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QMS (Quality Meat Scotland)

17 September 2014

QMS Monthly Market Report - September 2014QMS Monthly Market Report - September 2014

QMS - Quality Meat Scotland

Prices and Supplies

Deadweight prime cattle prices closed August on a firm footing. In the week ended August 30, Scottish abattoirs paid an average of 358p/kg dwt for a steer. This was 11p above their month opening level, 15p higher than they had begun July and their highest level for 15 weeks. Nevertheless, prices remained 11-12% lower year-on-year.

Prime cattle auction prices picked up in mid- August and then held firm through to the end of the month. The Scottish auction average varied from 195-198p/kg lwt between the week ending August 13 and the week ending September 3. Prior to this, the market had held broadly flat around the 190p/kg mark since mid-June. Despite recent increases, steers and heifers averaged 12% lower year-on-year as September began while young bulls were 16% cheaper. The premium for Scottish auction prices over the average in England & Wales narrowed to around 6% in late August having hovered at 10-15% for much of the previous 16 months.

The UK prime cattle kill rose by 1.5% year-on-year in July to 177,400 head. This was the third consecutive monthly increase, having risen by 3% in May but by just 0.2% in June. For a second month, it was only the steer kill that increased relative to a year earlier. Higher supplies in England & Wales and Scotland continued to offset a sharp reduction in slaughter at Northern Irish plants. The July figures showed a seasonal decline in the weekly average kill. At 35,500 head, it slipped to its lowest level of the year so far.

The average carcase weight at UK abattoirs fell back to a four-month low of 351.5kg in July. This was largely down to a 6kg decline in steer weights compared to the previous month. Steers averaged 369kg; heifers 326kg (down 2kg); and young bulls 354kg (up 3kg). However, compared with July 2013, the average prime cattle carcase was 11.5kg heavier. Young bulls were at their heaviest since October 2009.

As noted previously, the prime cattle kill at Scottish abattoirs continued to exceed its year earlier level in July. Following a 4% increase in June, slaughterings rose at a slower pace of 1.5% in July, reaching 39,300 head. Once again it was supplies of male cattle driving the increase with the steer kill up 3.5% and young bull numbers rising by more than a fifth. By contrast, there was a 9% decline in the heifer kill.

Although the average carcase weight at Scottish abattoirs eased back by a kilo from June, at 370kg, it remained 17kg higher year-on-year. Steers averaged 390kg, heifers 339kg and young bulls 372kg. This large increase in weights converted a 1.5% rise in slaughterings into a 6.5% increase in prime beef production. At 14,500t, Scottish abattoirs accounted for 23% of the UK total.

Deadweight cull cow prices at Scottish abattoirs traded towards the top end of their 2014 range during August. Prices averaged 248p/kg during the month compared with an average of 244p/kg in the January to August period. The slight overall increase has been driven by higher prices for the better grades. In contrast to deadweight cow prices, the auction trade has cooled of late. After holding steady between February and June, prices trended lower through July and the first half of August. There has been a slight seasonal recovery at the end of August/beginning of September, but prices remained slightly lower on the month. Compared to a year earlier, deadweight prices closed August 10% lower while auction prices were trading at a 13% discount.

In contrast to prime cattle supplies, UK abattoirs continued to have fewer mature cattle to work with than a year earlier. Slaughter numbers declined at an annual rate of 8% to 49,600 head. This was a 5-year low for the month.

There was a considerable year-on-year decrease in the slaughter of mature cattle in Scottish plants during July. Numbers fell back by nearly one-fifth to 4,800 head. The average weekly kill was below 1,000 head for a fourth month and at its lowest level since April 2011.

The total volume of beef produced by UK abattoirs during July was 3% higher than 12 months before at 78,600t. Increased slaughter numbers and carcase weights resulted in prime beef production rising by 5% to 62,350t. However, for the first time since April, increased carcase weights were unable to offset the shorter supply of mature cattle, pulling production volumes down by 6%.

