ANALYSIS - The last year has been a roller coaster experience for the UK beef sector – as it has been for the last five years.
For a considerable part of the year, UK beef was trading below the five year average, only to see a resurgence in price in the summer but without the anticipated Christmas peak in the beef market.
According to Agricultural and Horticultural Board analyst for beef and sheep meat Debbie Butcher, this year is expected to see a “similar malaise in trade” with prices drifting down.
Overall prime cattle numbers are back on last year, down by two per cent to 1.92 million head, making supplies tight, she told the AHDB Outlook 2016 conference in London.
Adult slaughter remained high last year up by three per cent on 2014 to 620,000 head, with a lot of dairy cows being slaughtered in the latter half of the year.
At the same time carcase weights were also up, with cows being slaughtered on average between 10 and 15 kg heavier and although there were fewer prime cattle the higher weights meant that production was up year on year.
Ms Butcher told the conference that imports from Ireland slowed down in the second half of last year after they had been higher than in 2014 for the start of the year.
However, overall imports of beef into the UK were up by six per cent in the year to November 2015 with a rise of 22 per cent of beef being brought in from the Netherlands.
More imports were also coming in from Poland, the UK’s third largest import market taking five per cent of the total UK beef market.
Exports of beef were challenged by the high exchange rates although the UK exported 15 per cent of its production both in niche market quality products and also in cow beef.
The main fall in trade was in the commodity beef to the Netherlands, where the market was being taken by imports from continental Europe.
Ms Butcher said that there had been some positive significant developments in the UK’s beef trade particularly in chilled boneless cuts that have seen a rise from 46 per cent of the total export market in 2010 to 70 per cent last year.
This, she said, is where the value is in the market and by adding value, the product was trading at around £4,500 per tonne compared to £2,500 for commodity beef cow carcases.
The conference heard that the fifth quarter sales were also doing well outside the EU both in terms of value, which was up by two per cent to £57 million, and volume, again by delivering added value.
Hong Kong headed the list of fifth quarter product importers followed by Ireland and the Netherlands.
“Not long ago we were throwing this product away. Now it is delivering a positive return,” Ms Butcher said.
While there was some positive news for beef on the export markets, the UK domestic market was a struggle with both volume and penetration down.
The coming year should see the dairy breeding herd in the UK, which has been rising over the last two years, stabilise.
The suckler herd in the UK has also stopped contracting although the economic situation still makes it difficult for suckler producers to make money, and the producers will have to look at their cost of production when it comes to finishing the cattle, Ms Butcher said.
Calf registrations for beef breeds are rising and more male calves have been registered from the dairy herd, putting more younger cattle on the ground.
This will have an impact on prime cattle supplies latter in the year with the effect of increased numbers being felt in the second half of 2016.
However, she said that slaughter numbers were still tight as a few years ago the UK was slaughtering between 2.4 and 2.5 million and this year the numbers are forecast to rise by two per cent to 1.96 million.
Cow numbers in the dairy herd are expected to be high for another year rising by three per cent to 635,000 head.
This will all mean that product will be up this year even if carcase weight remain the same as last year.
Exports could do better this year given the prospects for sterling, but imports are also likely to remain robust, and supplies on the UK market will again increase.
Ms Butcher said that the widening of the gap in price between UK and Irish beef by as much as 80p per kg could also have a significant effect on the UK market this year.
The market will also be influenced by the fluctuating exchange rates and although consumers will still put price at the top of the list as the driver for choice, convenience in preparing and cooking the product will also play a significant role.
The UK will also see continued competition in the manufacturing beef sector with more coming from Poland as well as Germany, Italy and the Netherlands.
On the global markets, Ms Butcher said that the momentum produced over recent years by the expansion of the Chinese market could have reached a plateau.
The exports to this region had largely come from Australia and also Uruguay, but now the market had also opened up again to Brazil.
However, the Australian herd had been hit by drought conditions and production is expected to be down by 13 per cent this year. The cattle herd is forecast to decline to 26.2 million, showing declines of five per cent for each of the last two years.
The US herd that had also been hit by drought is expected to recover by three per cent this year.
South America could see exports increase depending on what access Brazil can get to the US market
This region will see a rise in exports from Paraguay, which has now become the seventh largest beef exporter in the world, and is happy to export outside quota.
Uruguay saw exports rise last year thanks to agreements with China and also the US.
The main drivers for the UK and global beef trade over the coming year will remain weight, conformation, movement and mainly price, Ms Butcher concluded.