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QMS (Quality Meat Scotland)

17 April 2015

QMS (Quality Meat Scotland) April 2015QMS (Quality Meat Scotland) April 2015

QMS - Quality Meat Scotland


Prices and Supplies

Deadweight prime cattle prices fell back steadily through March. One of the key contributing factors was a significant weakening in the market for lean manufacturing beef. With processor requirements falling, there was an excess of cattle supply over demand, pushing producer prices lower. That producer prices fell despite numbers at price reporting abattoirs running 7.5% behind year-earlier levels during March emphasises the fall in demand. After falling by around 5p/kg dwt during February, the average steer price declined by 10p/kg during March to trade at 361p/kg dwt in the final week of the month. This was down 4% from a year earlier. Increased price competition from Ireland, due to exchange rate movements, may well have played a part.

Prime cattle prices have been fluctuating significantly in recent weeks at Scottish auctions. However, the overall trend has been for values to slip back. Indeed, prices averaged 199p/kg lwt in March compared with 205.5p/kg lwt in February. Compared to a year earlier, prices were around 3% lower through March.

At UK abattoirs, prime cattle slaughterings fell marginally behind year earlier levels in February. This was the first decline since April 2014. Numbers totalled 155,500 head. Whereas plants in England & Wales (E&W) handled 2% more prime cattle, there were declines of 4% in Scotland and 2.5% in Northern Ireland (NI).

A shift from young bulls to steers continued to show up in the slaughter data. Indeed, whereas the young bull kill fell 32% year-on-year in February to 12,500 head, the steer kill was 7% higher at 80,400 head. This indicates that farmers have reacted to the market signal of increased penalties for out-of-specification young bulls. For a second consecutive month, the heifer kill rose 1%; 62,600 were slaughtered.

A seasonal increase took the average UK prime cattle carcase weight up to 351.5kg. This was 5.3kg higher than in the same month last year; an increase of 1.5%.

As noted above, prime cattle throughput at Scottish abattoirs was down by 4% on a year earlier in February. Slaughter numbers totalled 31,650 head. For the first time since February 2014, steer numbers were lower than a year earlier. Meanwhile, the young bull kill was down for a fourth successive month and the heifer kill was down for an eighth month.

At Scottish abattoirs, the average prime cattle carcase weight was 5.5kg heavier than a year earlier in February at 368kg. This partially offset the decline in slaughterings and meant that prime beef production fell 2.5% to 11,650t. Steers averaged 3kg heavier at 389.5kg, heifers 7.5kg heavier at 345.5kg and young bull carcase weights increased by a kilo to 335kg.

Deadweight cull cow values held up in March, trading relatively steady through the month. At price reporting abattoirs, the average cow sold for 258p/kg in the final week of March. This was up 5p on the month and 7p (2%) on the year. By contrast, auction prices cooled. With marketings also falling back, this indicates sluggish demand. A sharp fall in the last week of March saw prices average 5% below year earlier levels at 117p/kg lwt.

At UK abattoirs, the mature cattle kill has begun 2015 ahead of its early 2014 levels. Slaughterings were 4% higher than 12 months before in both January and February. However, with cow carcases averaging 5-6kg lighter, cow beef production volumes rose by a slightly slower 3%.

During February, UK abattoirs produced 70,900t of beef. This was up 2% year-on-year and was the 10th consecutive month to show an increase. It was also a 4-year high for the month. Prime beef accounted for 77% of the total.

The latest household purchases data from Kantar Worldpanel shows that volumes declined 1.5% year-on-year during February. With prices averaging the same as a year earlier, the amount of money spent on beef was also 1.5% lower. This followed two 4-week periods of volume growth and three 4-week periods of growth in spending. However, the number of households buying beef continued to increase (for the 10th time in the previous 11 4-week periods), suggesting that beef is becoming more popular, but that it is being bought in smaller quantities. Looking at the different cuts of beef shows that roasting joints proved popular in February, rising by 10.5% in volume terms. This was helped by sharply lower prices. However, the volume of mince and stewing beef fell by 5%. This decline in mince sales came despite cheaper prices. Although the volume of steaks bought fell by more than 2%, households continued to spend more on them.

