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QMS (Quality Meat Scotland)

20 October 2014

QMS (Quality Meat Scotland) October 2014QMS (Quality Meat Scotland) October 2014

QMS - Quality Meat Scotland


Prices and Supplies

Deadweight prime cattle prices continued to rise through September and into October, with the average steer reaching a 24-week high of 373p/kg dwt in the week ending October 4. Though 10p higher than a month earlier, this was nevertheless still 10.5% lower than in the same week last year. After easing back in the second half of September, the prime cattle average at Scottish auctions picked up at the beginning of October, reaching a 24-week high of 202p/kg lwt. Nevertheless, it was still 11% lower than in the same week last year.

Despite slipping seasonally to its lowest level of the year so far in terms of weekly average, the prime cattle kill at UK abattoirs during August was 9% higher year-on-year at 143,250 head. This was the fourth consecutive month to show an increase. However, fewer young bulls were slaughtered than a year earlier for a seventh month, falling by 16.5%. By contrast, the steer kill was considerably higher, rising by 23%. In addition, following two months of declines, 5% more heifers were slaughtered. Meanwhile, the regional breakdown showed respective increases of 5.5% and 12.5% in Scotland and England & Wales, but a 0.5% decline in Northern Ireland. The average prime cattle carcase weighed 348kg at UK abattoirs during August. This was a seasonal decline of 3kg on the month but it remained 11kg higher on the year.

The average steer weighed 365kg, the average heifer 323kg and the average young bull 351kg. At Scottish abattoirs, prime cattle throughput ran ahead of its year earlier level for a fourth consecutive month in August. The rate of increase picked up to nearly 5.5% from 1.5% in July. Numbers totalled 30,200 head. Abattoirs continued to find male cattle in good supply but heifers were scarce.

Indeed, while the steer kill increased by 11% year-on-year and the young bull kill by 14%, 5% fewer heifers reached Scottish abattoirs. There was a seasonal decline in carcase weights at Scottish abattoirs in August with the prime cattle average slipping to 364kg from 369.5kg in July. However, it did move 18kg ahead of its year earlier level. Steers averaged 385kg, heifers 335.5kg and young bulls 359kg. Compared to last August these were increases of 20kg, 15kg and 5kg respectively.

The combination of higher carcase weights and increased slaughter numbers led to an 11% year-on-year increase in the volume of prime beef production at Scottish abattoirs. Deadweight producer prices for most grades of cull cows continued to trade relatively steady into October. The overall average has also lacked direction in recent weeks; though changes in quality have caused week-to-week fluctuations.

In the week ended October 4, the average cull cow price stood at 245p/kg dwt; 1p/kg above its January to September average, but still 9% below its year earlier level. At Scottish auctions, cow prices have fallen seasonally of late, pushing them back towards their levels of early August, trading at 112.5p/kg lwt at the start of October. As prices cooled more rapidly last autumn, the year-on-year declines have narrowed to 8% at price reporting abattoirs and to 3% at Scottish auctions. For the first time in five months, UK abattoirs slaughtered more mature cattle than a year earlier during August. Throughput increased by 7% to 45,300 head. However, this was still lower than in August 2011 or 2012. By contrast, the mature cattle kill north of the border continued to run behind last year’s level in August. Slaughterings fell 8.5% to 4,500 head but averaged above 1,000 head a week for the first time since March.

Beef production at UK abattoirs was 12% higher than twelve months before in August 2014 at 64,500t. On a weekly basis, production increased between July and August for only the second time in the past 9 years. Kantar Worldpanel data indicates that GB household beef consumption held up better this summer than a year ago. Indeed, sales volumes increased by 5% year-on-year in the 12 weeks to August 17 as an 8% rise in expenditure more than offset a 3% higher average price. Roasting joints saw the largest increase in consumption with purchased volumes up 11.5%.

