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QMS (Quality Meat Scotland)

19 June 2015

QMS (Quality Meat Scotland) - June 2015QMS (Quality Meat Scotland) - June 2015

QMS - Quality Meat Scotland


Prices and Supplies

Between March and mid-May, prime cattle deadweight prices fell steadily. Having opened March at an average price of 370p/kg dwt for steers at reporting abattoirs, by the week ending May 16, the average had fallen by 32p/kg to just under 338p/kg; a decline of 8.5%. Prices then stabilised in the third week of May. This left them 4.5% lower than in the same week last year.

At Scottish auctions, prime cattle prices also trended lower through the spring. Indeed, the prime cattle average dipped from around 205p/kg lwt in February to around 190p/kg lwt in May. However, the differential to 2014 has been much smaller at auctions than for direct sales, with the prime cattle average trailing its year earlier level by 1-2% in most weeks. Then, in the second half of May, prices averaged the same as they had in 2014.

A number of factors have placed downwards pressure on the market of late. With prime cattle numbers trailing year earlier levels at price reporting abattoirs in recent months, it indicates that demand has fallen significantly, given that a shorter supply would normally push prices higher, if demand was constant. The main driver behind the imbalance was a a significant build-up of lean manufacturing beef in UK cold stores. This was caused by a number of factors, including increased UK beef production volumes in late 2014, and higher imports from Ireland which followed a jump in Irish beef production. In addition, the strength of sterling made it even harder than usual for UK exporters to compete in price sensitive markets for manufacturing grade beef, leaving more beef on the home market. The build-up of beef in cold stores reduced processor requirements, pushing down the prices they were willing to pay producers for their cattle. In addition, retail demand had reportedly been firm ahead of the festive season, then Valentines Day and Easter. With procurement for these special occasions generally taking place a month in advance, demand reportedly slipped after Easter buying in early March. This all happened at a time when cattle population data indicates that there were fewer prime cattle of slaughter age than 12 months ago. The stabilisation of prices in the third week of May suggests that the build-up of beef in cold stores may have begun to decrease, reducing the imbalance between supply and demand for cattle.

Having fallen slightly behind year earlier levels in March, the UK prime cattle kill decreased by a more significant annual rate of 4% in April. 181,500 prime cattle were slaughtered, working out at 36,300 per week. Abattoir throughput fell in each of the three UK regions, with England & Wales (E&W) showing the smallest decline of 2.5% while numbers were down by more than 5% in Scotland and by more than 7% in Northern Ireland (NI).

UK slaughter data continued to show a shift from young bulls to steers with the steer kill rising by 3% while the young bull kill was down by more than a quarter. For a second successive month, the number of heifers handled by UK abattoirs was lower than a year earlier, slipping by 5.5%.

At 354.2kg, the average prime cattle carcase weight at UK abattoirs continued to exceed year earlier levels in April. However, the annual increase slipped back from 5kg in February to just over a kilo in March, before narrowing further to just 0.1kg in April. As noted above, prime cattle throughput at Scottish abattoirs was down by nearly 5.5% year-on-year in April with throughput totalling 38,100 head. Numbers were lower across the board, with steers down 4.5%, heifers down 6.5% and young bulls by 2.5%.

The average weekly kill was down by more than 400 head on the same month last year at 7,600 head. While the trend of increasing prime cattle carcase weights at the UK level appears to have slowed in recent months, there has been no let-up north of the border. Indeed, at 377.5kg in April, the average weight in Scotland was up by 8kg (2%) year-on-year. Steers and heifers averaged 2% heavier at 400kg and 349kg, respectively, whereas young bulls were marginally lighter at 347kg. This makes bad reading for abattoir operators, who find it harder to sell steaks and roasting joints from carcases weighing over 400kg to premium customers. Where steaks and roasts are too big for the multiple retailers, they often have to be sold at significantly lower prices into the food manufacturing trade.

In contrast to prime cattle, cull cow prices were relatively stable through the spring and were mostly above 2014 levels. Although the average cull cow price at price reporting abattoirs has fluctuated between 245p/kg dwt and 260p/kg dwt, grade prices have shown little movement. Clearly, there has been week-to-week variation in carcase quality. At Scottish auctions, average prices have also fluctuated more than they did in 2015, suggesting a wider variation in quality. Moving into May, deadweight prices for the better grading cows have dipped back a touch. Meanwhile, auction prices dipped at the beginning of the month before picking up for three weeks. Compared to May 2014, auction prices have averaged 2.5% higher, while deadweight prices for most grades have been 2-3% higher.

April was the fourth time in five months that UK abattoirs slaughtered a higher number of mature cows and bulls than 12 months before. At 47,300 head, slaughterings were up by 1%. The weekly average kill fell back to 9,500 head from 10,900 in March and 12,600 in the first two months of the year. In most years, the weekly average mature cattle kill has fallen to a seasonal low in April.

