TheBeefSite.com - news, features, articles and disease information for the beef industry

QMS (Quality Meat Scotland)


19 August 2014

QMS Monthly Market Report - August 2014QMS Monthly Market Report - August 2014


QMS - Quality Meat Scotland

Prices and Supplies

Deadweight prime cattle prices edged forward through July. The average steer price lifted from a 29-month low of 343p/kg dwt in the first week of the month to trade at 348p/kg in the week ending August 2. This was 15.5% lower than in the same week last year, compared with annual discounts of 17- 17.5% throughout much of June and July. During four of the five weeks of July, heifers averaged more expensive than steers; an historically rare occurrence. This may well reflect that while steer supplies at price reporting abattoirs have been running well in front of 2013 levels, fewer heifers have been handled.

Prime cattle prices have steadied at Scottish auctions since mid-June with the overall average trading at between 189p/kg lwt and 194p/kg lwt in the eight weeks to August 6th. Since prices cooled in late July 2013, the annual price differential has narrowed from nearly 20% to 16% over the past month. However, the annual discount for young bulls has remained at 25-30%.

UK prime cattle slaughterings fell by 0.5% year-on-year in June to 150,300 head. While kill numbers were higher than last year in England & Wales and in Scotland, they fell sharply in Northern Ireland. The lower kill in NI has been linked to a decline in imports of finished cattle from farms in the Irish Republic as NI processors are struggling to sell the meat from cattle born and slaughtered in different countries since it cannot be labelled ‘Irish’ or ‘British’. Though the overall kill was lower, UK abattoirs handled around 5.5% more steers than a year earlier. This was more than offset by a 3.5% decline in the heifer kill and a 10% decline in the young bull kill. The weekly average kill slipped to a six-month low of 37,600 head.

Despite fewer prime cattle being slaughtered, record carcase weights meant that prime beef production rose by 3.5% year-on-year in June, reaching 53,350t. The average carcase weighed in at 355kg in June, exceeding the previous high set in April of 354kg, and was well above the June 2013 average of 341.5kg. Steers and heifers were 13-14kg heavier than last year while young bull weights increased by an average of 7kg.

During the first half of the year (H1), the UK prime cattle kill ran nearly 1% higher than in H1 2013 at 986,300 head. A 2% increase in the number of steers and heifers slaughtered was partially offset by a 6% decline in young bull throughput. As a consequence, young bulls accounted for 13% of prime cattle slaughterings compared with 14% in H1 2013.

With better weather conditions and lower feed costs encouraging producers to add weight, the 1% increase in prime cattle slaughter during H1 2014 turned into a 3% rise in prime beef output as volumes reached 345,900t.

As noted previously, the prime cattle kill at Scottish abattoirs ran ahead of year earlier levels in June. Throughput increased by 4% to 33,750 head with the weekly average reaching a 16-month high of nearly 8,450 head. Driving the increase was a 7% increase in the steer kill. Meanwhile, Scottish processors handled 1% more heifers but 1% fewer young bulls than in June 2013.

With the average carcase weight at Scottish abattoirs up nearly 17kg year-on-year in June at 371kg, prime beef production rose by 9% to 12,500t. The average steer weighed 391.5kg (+16.5kg); the average heifer 339.5kg (+17.5kg); and the average young bull 372kg (+11kg).

During H1 2014, the total number of prime cattle slaughtered at Scottish abattoirs was 1% lower year-on-year at 210,500 head due to tighter heifer supplies. However, this was more than offset by higher carcase weights and prime beef production subsequently increased by 2.5% to 77,100t.

Deadweight cow prices have been averaging close to 245p/kg at Scottish abattoirs since late February. In the week ending August 2, the average cow sold for 247p/kg dwt; a 5- week high, though still 12.5% lower year-onyear. However, the average price will have been influenced by an increased quality of cows given that prices for the individual grades were generally 2-3p lower than at the beginning of July. There has been a more noticeable seasonal cooling of the cow trade at Scottish auctions with prices slipping back to 113p/kg lwt in late July, having traded at around 120p/kg lwt between March and June. Despite the recent dip, the price differential with last year has narrowed to 10%; the smallest since mid-January.

For a twelfth time in 14 months, UK abattoirs slaughtered fewer mature cattle than a year earlier during June. Supplies decreased by 6% to 38,900 head. The average weekly kill was below 10,000 head for a third month; the first time this has been the case in 3 consecutive months since the second quarter of 2010.

The annual decline in the mature cattle kill at Scottish abattoirs matched the 6% UK decrease in June. This was the 13th time in 14 months that supplies have been below year earlier levels. However, numbers were marginally higher than in May, at just under 4,000 head.

At the UK level, the lower mature cattle kill failed to offset increased prime beef production and total abattoir output grew by 2.5% year-on-year to 66,300t. However, average weekly domestic production did slip to a 6-month low.

