Severe price competition at retail level could keep a lid on read meat returns in the coming months.
Farm experts have highlighted the continued competition among retailers and raised questions over the ability for the supply chain to pass on increased raw costs.
It was a theme highlighted by Stuart Ashworth, head of economic services with Quality Meat Scotland (QMS), as he pointed to the Co-Operative’s £75 million investment in cutting the cost of 200 own-brand products including British meat and poultry.
But Mr Ashworth also highlighted growing divergence between retail and farmgate beef prices. He suggested there were opportunities for the price of retail beef and pigmeat to fall without this impacting farmer returns.
"A similar scenario is revealed for lamb where the farmgate price has fallen 10 per cent between 2014 and 2015, while the retail price has increased by 2 per cent,” said Mr Ashworth.
“This however hides the fact the lamb retail price movement since 2013 has not matched the overall increase in farmgate price for lamb in that period."
He said the move was even more pronounced for pork prices, with farmgate returns falling 18 per cent between 2014 and 2015 despite retail pork prices falling just 3 per cent.
Competition between the UK’s four major retailers is widely acknowledged to have contributed to increased pressure on farmer returns in recent months. The UK’s largest supermarkets are fighting for market share as discounters Lidl and Aldi rise in popularity.
Mr Ashworth suggested the intense prevailing price competition in the multiple retail sector meant it was unlikely there would be significant strengthening in farmgate prices in the ’short to medium term’.
Figures in Wales showed there could be an increase in both beef and sheep supplies during 2016, but Hybu Cig Cymru (HCC) said it was uncertain at this stage how positive retail developments in lamb sales would combat plentiful lamb supplies.
A HCC spokesman said: "Prospects for the lamb crop look reasonable. Conditions over the past two years, and during tupping, were favourable but much will depend on weather conditions during lambing season and rearing rates."
Sheep meat production is expected to rise four per cent with the sharpest increase to happen toward the end of the year, which is attributed to higher mutton production.
Cattle registrations were also three per cent higher during 2015, according to British Cattle Movement Service (BCMS) data.