Steaks also performed well, rising by 7% and there was a 3.5% gain for mince. By contrast, purchases of stewing beef continued to decline, falling by 2%. After steadying in September, Irish prime cattle prices lifted as October began. R3 grade steers picked up 2c/kg on the week to reach a 6-week high of €3.54/kg dwt (277p/kg). Nevertheless, prices fell 7.5% short of their year-earlier level. Compared to the average UK R3 steer, Irish prices were 21% lower; a year earlier this had been 19%.

Most countries on the continent favour young bull production over steers. At the beginning of October the average price for an R3 grade young bull in the EU 28 was 1% higher on the month at €3.64/kg dwt (285p/kg). In a number of the major beef-producing nations, such as Germany, Spain and Poland, prices rose in line with the average. The main exceptions to the downside were France andHolland, where prices cooled by 1%. On the other hand, prices increased by 2.5% in Ireland and by 4.5% in the UK. Whereas UK young bull prices traded 17% above the EU average, Irish prices were 4% below it.

Though EU28 R3 grade young bull prices averaged slightly higher on the month, they remained marginally lower year-on-year. Prices were down by an above-average 3% in France and Holland, but were up 1% in Italy and Ireland, and by 3% in the UK.

Seasonal pressure on cow prices across much of the EU saw the average price for an O3 grade cull cow slip back by nearly 2% on the month, trading at €2.82/kg dwt (221p/kg) in the week to October 5. While prices in Spain, France and Germany fell 3%, there was a smaller 1% decline in Holland and Polish prices were unchanged.

By contrast, UK prices picked up by 1.5% and a 3% gain accrued to Irish producers. These against-the-grain increases saw Irish prices move 6% above the EU average while UK prices began October 11.5% higher than the average. A month earlier these premia had stood at 1.5% and 7.5%, respectively. Prices remained lower than last year across much of the continent, averaging 5% lower. The UK and Greece were the main exceptions, now matching in the former and up by 1% in the latter.

HMRC trade data indicates that July was the third consecutive month that UK beef exports exceeded year earlier levels. Export volumes grew by 7% over the same month last year to reach 8,500t as higher domestic production made more UK beef available for export. At 11% of July beef production, exports took a slightly greater share of the market than 12 months before. Export prices came under pressure from the strong pound and the average value of shipments fell 9% year-on-year to £3,500/t.

Trade with other EU Member States rose by 6.5% year-on-year in July and reached 7,900t. This was largely driven by increases in export volumes delivered to the largest markets ofIreland and the Netherlands. Sales to Ireland rose 18% to 2,900t and lifted by 9% to Holland, reaching 2,450t. Elsewhere, while exports to Belgium, France, Germany, Spain and Poland declined, trade with Italy, Sweden and Denmark picked up. Shipments to non-EU countries held at around the 600t level for a third month in July.

As a consequence, this pushed them up by 14% on the year. Two-thirds of the total volume went to Hong Kong compared with just 10% 12 months before. Frozen beef accounted for 98% of the trade with Hong Kong. UK beef imports dipped to a 5-month low of 19,050t in July and were down by 6% from the same month last year. While imports of fresh beef were marginally above their July 2013 level, a fifth less frozen beef came into the country. The much higher level of domestic production this summer coupled with lower producer prices may well have reduced the requirement to import manufacturing beef.

Beef deliveries from the Irish Republic were 3% higher than in July 2013 at 12,600t. Though Irish beef accounted for its lowest share of total shipments in the year-to-date, at 66%, it was still well above its July 2013 share of 60%. Import volumes from non-EU countries fell by 17% year-on-year during July to 2,900t. Though total imports from Brazil and Botswana were significantly lower, fresh beef imports increased, and Uruguayan imports also rebalanced towards fresh beef.

Deliveries from Australia declined but New Zealand and Namibia increased trade with the UK. Namibia was the largest supplier in July, delivering 950t. News Round Up June Agricultural Census figures for Scotland showed that the beef herd contracted by 2.5% to 436,500 head; a loss of 10,400 beef cows. By contrast, the dairy herd expanded by 2.5% to 169,700 head; a 6-year high. As a result, the share of beef cows in the total breeding herd fell from 73% to 72%, having fluctuated between 73% and 74% since 2006. This summer’s increased prime cattle kill can be explained by an increased number of cattle aged over 24 months of age on farms in June.