Kantar Worldpanel data on beef consumption shows that in the 12 weeks to June 22, GB households bought a higher volume than a year earlier. With the average price 4% higher, it took an increase in cash spending of 5% to take consumption volumes 1% above year earlier levels. Higher domestic beef production resulted in the consumption of home produced beef rising by an annual rate of 7.5%. The overall increase in the volume retailed was driven by roasting joints as sales grew 15%, helped by a 2% decline in average prices. By contrast, stewing beef and mince were 3% more expensive and sales fell 16% and 0.5% respectively. The decline in mince sales volumes came despite more people buying it, suggesting higher prices led shoppers to purchase smaller quantities. Demand for steaks remained firm though, as sales volumes edged higher despite becoming nearly 10% more expensive. As a likely consequence of the good weather through the late spring and early summer, burger sales increased strongly, rising 11% year-on-year in the 12 week-period and by 14.5% in the 4-week period ending June 22.

Following their sharp decline through June, Irish beef producer prices fell further in the first half of July before showing tentative signs of recovery. The average R3 steer price reached a 6-week high of €3.64/kg dwt in the week ending July 27 before edging back to €3.63/kg (288p/kg dwt) in the week ending August 3. This was up 4c/kg on the month and 5c above the low point of the week ending 13 July. Compared to the same week last year, Irish prices closed July down 10% in euro terms. However, when converted into sterling, prices were 18% lower year-on-year, highlighting the impact of a weaker euro on Irish price competitiveness in the UK market.

Most countries on the continent favour young bull production over steers. The average price for R3 grade young bulls closed July at the same level it had opened the month, trading at €3.60/kg dwt (285p/kg dwt). However, as sterling strengthened in value over the month, the average young bull price fell by 1% in sterling terms. Despite the overall euroterms average flat-lining during July, prices fell by 7% in Holland, 4% in Sweden and by 2% in Spain, Belgium and Denmark. There were also small 1% moves lower in Poland and Portugal. Meanwhile, German, Austrian and French prices were broadly level on the month. By contrast, prices lifted by around 2% in the British Isles. A 5% monthly gain for Greek producers extended their lead at the top of the pricing table, taking the average R3 young bull to €4.55/kg dwt (361p/kg dwt). This was 27% higher than the EU average and 16% above the UK average.

A year-on-year comparison of R3 young bull prices shows a 4% decline for the EU average. However, when quoted in sterling, the average has fallen by 12%, highlighting the impact of currency movements on markets where competitive pricing is important. Moving back to euros, the most significant annual declines have occurred in Ireland and Sweden with prices down by 11% and 15.5% respectively. There were also above average declines for UK (- 8%), Belgian (-7.5%), Dutch (-8.5%) and French (-5.5%) producers. Prices have also decreased in Austria, Germany and Spain; though to a lesser extent. By contrast, there has been some price appreciation in Poland and Portugal, up 2%, and in Greece, up 5%.

There was some seasonal pressure on O3 grade cull cow prices during July with the EU average sliding 1.5% to €2.92/kg dwt (232p/kg dwt). With adequate supplies already sourced for the peak summer burger trade, prices cooled by around 4% in a number of Member States, including Germany, Poland, Italy and Holland. However, the market was more balanced in the UK and France, and prices lifted 1% in Spain. Irish producers fared best with a 5% monthly increase (4% in sterling).

EU28 O3 cull cow prices opened and closed July running 9% behind 2013 levels. The largest annual declines have tended to be in the north west of the continent, with prices down 10% in Austria, Belgium, Holland, Germany, and France. However, there have been smaller declines of 7.5% in Italy and 4-5% in the British Isles and Poland. Only in Romania are prices exceeding year earlier levels, up 1.5%.

According to HMRC trade data, the UK exported 8,250t of beef in May. This fell 5.5% short of the same month in 2013 when more than 8,700t had been shipped overseas. 12% of domestic beef production was exported in May 2014, compared with more than 13% in May 2012 and 2013, and a high of 17% three years ago. Nevertheless, it was still a significantly higher share than in the same month between 2006 (when UK beef exports to the EU resumed following the BSE-related ban) and 2010.

There was an overall decline in sales to EU markets of 8.5% year-on-year in May 2014. However, this was not distributed evenly across markets. Indeed, trade with Belgium, France and Germany was around 40-50% lower, while sales to Holland and Sweden were a fifth lower. By contrast, exports to Denmark, Ireland, Italy, Poland and Spain increased. Shipments to Ireland totalled more than 2,900t during May, accounting for 38% of shipments to the EU. The second most important destination was Holland, with deliveries of 2,100t making up 27.5% of sales to the EU.

Looking further afield, exports to non-EU markets reached an 18-month high of almost 600t. This was driven largely by a jump in sales of frozen beef to Hong Kong. Exports to Hong Kong totalled around 370t; up from just 2t in May 2013 and an average of just over 100t per month in the opening third of this year. Meanwhile, exports to Ghana continued to run well behind last year’s levels, down 40% at 70t.

