Meat Market Update

Cattle

The beef market made a strong recovery throughout June and July as the supply and demand balance swung back in favour of the producer.  However, over recent weeks prices have eased and they are now trading below last year’s price for the first time since early June.  But supply and demand remains finely balanced and, as processors turn to their Christmas requirements, there are prospects for price improvements; especially as prime cattle supplies are forecast to tighten further, together with an expectation of stronger retail demand.

We have written many times about the effects of the Pound: Euro exchange rate on UK agriculture and this has been a big factor affecting the competitiveness of the UK beef market this year.  Imports from other EU Member States are up by 19% on the year to August.  Shipments from Ireland increased by 9%.  Notably imports from both Poland and Germany have doubled compared to the same period last year.  The surge in production from Poland is starting to becomea threat to other EU beef producing nations, including the UK.  Production in Ireland is reported to be slowing, although shipments to the UK do not seem to be yet.

The exchange rate is also having an effect on beef exports.  Trade is reported to be significantly lower to all the main EU destinations.  In August exports were down by 25% compared to 2014 at 6,720 tonnes.  However destinations outside the EU are influenced by the more favourable US dollar exchange rate; this has seen exports increase by more than 20% on the year to August 2015.

According to BCMS data, domestic production is expected to tighten in the run-up to Christmas and for the first few months of 2016.  However, the ongoing problems in the dairy sector could see an increase in cull cows coming onto the market especially as producers bring cows in for the winter.  Using BCMS data to look further ahead, registrations showed an increase last year, but even so prime cattle supplies are still expected to remain tight by historic standards.  According to the AHDB, the numberof culls from the breeding herds is more likely to influence production.  Expecting these to remain high due to low milk prices and the lack of profitability in the beef sector, the Board is forecasting production levels to rise by 2% next year, to around 880,000 tonnes.  This is similar to 2014 levels.  The import and export trade will continue to be influenced by the strength of Sterling against the Euro, but the AHDB are forecasting imports to fall a little, mainly due to reduced imports from Ireland in the first half of 2016 and exports to rise just slightly due to lower production in Ireland and the possibility of the Pound weakening.

Lamb

After a welcome uplift at the beginning of September, prices have eased again.  With numbers running ahead of last year, a mid-season rise in prices was a little unexpected.  It was hoped that this would signal a change in direction in the market, but it was not to be.  Prices have fallen since September and the GB Liveweight SQQ is in the region of 13p per kg less than at the same time last year.  September saw a significant increase in monthly UK lamb slaughterings; up by 12% compared to the same month in 2014 to 1.2 million head.  This resulted in UK sheepmeat production increasing by 13% in September.   Total UK production from January to September is up by 4% on the year.  With many more lambs to come to the market it is difficult to see where any price improvement will come from, at least in the short to medium term. 

On a more positive note imports to the UK were 6% less in the first eight months of the year compared to 2014 and with production in both New Zealand and Australia projected downwards for the 2015/16 season this is expected to continue for the first half of 2016.  There is a question mark over the accuracy of export figures, which show a sharp decline for the first eight months of this year, but these are expected to be revised so that the overall decline in shipments in 2015 is 1%.  Latest figures from the AHDB show that overall UK sheepmeat production is still forecast to be 5% more than in 2014.  It is expected to be the second half of 2016 before production tightens meaning pressure will downwards until then, unless there is an increase in demand.  Overall production in 2016 is forecast to be ‘marginally’ less than 2015 levels.