Data from Kantar Worldpanel shows that GB households bought significantly more beef than a year earlier during the 4 week period to July 20. Despite the average price rising by 3.5% to £7.90/kg, 13.5% more money was spent buying beef, pushing sales volumes up by 10% year-on-year. Despite warm, dry weather across much of the country, the best performing category was premium roasting joints which saw sales volumes rise by more than 40%. Meanwhile, there were also gains for steaks (+2.5%), lower value stewing beef (+2.5%) and mince (+8%). However, there was a reduction in sales of lower value roasts and premium stewing beef. Burger sales disappointed, falling by nearly 15%, while ready meal sales were down by 4%.

Following a brief recovery in late July, Irish producer prices returned to a downwards trend through August. From a 6-week high of €3.64/kg dwt (288p/kg dwt) in the week to July 26, the average R3 steer price fell by 1c/kg for two weeks before declining by 10c/kg over the next three weeks to finish August at €3.52/kg (280p/kg). This was its lowest level since October 2011. Compared to the same week last year, Irish prices were 13% lower in euro terms, but 19% lower in sterling. During August, the premium for an R3 grade UK steer over an Irish steer widened from 44p/kg to 61p/kg.

Most countries on the continent favour young bull production over steers. For a second month, the average R3 grade young bull in the EU held steady at €3.60/kg dwt (287p/kg dwt). Of the major beefproducing nations, the largest monthly increases occurred in the UK and Holland (3.5% and 4.5%). By contrast, prices fell 2-3% in Italy, Ireland and Greece. Having begun August 9% above the EU average, UK prices finished the month 13% higher.

R3 grade young bulls remained 4% lower year-on-year at the EU level. Though movement in the UK, France, Italy, Germany and Spain was closely in line with the average, Irish prices were 12% lower. By contrast, Greek, Dutch and Polish producers were paid roughly the same as 12 months before and Portuguese farmers fared best with a 3% rise.

O3 grade cull cow prices cooled by 1% on average across the EU during August. While Polish prices moved with the average, there were additional pressures in Ireland, Germany and Holland, where prices fell by 2%, 3% and 5.5%, respectively. By contrast, prices moved 3% higher in Portugal and by nearly 1% in Spain, while UK, French and Italian prices flat-lined. Compared to the same week last year, cow prices were on average 7.5% lower. However, there were considerably larger declines in Eastern Europe while UK prices were just 1.5% lower.

According to HMRC trade data, UK beef exports reached a three-year high for the month of June, totalling 9,700t. With domestic production running well in excess of year earlier levels, export growth picked up to 20% in June following a 14% gain in May. For a second month, 14.5% of domestic beef production was exported. This was two percentage points higher than a year earlier. The average value of sales came under pressure from the strong pound and was down more than 9% year-on-year at £3,450/t.

Exports into the EU rose at a slightly slower pace than the overall trade. Nevertheless, at 9,050t, they were still up by 18% on June 2013. The main driver of change was a surge in volumes to Holland (the UK’s largest market). Exports to Holland increased by nearly 50% compared to 12 months before when they had fallen to an annual low. Shipments fell to most other Member States; though France and Germany were exceptions. Exports to the Irish Republic fell by 4% and, at just under 2,900t, were slightly below the volumes shipped to Holland.

Looking further afield, exports to non-EU markets exceeded the 600t mark for the first time since November 2012. This was driven largely by a jump in sales of frozen beef to Hong Kong. Exports to Hong Kong trebled year-on-year, totalling 300t. Although deliveries to Ghana were at their highest of the year-to-date (117t), they fell 25t short of June 2013 level. The volume of beef sold to Switzerland matched its year earlier level of 66t.

Beef imports to the UK reached a threemonth high of 20,600t in June. However, this was the first month to show a year-onyear decline since August 2013. Indeed, deliveries fell 7% short of the June 2013 total of 22,150t. While imports of fresh beef declined by 2.5% to 14,500t, frozen deliveries were nearly 20% lower at 5,900t.

Imports from Ireland fell 3% short of their year earlier level in June, slipping to 14,400t. This was mainly down to frozen product (down 11%) as imports of fresh beef from Ireland showed little difference. In terms of other EU suppliers, imports from Poland, Germany, Italy and Spain were down, but increased volumes arrived from Denmark, France, Holland and Belgium.

