LMC: Retail Beef Prices Edge Higher In Autumn

NORTHERN IRELAND, UK - Farmgate beef prices have been significantly higher than 2010 levels throughout 2011 and until the autumn the impact of this on retail prices had been negligible with reports of processors struggling to pass these higher prices on to retail level.

24 November 2011

3 minute read

Europe

However, throughout the autumn we have begun to see increases in retail beef prices in GB relative to the same period last year, and as a consequence, retail demand has come under some degree of pressure.

GB is the biggest market for the NI beef industry and in the four weeks ended 31 October 2011, Kantar have reported that the average price of beef in GB was £6.50. This was seven per cent (47p/kg) more than in the same period last year when the average price was reported at £6.03.

This is a significant increase and reflects what has been going on at farmgate level in NI and elsewhere in the UK over the course of the last year.

The result of these higher retail prices in October has been reduced retail demand year-on-year. However, it is encouraging that the reduction in demand has not been proportionate to the increase in price. Volume sales have fallen by five per cent in October compared to the same period last year, however, Figure 2 clearly shows how the seasonal increase in demand this autumn has continued regardless.

The combination of the seven per cent increase in price and the five per cent decline in volume sales, is a two per cent increase in expenditure which is very positive in these straightened economic times.

The reduction in demand has been caused by a two per cent decline in penetration, meaning that there has been a slight decline in the proportion of consumers that have beef on their shopping list. A three per cent decline in the average weight per purchase shows that those consumers that have put beef in the trolley are buying slightly smaller volumes.

In October, there were year-on-year declines in sales of all beef cuts with the exception of stewing. Stewing volumes increased by a modest 2.5 per cent in October, perhaps indicating that consumers may be more inclined to trade down in a higher price environment.

If this is the case, there been no such benefit in terms of mince demand as its sales were down by three per cent in October, with frying / grilling sales down by five per cent. Roasting sales were down by a substantial 16 per cent compared to the same period last year.

In October, lamb sales remained sluggish with prices 13 per cent higher than during the same period last year. The average retail price of lamb was £8.52/kg in October. These higher prices have led to significant reductions in volume sales and lamb spend.

Volume sales are down 18 per cent year-on-year, with expenditure on lamb down by eight per cent as a result of the combination of higher prices and reduced volumes.

In October, sales of lamb stewing and mince were down by four and nine per cent respectively. The most significant volume declines were for leg roastings (-35 per cent) and chop steaks (-20 per cent). In some respects it is worth noting that the high price of lamb is simply a reflection of reduced availability due to a vibrant export trade.

Consumers cannot buy lamb if is not on the supermarket shelves. However, there is a longer term concern that consumers may take lamb off the menu altogether if an out-of-sight / out-ofmind scenario was to prevail. This indeed is a concern. In the last month, penetration of lamb was down by 14 per cent year-on-year, with only a fifth of consumers purchasing lamb. The industry will be anxious to see an end to such sharp year-on-year declines in sales.