Cattle Tracing Service and sanctioned.


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Solutions

 

“As an industry, we need to find the solutions and create a better market to ensure every calf’s life has a value,” said Graham Wilkinson, agriculture director at Arla Foods UK.

 

“Many Arla farmers have already shown good breeding practices, identifying new supply chains and evolving calf care can significantly increase the market opportunities for their calves.”

 

Mr Wilkinson suggested reducing imports, which account for 30 per cent of UK beef supply, could absorb extra production.

 

Greater use of sexed semen could also reduce the number of male dairy calves, with the technique currently running at a 90 per cent success rate, according to AHDB, and the conception rate gap between it and conventional breeding narrowing.

Is cut devaluation, not production, the problem?

At the other end of the supply chain, there are continued complaints that supermarkets are devaluing beef by selling more as cheaper mince than higher value cuts.

 

“Supermarkets and the large processors are mincing more good cuts rather than encouraging shoppers to buy them as a tasty meal ingredient,” said Chris Dodds, chief executive of the Livestock Auctioneers Association.

 

He questioned whether there was large over-supply in the beef sector, using strong store prices as evidence.

 

He recognised this may partly be because of the abundance of good quality forage on farms which needs consuming, but pointed out professional store rearers who sell cattle on a weekly basis are not in the habit of over-paying.

 

Increased

 

Over the past year, the number of all types of cattle slaughtered has increased by 1.3 per cent.

 

In October, there was a 1 per cent increase in prime cattle slaughtering to 186,100 head, according to AHDB.

 

The volume of beef and veal produced in the month was 86,100 tonnes, three per cent more than October 2018.

 

Consumption is down between 1 and 2 per cent this year, mainly due to the absence of the barbecue weather seen in 2018 and events such as the World Cup.

 

Exports are up a little, while imports are down slightly.

 

Tighten

 

Duncan Wyatt, lead red meat analyst at AHDB, said UK beef supply could tighten over coming months.

 

At the beginning of October, the number of beef cattle between 12 and 30 months was 46,800 lower than the year before, with the number of beef cattle under 12 months 15,900 lower.

 

He said: “If the breeding herd continues to fall, as it has been, then fewer replacements will be required and this will support beef production.

 

“If the herd stabilises, then the reduction in the number of younger cattle coming through will feed through to lower beef production.”

 

Mr Wyatt added production could be influenced by carcase weights, which have risen over the last year.

 

Global prices

 

Outside the UK, global beef prices are rising strongly, with reports of Brazilian prices on a par with those in Ireland.

 

Rabobank reports strong Chinese import demand, partly driven by reduced pigmeat production, is pushing up global prices.

 

Between May and September, the Chinese retail beef price rose 14 per cent, with the pork price doubling.

 

Rabobank expects slow global beef production growth in 2020, with European output down 1 per cent.

Scottish prices firm

After a prolonged period of decline, farmgate beef prices in Scotland have increased by 2 per cent over the past month, the latest market analysis by Quality Meat Scotland (QMS) has found.

 

But prices are still 8 per cent or 30p/kg deadweight lower than this time last year, according to Stuart Ashworth, director of economic services at QMS.

 

Cull cattle prices are similarly lower than 12 months ago, but by a more modest 2 per cent.

 

The weekly cull cow slaughter numbers have been running higher than a year ago for the whole of the past quarter.

 

“A more modest decline in cull cattle prices and higher volumes killed does suggest more robust demand for manufacturing beef than for prime beef,” said Mr Ashworth.

 

Exceeded

 

“Weekly prime cattle slaughter numbers have also exceeded last year’s levels over the past quarter, although more recently there is some indication that availability is beginning to tighten.”

 

Beef supplies are, however, being supported by increases in carcase weights, particularly among steers.

 

Average carcase weights in October were 1 per cent higher than a year ago, but remained lower than two years ago.

 

Nevertheless, increasing numbers of cattle will be falling outside of many buyers preferred upper weight limits.

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