During April, UK abattoirs produced an estimated 80,600t of beef. This was down 2% yearon-year and was the 2nd consecutive month to show an decrease. Prior to March, 13 of the previous 14 months had shown year-on-year increases.

The latest household purchases data from Kantar Worldpanel, for the 12-week period ending April 26, shows that the volume of beef retailed in GB decreased by 2% when compared with the same period of 2014. This was despite a greater number of people buying beef and it becoming marginally cheaper to buy. Looking at the sales by cut, while sales of roasts, stewing beef and mince all declined, steak sales volumes progressed, rising by 4%, despite average prices continuing to run ahead of year earlier levels by 2%. Reflecting changes in shopping habits, the data showed that people were generally buying beef more often, but that this was more than offset by purchasing a smaller volume of beef on each trip.

In euro terms, Irish prime cattle prices have been relatively steady of late, edging up through March, stabilising in April and then slipping a touch in May. In the week ended May 24, the average R3 grade steer sold for €4.05/kg dwt (290p/kg dwt). This was down 4c on the month but 2c higher than in late March. Compared to the same week last year, it was 25c higher; an increase of 6.5%. However, due to the strengthening of sterling against the euro, when converted into sterling, Irish farmgate prices were down 4p on the month and by 18p (6%) on the year. The gap between the UK and Irish averages for an R3 steer stood at 17% in late May. This was similar to May 2014. However, back in the autumn, it had been as wide as 36%.

Most countries on the continent favour young bull production over steers. In the week ending May 24, the average price for an R3 grade young bull in the EU was 1% lower on the month, at €3.72/kg dwt (267p/kg). In Germany and the UK, euro prices fell by 3% and there was a 2% decrease in Spain. Smaller declines occurred in France, Ireland and Holland while Polish prices edged higher. By contrast, prices jumped by 6.5% in Sweden. In late May, Irish prices were 7% above the EU average; in the UK, they were 18% higher.

Compared to a year earlier, the EU average R3 grade young bull price was up by 2% in euro terms. However, there was significant variation around this average. Of the major producers, there were 3-4% declines in France and Spain, and a below average lift in Holland. In Germany, prices rose slightly faster than the average. Much larger gains were seen in Poland (9%), Ireland (10%), and the UK (12.5%). Swedish prices led the way, rising by a fifth.


In the week ending May 24, the average O3 grade cow price in the EU was up slightly on the month at €3.06/kg dwt (220p/kg dwt). Some Member States, including the UK, Germany, Spain, Ireland and Poland, saw small euro declines of 1-2%, but this was more than offset by increases elsewhere. For example, there were gains of 2% for French and Dutch producers and stronger increases of 5% and 7% in Italy and Sweden, respectively.

Compared to a year earlier, the EU O3 cow price was up 2.5% in euro terms. This masked a wide variation. Indeed, while prices were up 14-15% in the UK and Ireland, and by more than a fifth in Sweden, they were 5% lower in France and Spain. In Holland and Poland, prices increased by an above average rate of 5% and there was a 7% increase in Germany.

During March 2015, UK beef exports trailed year earlier levels by 8% at 7,900t. This was a 6-year low for the month. Exports accounted for 11.5% of UK production; down from 12.5% in March 2014. Reflecting the headwind of an unfavourable exchange rate, UK beef exports to the EU were down 10.5% year-on-year at 7,500t in March. Though exports to Ireland, Italy, Denmark, Poland, Italy and Sweden rose, these increases were more than offset by a sharp decline in shipments to Holland, the second largest market. Germany also disappointed. UK exports outside of the EU were up significantly year-on-year in March at 500t. Trade with Hong Kong remained the bulk of non-EU shipments, accounting for two-thirds of the total, having risen to nearly 350t from less than 100t in March 2014. Exports to Switzerland and Norway continued to show growth on last year, but from a low base.


The expansion in beef imports to the UK appears to have slowed down in the first quarter of 2014 (Q1). Indeed, overall imports were up by 1.5% year-on-year at 58,600t, compared with a calendar year increase of more than 5.5% in 2014. March trade volumes were marginally above year earlier levels at 21,300t as higher fresh beef deliveries were almost cancelled out by lower imports of frozen product. During Q1 2015, imports of beef from Ireland were down fractionally on last year at 41,900t. This was 71.5% of total imports; down one percentage point from a year earlier. Having been higher in the first two months, March volumes were 7% lower year-on-year at 15,000t. Most of this decline was down to frozen imports which fell by a fifth; fresh imports were 3% lower. The decline in product arriving from Ireland was mostly offset by higher imports from Poland, Holland, Germany, France, Spain, Belgium and Italy. Arrivals of non-EU beef were also above year earlier levels in March, running 21% higher at 1,900t. Though trade with Oceania fell back, increased imports arrived from Botswana, Namibia, Brazil and Uruguay.