The number of beef females over 24 months rose 3% to 86,250 head while there was an 11.5% increase in the number of male cattle in this age bracket, taking them to 77,800 head. However, a 2% decline in the 12-24 month population (to 391,900 head) may be a signal that supplies are about to tighten. In addition, there were 1% fewer cattle less than 12 months of age on Scottish farms in June.

This suggests that cattle supplies may continue to prove tight into the second half of 2015. The June agricultural census for England revealed that the beef herd contracted by nearly 1.5%, slipping to 710,000 head from 720,000 head in June 2013. By contrast, the dairy herd expanded by 2.5% to reach 1.143m head. Consequently, the total breeding herd grew by 1% to 1.853m head. This means that beef cows accounted for 38% of the total breeding herd, compared with 39% in June 2013 and nearly 40% in June 2012. In terms of other cattle over 2 years of age, there were 3.5% more beef females and 11% more males.

However, the lower calf registrations and higher mortality rates of 2012-13 will have contributed to the 5% decline in both male and female beef cattle aged between 12 and 24months; and this suggests the recent trend higher in slaughterings may not last. Looking slightly further forward, things may ease again given that a 1.5% increase in females aged less than 12 months more than offset a slight decline in young males.

A sharp 5% decline in Northern Ireland’s beef herd was reported in its June census as numbers fell to 257,000 head. By contrast, dairy cow numbers grew by 5% to 292,100 head and accounted for 53% of total cow numbers compared with 51% last year and 50.5% in June 2012. The total cow population slipped marginally to 549,100 head. Meanwhile, incalf heifer numbers fell sharply with beef down 15% and dairy down 8%, while 1% fewer heifers had been retained for future breeding. However, there was an 8.5% increase reported in the number of female slaughter cattle over the age of 12 months plus 13% more male slaughter cattle over 24 months of age.

Then again, there were 8% fewer males between 1 and 2 years of age and 3% fewer cattle aged less than 12 months. Though Irish export abattoirs remained well supplied with prime cattle compared with last year, slaughter growth slowed in September. Indeed, whereas throughput had exceeded 2013 levels by 26% in August, throughput rose by 10.5% in September to 107,400 head. Nevertheless, weekly kill numbers picked up to their highest levels of the year-to-date, exceeding 27,000 head in the second half of September. Not only were these the highest levels in the year-to-date, but the highest levels since October 2011.

The USDA has revised its US beef production estimates for both 2014 and 2015 due to cattle numbers on US feedlots coming in below previous expectations. With fewer finishing on feedlots this year, 2014 production has been forecast 1% lower at 11.064m tonne. Meanwhile, with fewer cattle being placed into feedlots, the USDA has reduced their 2015 production estimate to 10.755m tonnes.

This would work out as an annual decrease of nearly 3%. Though production estimates have been lowered, no change has been made to producer price forecasts as higher imports are expected to ease supply-side pressures, while increased availability and the subsequent lower prices for substitute proteins such as pork and poultry are expected to take some demand out of the market.

Uruguayan slaughter data shows that abattoirs were well supplied with cattle relative to last year during July as throughput increased by 4.5% to 152,300 head. However, compared to two years earlier, supplies still fell 7.5% short. In the opening 7 months of 2014, throughput fell by 1.5% year-on-year to 1.251m head. It was also down by 1.5% on the January to July period of 2012. In Uruguay, slaughter is widely distributed amongst a large number of abattoirs. Indeed, during July, the largest plant had a 9% share of the kill with the largest 10 accounting for only 57% of the market.

During August, Argentina exported 13,000t of fresh beef. The largest buyer was Russia, taking delivery of 4,000t – 31% of the total volume. Chile came next, purchasing 3,000t (23% of the total), while shipments to Israel totalled 2,000t (15%) and 1,800t (14%) were delivered to China. The most popular products for Russian buyers this year have been forequarter and tongue. By contrast, Chile has favoured knuckle and shoulder while Israel’s largest import has been chuck roll. The most popular product for Chinese buyers has been beef shin.

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