Meat Market Update

Cattle

Cattle prices appear to be showing some signs of stability in February after falling throughout January.  But deadweight prices are about 30p per kg less that at the same time last year, and with throughputs 2% lower.  With all that said, 2016 looks like being a difficult year for beef producers.  It will be more important than ever to achieve the correct specification for weight, fat class, conformation and now the number of animal movements. 

Forecasts from AHDB suggest UK beef and veal production could rise by 2% in 2016 compared to 2015, putting further pressure on prices.  As always the Sterling:Euroexchange rate will play a significant role.  Increased cattle numbers in Ireland are expected to mean more beef will be available at competitive prices especially if the exchange rate is favourable to imports.  However, the Pound has weakened further over the last few days following the announcement of the EU Referendum and the uncertainties surrounding Brexit, which will make imports from the Eurozone less competitive.  Producers will be reliant on an increase in demand; but even though the economic climate is looking better in the UK, modern lifestyles, where meal preparation is typically about half an hour now is not conducive to traditional roasting or stewing beef.

Sheep

The lamb market currently appears to be finely balanced.  Following several weeks of improving prices the liveweight lamb trade has weakened.  An improving trade resulted in more being marketed, which had the knock on effect of prices falling by the end of the week ending 17^th February and throughput numbers declining again.  Deadweight prices continue to improve as slaughterings decline.

Looking forward there is some uncertainty over the number of lambs on the ground.  Previous forecasts by AHDB had been suggesting a large 2015 lamb crop. In its latest forecasts, the AHDB has revised its 2015 lamb crop down by 432,000 head.  This would suggest a lower carry-over into 2016, but this may not be the case as the final quarter of 2015 saw slaughterings fall by 7% compared to 2014 and the number of ewe lambs retained for breeding has fallen this year. 

AHDB is forecasting the lamb crop to increase in 2016, by 1%, to around 17.3 million, based on an improved lambing percentage.  However, this is partly dependent on the weather at lambing time.  Assuming a more usual marketing pattern in 2016, slaughterings are expected to be lower in quarters two and three compared to 2015 but higher in the fourth quarter.  Clean sheep slaughterings are forecast to be up by just over 1% on 2015 levels.

But as, if not more, important than for the beef trade is the Sterling:Euro exchange rate.  A weaker Pound against the Euro in 2016 should improve export conditions in 2016 compared to 2015 whilst imports are expected to decline.  New Zealand is forecasting a 7% decline in production, although due to an earlier than normal slaughtering schedule, imports are expected to be higher in the first quarter of 2016 after which they are expected to reduce.  But even with higher exports and lower imports, this is not expected to offset the increase in production forecast from a rise in both adult and lamb slaughterings.  The AHDB forecasts production in 2016 to be 4% higher than in 2015 at 314,000 tonnes, the highest level since 2008, which will put pressure on prices.

Pigs

2015 was a difficult marketing year for pig producers and with conditions looking pretty similar for the year ahead.  The 2016 year hasn’t started very promisingly, with prices falling sharply in January due to a large surplus of pigs after Christmas.  During the first week of February the APP fell to 117.31 p per kg; the lowest it has been since April 2008 (back then in was the DAPP).  However latest figures for the middle of February, show signs of some stability in the market.

Looking forward, latest forecasts from AHDB Pork show supplies of pig meat to the UK are expected to increase further in 2016.  Domestic production is estimated to rise by just under 2% to 918,000 tonnes.  This will be the seventh consecutive year of increased production, although this year it is forecast to be at a lower level than the previous two.  UK pig prices remain at a premium to the EU price which means imports remain attractive.  In 2015 imports increased slightly and they are forecast to do so again in 2016, but with the UK-EU price gap narrowing and the Pound weakening the growth in imports may slow towards the end of the year.  The UK price premium and the strength of the Pound against the Euro made exports difficult last year.  Increased supplies will keep the pressure on prices unless there is an increase in demand.