News Round Up

After rising by more than 13% during 2014, prime cattle throughputs at Irish export abattoirs rose by just 1.5% year-on-year in Q1 2015. Into April and May, numbers have now fallen behind last year’s levels with the prime kill down 3% in the seven weeks to May 16. According to Eurostat trade data, March was the first month of Irish beef exports to the USA. During the month, Ireland exported just 2.6 tonnes of fresh beef and 0.8t of frozen beef to US buyers. The price per tonne of these shipments shows that high value cuts of beef were sold. Indeed, the average price for the fresh beef was €18,300/t (£13,000/t), while the frozen beef came in at an average price of €12,100/t (£8,600/t). Currently, Ireland is only approved to export muscle cuts of beef to the US, but discussions are ongoing in attempt at gaining access to the lucrative US market for minced beef. In the USA, the Agriculture Committee in the House of Representatives has voted to overturn the controversial country-of-origin labelling (COOL) requirements which led Canada and Mexico to take the US Government to the WTO. The vote followed a WTO ruling that found the legislation to be in violation of international trade rules and would thereby allow Canada and Mexico to impose retaliatory measures. COOL was found to have discriminated against meat from animals spending time on both sides of the US border. This was because it led to increased separation of products on supermarket shelves and generated an additional administrative burden throughout the supply chain, thereby creating an incentive for processors and retailers to favour US product. US meat processors have consistently been opposed to this legislation. As well as for beef, the Agriculture Committee voted to repeal the law covering pork and chicken.

In mid-May, producer prices in Canada averaged 37% higher than a year earlier. Indeed, in the key beef producing state of Alberta, the average steer sold for C$7.44/kg dwt (391p/kg), compared with C$5.44/kg dwt (286p/kg) in the second week of May 2014. The price increase reflects tight supply across North America plus a decrease in the value of the Canadian dollar against the US dollar. On the supply side, the Canadian cattle inventory showed that on January 1 2015, there were 3% fewer cattle on Canadian beef farms than 12 months before. The number of beef cows was 2% lower at 3.824m head, while the number of beef heifers for slaughter and steers over 12 months of age were both down by 5% on a year earlier. Meanwhile, in the key Canadian export market of the USA, slaughterings were down 7% year-on-year in the first 18 weeks of 2015. In terms of currency movements, the US dollar is currently around 10% stronger than a year earlier against the Canadian dollar, allowing Canadian producer prices in local currency to rise faster than they have in US dollar terms. In US dollars, prices have risen by 22%. Prime cattle have been in tight supply in New Zealand this year with steer numbers 2.5% below year earlier levels in the first 7 months of the 2014/15 season. Going forward, supplies are expected to tighten further and could end the season 6% lower, as strong prices and drought led to earlier slaughtering during the summer months (winter in the UK). Due to the combination of shorter supply and increased export demand from the USA, 300kg steer prices are well above year earlier levels, trading up 18% year-on-year at NZ5.30/kg dwt (250p/kg) on the North Island and up 21% at $NZ5.10 (240p/kg) on the South Island. In contrast to tighter steer supplies, increased numbers of heifers have been reaching NZ abattoirs this year. However, this has reflected a downturn in dairy prices which have led dairy producers to retain fewer heifers for breeding; like steers, beef heifers have reportedly been in shorter supply. Despite the strong outlook for prime cattle prices, the store market has taken a downswing in recent weeks as finishers are reported to have secured cattle earlier in the year, reducing demand in May. Nevertheless, store prices remain well above year-earlier levels on both the North and South Island’s at around NZ$2.60-2.70/kg lwt (125p/kg lwt). During the first four months of 2015, Brazil exported 317,900t of fresh beef. This was down by more than a fifth on the same period of 2014 when just over 400,000t had been shipped overseas. The sales decline came despite a decrease in average export prices; they slipped by 4% in US dollars terms to $4,236/t (£2,700/t). However, when converted back into the Brazilian real, export prices in fact increased by approximately 18%, meaning that overall export sales revenues were 6% lower in local currency terms than twelve months before (they were 24% lower in dollars at $1.35bn (£860m)). Though exports of fresh beef fell sharply, trade in processed beef products, offal, casings and salted beef all showed increases. The main drivers behind lower fresh beef exports included economic crises in two of Brazil’s major customers, Russia and Venezuela, which limited consumer purchasing power. Exports to Hong Kong, Iran and Chile were also significantly lower, but Egypt bought slightly more Brazilian beef. Going forward, the Chinese market has opened to Brazil and this should help the Brazilians to replace lost custom elsewhere. The end to the ban was initially announced last summer by Chinese authorities, but it has taken almost a year to receive the final go-ahead. Eight Brazilian plants have been approved for export to China with a further nine expected to gain approval in July.

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