Beef Supply Shock for Complacent Supermarkets

UK - Complacent supermarket beef buyers are in for a huge supply shock in 2011, the National Beef Association has warned.
calendar icon 21 October 2010
clock icon 3 minute read

It says its repeated advice that big retail buyers need to back domestic beef production in a determined manner, or else run the risk of going unnecessarily short in future, has been resolutely, even arrogantly, ignored.

However, the Holstein bull beef bubble, which was singlehandedly responsible for the unexpectedly large numbers of beef cattle on offer over the past 12 months, burst with a bang when grain prices exploded in July – and supermarkets made the mistake of simultaneously deciding to pay less for beef, according to the NBA.

And this mixture of buyers being short sighted about purchase prices, at a time of relentlessly rising production costs, means the volume of prime cattle sold over twelve months from June 2011 could be ten per cent lower than it was over this year’s peak production period.

“The supermarkets found it amazingly easy to secure their beef this past year and it has made them careless. Cheap grain at £80-£100 a tonne meant that over 95 per cent of Holstein bull calves registered in 2009 were reared and an avalanche of finished cattle was thrown at the market a year later,” explained NBA chairman, Oisin Murnion.

“But now grain is trading ex-farm at more than £140 a tonne, and Holstein bulls that were selling for 255p a deadweight kilo in January are struggling to top 225p, at least half of Holstein bull calves registered since August have been ignored by rearers and killed at around ten days old by bobby beef specialists instead.”

“This trend will continue until at least next harvest and on top of this perhaps 70 per cent of the remaining Holstein male calves are being reared as more flexibly managed steers and will take something like four to six months longer to hit slaughter weight.”

The NBA said it is certain this means a dramatic fall in UK beef availability at a time when world beef supplies continue to tighten and cattle price charts in South America, and other regular sources of imported beef, are pointing skywards.

“The supermarkets are about to receive a hard lesson on what happens if they do not look after their domestic suppliers by paying prices that are in line with production costs - and it must be hoped that this time they take in what they are being taught,” said Mr Murnion.

“The overnight Holstein bull beef boom masked a progressive downwards trend in core sectors of UK beef production and persuaded the multiples there was no need to pay more for beef, or encourage regular suppliers to maintain breeding cow and finished cattle numbers.

“Slaughterers, who were dazzled by the appearance of perhaps 200,000 extra cattle over the last 18 months, readily admit it has been years since prime stock has been as easy to find but are also saying it could be at least a decade before slaughter cattle numbers hit 2010 levels again.”

“The NBA, which has been regularly criticised by supermarket red meat buyers for warning that 2010’s cattle throughput levels could not be maintained, is once again saying that if domestic beef production is not given immediate encouragement through a significant lift in market prices there will be further, avoidable, drops in UK beef output from 2012 onwards. Let it be hoped that this time we are listened to.”

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