The volume of imports from outside of the EU fell by a quarter year-on-year in June to 2,600t. Botswana was the only major supplier to deliver more beef with volumes reaching an 8-month high of 400t. Imports from Australia fell sharply relative to last year as trade had been at its highest level for more than a decade in June 2013. Nevertheless, at 600t, Australia remained the largest non-EU supplier of beef to the UK.

News Round Up

Following a slowdown in the expansion of the Irish prime cattle kill in July, throughput at export abattoirs picked up markedly in August. In the 4 weeks to August 30, throughput totalled 96,100 head; a year-on-year increase of nearly 20,000 head (26%). This was well in excess of the year-to-date increase of 16% - slaughterings reached 803,000 head in the January to August period; up from 692,500 head in the same period last year. Live exports have also been higher this year. In the six weeks to August 11, the total rose by 28% year-on- year to 17,300 head. Nevertheless, with last December’s census reporting fewer cattle under 12 months of age on Irish farms, it seems likely that the upwards trend in slaughterings and live exports will begin to run out of steam in the months ahead.

Although last December’s Irish census reported 1% fewer cows overall, and a 4% decline in beef cows, the cow kill at Irish export abattoirs made a fast start to the year, rising by 13% in the first quarter. Indeed, up until mid-April, slaughterings exceeded year earlier levels in every single week. However, since then, kill numbers have been lower in all but 4 weeks, and, during the month of August, cow throughput was 8.5% lower on the year at 25,900 head. Nevertheless, at 246,500 head, the year-to-date kill remained 1% ahead of last year, suggesting that the recent downwards trend is likely to continue.

During July there was a shortage of cattle in Northern Ireland with the monthly prime cattle kill down by nearly a fifth year-on-year at 22,300 head while the cow kill dropped by just over 20% to 6,700 head. This was despite exports of cattle for slaughter more than halving to 800 head and live imports of finished cattle rising 1% to 3,300 head. The overall decline in live exports was the result of a large decrease in movements to GB abattoirs (-72%) more than offsetting higher sales to plants in the Irish Republic (+32.5%). Meanwhile, although the number of finished cattle imported from GB for slaughter jumped more than 8-fold yearon- year to 850 head in July 2014, 22% fewer cattle were brought in from farms in the Irish Republic. The decline in throughput at Northern Irish plants during July was partially offset by a 9kg increase in prime cattle carcase weights to average 330kg while the average cow killed out 10 kilos heavier at 311kg.

Before Russia banned imports of beef from the EU, USA, Canada, Australia and Norway at the beginning of August, it had already increased deliveries from Brazil and Argentina. Indeed, in the first third of 2014, 22% of Brazil’s beef exports were sent to Russia, but this increased to 25% in May, nearly 30% in June and 32% in July. Compared with 12 months before, Brazilian exports to Russia were 78% higher at 40,900t in July. Meanwhile, Argentinean trade data shows that exports to Russia made a very slow start to 2014, falling by 39% in the opening third, before surging in May, June, and July. At 10,600t, May to July volumes were more than three times their January to April level and up 130% year-on-year. Russia became Argentina’s largest market for fresh and frozen beef in May; by July it accounted for more than 36% of total shipments.

With Lithuanian beef exports being highly geared towards the Russian market, producer prices have taken a significant hit over the past month since the ban was announced. The average R3 grade young bull fell 11% on the month to stand at €2.48/kg dwt (198p/kg) in the final week of August, while O3 grade cull cows declined by a fifth to €1.93/kg (169p/kg).

The Canadian beef herd contracted in the year to July 1 2014. Numbers declined by 1% to 3.922m head. This came after two years of slight increases and meant that the herd was at its smallest since 1991. Moreover, it was 28% smaller than at its July 2005 peak of over 5.4m head. Cow numbers were lower across the country. There was also a decline in the available supply of cattle for slaughter with the number of steers back nearly 2% at 1.608m head and heifers for slaughter down just over 2% at 1.996m head. Meanwhile, the number of cattle less than one year of age also contracted, decreasing by 1.5% to 4.356m head. In addition, 3.5% fewer beef heifers were retained for future breeding as numbers fell to 616,200 head. The census therefore points to tighter Canadian beef supplies in both the near and longer-term.

September 2014

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