In euro terms, Irish prime cattle prices fell back slightly between mid-February and mid-March before firming again towards the end of March. At €4.05/kg dwt (296p/kg), Irish R3 steers reached a 5-week high in the final week of March. Compared to a year earlier, they were up by 7.5%. Looking at Irish price movements in sterling terms reveals a different situation. Indeed, due to a significantly stronger sterling, the increased euro price translated into a 5% lower sterling price when compared with the same week last year, underpinning the competitiveness of Irish beef. As March drew to a close, Scottish prices were 22% above Irish levels. However, with Scottish prices falling in March, this gap has eased back to its smallest level since August of last year.

Most countries on the continent favour young bull production over steers. The average price for an R3 grade young bull in the EU fell 1.5% during March to trade at €3.80/kg dwt (278p/kg). In Germany and the UK, prices fell by 4% and there were small decreases in France, Italy, Poland and Spain. However, there was a small increase in Ireland and Swedish prices rose by nearly 3%. Dutch prices surged by 11%. Whereas Irish prices closed February 4% ahead of the EU average, UK prices were 19% above it. Although the EU average R3 grade young bull was around 1% higher than a year earlier in late March, there was wide variation across Member States. Of the major producers, Ireland had the largest euro terms increase of 16%. The UK followed closely behind with a 12% increase and Swedish producers were paid 13% more. Other countries to see gains included Germany (2%), Poland (5%) and Holland (5%). By contrast, young bulls were valued 2-4% lower year-on-year in Spain, Portugal, Italy and France.

There were further seasonal increases to cow prices in the EU during March. The average O3 cull cow sold for €2.99/kg dwt (219p/kg) in the final week of March; 2.5% higher than in the final week of February. The UK was one of just three member States to see a small decline. Meanwhile, there were small increases of 1-3% in most of the main producing nations, but Italian and Dutch producers saw stronger gains of around 7%.

The average O3 cow price was 1.5% ahead of last year’s levels in late March. Irish and UK cow prices showed significant gains of 22% and 16%, respectively. There were also strong increases of 6-9% in Germany, Holland, Poland and Sweden. By contrast, cow prices traded 6-7% lower year-on-year in Spain and France.

In the opening month of 2015, UK beef exports trailed year earlier levels by 4% at 8,100t. Hindered by a stronger sterling against the euro, this was a 5-year low for the month. Exports accounted for 9.5% of domestic production; down from just over 10% in January 2014.

Reflecting the difficulty caused by unfavourable exchange rates, UK beef exports to the EU were down 8% year-onyear in January at 7,500t. Trade with Belgium, Germany, Italy and Holland fell by 20-40%. However, this was partially offset by higher sales to France, Ireland, Spain and Sweden.

Export sales to non-EU markets made a stronger start to 2015 than they had to 2014, more than doubling to 600t. Within this, Hong Kong was the principal market, accounting for nearly 40% of shipments. It was also the main driver of the increase given that sales more than trebled. Of the other regular trading partners, sales to Ghana were down sharply, but more UK beef went to Switzerland.

UK beef imports rose strongly in January. This was despite increased domestic production and lower exports. Deliveries were up by 8% year-on-year at 20,600t; an 11-year high for the month. Breaking this down into fresh and frozen product showed that whereas fresh beef imports increased by 12% to 15,500t, frozen imports decreased by 2% to 5,150t.

Ireland continued to be the UK’s largest supplier, delivering 14,750t of beef in the first month of the year. This was up by 10% year-on-year and is likely to have been influenced by the weaker euro making Irish beef look attractive in price sensitive markets. Splitting imports from Ireland into fresh and frozen product showed that both showed significant increases – 11% for fresh and 8% for frozen. Other EU suppliers to increase deliveries included Holland, Poland, Spain, Belgium and Italy. On the other hand, Denmark, Germany and France shipped less beef to the UK than at the beginning of 2014.

Arrivals of non-EU beef fell significantly from a year earlier in January. Imports were a quarter lower at 1,650t. Trade with Oceania and Brazil fell sharply, but imports from Uruguay, Namibia and Botswana picked up.

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