LMC: Cattle Supplies Thin Locally in January

NORTHERN IRELAND, UK - Throughout 2011, tight cattle supplies had been a significant feature of the NI beef trade with higher farmgate prices a key consequence. The latest slaughter reports from DARD show that in January 2012 supplies have tightened further.

13 February 2012

4 minute read

Europe

The slaughter figures for January (four weeks ending 28/01/12) make for fairly stark reading, with prime cattle supplies down by 16 per cent year-onyear. The total kill was down by 15 per cent. This represents a continuation of the tight supply situation that was prevalent throughout much of 2011. In considering these figures however, it is important to point out that the first quarter of 2011 was the tail end of a cycle of strong finished cattle supplies with the kill remaining relatively strong last January. The current cycle of sharp declines in slaughter numbers did not begin in earnest until last April, so these figures do not represent a compounding of the tight supply situation that prevailed through most of 2011. By any measure however, the January clean cattle kill was very low. From 2009-2011 the January kill averaged about 30,000 head for the month. Table 1 clearly shows that the kill this January was about 4,500 head fewer at around 25,500 head last month. The prime cattle supplies chart overleaf illustrates this decline very clearly.

It is worth noting that in contrast with 2011, the decline in numbers was significant for all categories of prime cattle this January. Over the course of 2011 there was sharp decline in the availability of young bulls (-17 per cent) and while numbers of steers (- two per cent) and heifers (- five per cent) were also lower, the reductions were more subdued. At the start of this year steer numbers are back by 13 per cent with heifer numbers down by 15 per cent. For processors trying to meet orders, such a decline in steer and heifer numbers is an obvious concern.

While prime cattle supplies had been under pressure throughout 2011, the cow kill was very high last year (+14 per cent on 2010 levels), compensating for some of the decline in clean beef availability. Once again, this contrasts with the kill profile in January 2012. Last month the cow kill was down by two per cent, contributing to the overall decline in the availability of beef in NI. Another factor which contributed significantly to the reduced kill this January is reduced imports for direct slaughter. The bulk of these imports are sourced in the south and over the course of 2011, imports for direct slaughter from ROI generally accounted for about 6.5 per cent of the overall cattle kill, with around 570 head imported each week by factories from ROI. Last month, the number of finished cattle imported from ROI fell by almost 50 per cent, from 2,400 head to just 1,250 head. It seems therefore that tight supplies elsewhere is also impacting cattle throughput in Northern Ireland.

This issue has also manifested itself through reduced numbers of store cattle and weanlings imported onto NI farms from ROI in 2011. In 2010, these nomad cattle, as they are known, accounted for a small but significant proportion of NI slaughterings. With strong prices for finished cattle in the ROI market last year, NI farmers became less inclined to import and the number of nomads on the ground in NI is now much lower than previous year levels. Price reporting data shows that local slaughterings of ROI origin cattle this January were down by 32 per cent compared to January 2011.

All of these factors have combined to lead to reduced supplies. The impact of these developments on processing businesses becomes a growing issue the longer this situation prevails. Throughout 2011 competition for finished cattle was intense and while they may have to pay higher prices, factories may also be able to recover greater returns from customers. Perhaps a greater concern at the processing end is the impact of falling throughput and excess capacity on unit costs and overheads. To put the decline in context, the fall of around 5,500 head in the total cattle kill since last January would probably account for the entire January kill in most local factories. There is no doubt that some local processing businesses will be coming under pressure as a result.

From a producer perspective, the picture is obviously quite positive since tight supplies have the potential to generate upward pressure on price. Of course for that to happen the right demand conditions also have to be in place and it seems that this was not the case in January. A combination of excess stocks in factories’ chills (the kill was stronger in December) and weak postChristmas demand may have contributed to the subdued farmgate prices throughout the UK at the start of this year. Looking ahead over the coming months it is expected that supply will remain tight and it is likely that this will help to underpin the trade.

In contrast to cattle supplies, sheep availability has been very strong in the new year with the total kill up by 17 per cent since last January. The hogget kill is up by 24 per cent and this increased availability will be welcomed by lamb processors who had been struggling with tight supplies in recent years.

This year-on-year increase is an extension of a trend that prevailed over the last quarter of 2011 and with exports for direct slaughter to ROI greater than 2011 levels this January, it would seem that the increase has not come at the expense of reduced exports.