The UK imported 19,600t of beef during May. While this was 4% higher than last year, it was still 300t (1.5%) short of the same month two years ago. Imports accounted for approximately 25% of the total volume of beef on the UK market in May. This was unchanged from the previous two years but slightly higher than in May of 2009-11. While the 14,650t of fresh beef exceeded May 2013 levels by 5%, imports of frozen beef were marginally lower, at 4,900t. This was also a 4-year low for the month.

During May, higher beef production in Ireland continued to feed through to higher shipments to the UK as deliveries increased by 14% year-on-year to 14,100t. This was 72% of total imports; well above the May 2013 share of 65.5%, but in line with the average share for the first five months of this year. Fresh beef imports from Ireland were up 7% year-on-year while imports of frozen beef jumped by nearly 50% as they had been adversely affected by the horsemeat incident last year. While beef from Ireland accounted for three-quarters of total UK fresh beef imports during May, it took a smaller 65% share of frozen beef imports. Other EU suppliers to deliver more beef to the UK included Holland, France, Poland, Belgium and Denmark. However, less beef arrived from Germany, Spain and Italy.

During May, beef imports to the UK from non-EU countries declined by a third year-on-year to 1,800t. Two-thirds of this beef came from Oceania with deliveries from Australia up 40% at nearly 800t and shipments from New Zealand 7% higher at more than 400t. By contrast, imports from South America and Africa fell sharply.

News Round Up

The large increase in Irish cattle supplies seen throughout the first half of this year showed the first signs of slowing in July. Indeed, the monthly prime cattle kill in export abattoirs exceeded year earlier levels by 5.5%, having been up by 21.5% in June and by 16.5% in H1. Supplies tightened considerably in the middle of the month with numbers only marginally higher in the week ending July 19th and then 3.5% lower in the following week. However, they did pick up again at the end of the month, posting a 6.5% year-on-year increase.

Russia has banned all beef imports from the EU, Norway, the USA, Canada and Australia for a year. Trade data suggests that Norway has no beef trade with Russia, while shipments from Australia, Canada and the US made up less than 2% of their total beef exports in 2013. Furthermore, beef exports to Russia from Canada and the US have already been restricted since early 2013 based on Russian concerns over the use of a growth promoter, ractopamine, in cattle feed. There may, however, be more of an impact in the EU as Member States exported around 32,400t of beef to Russia in 2013 for a monetary value of €110.5m (£88m). Nevertheless, any initial impact is likely to dissipate over time as exporters find new markets in other parts of the world. It should also be noted that an additional 32,400t of beef would only increase the total annual supply of beef on the EU market by around 0.5%. According to Eurostat trade figures, the largest EU exporters of beef to Russia in 2013 were Poland (10,300t) and Lithuania (8,000t), while Germany, Denmark, Spain and Italy each delivered 2-3,000t and Ireland 1,400t.

In the same week that Russia banned imports from the EU, US, Norway, Canada and Australia, it granted export permits to five more Brazilian processors. During June, Russia was the largest overseas buyer of Brazilian beef, taking delivery of 29,100t; 29.5% of the 98,300t of fresh beef exported. With the average value of these shipments slightly below average at $4,435/t (£2,640/t), total receipts from trade with Russia, at $129m (£76.5m), amounted to 27% of the $471.6m (£280m) monthly total.

Chinese authorities have lifted a ban on Brazilian beef that was imposed after a Brazilian cow tested positive for BSE in December 2012. The announcement came during a visit of the Chinese President, Xi Jinping, to Brazil in mid-July and follows a Chinese inspection of Brazilian abattoirs and their animal health control measures in May. Prior to the ban, China was a relatively minor market for Brazil, with around 17,000t of mostly frozen beef exported in 2012 at a value of around $38m (£22m). However, Hong Kong was the second largest buyer of Brazilian beef in June 2014, taking delivery of 19,900t of fresh beef plus 9,900t of fifth quarter product. Once shipments resume to China, it is likely that some of the beef currently being delivered into Hong Kong will be diverted to the Chinese market. Nevertheless, only 8 Brazilian abattoirs are approved to export beef to China, limiting the possibilities for any significant expansion in trade.

With the US cattle herd at its lowest level since the early 1950s, and producers taking advantage of good weather conditions to rebuild their herds, supplies of finished cattle have fallen sharply this year. Indeed, in the final week of July, the USDA estimated that throughput at US abattoirs was 7.5% lower year-on-year at 574,000 head and in the first seven months of 2014, numbers were back by 7% at 17.649m head. One casualty of tight supplies has been an abattoir in Milwaukee, Wisconsin, owned by one of the country’s largest beef processors, Cargill. As a consequence, 600 jobs have been lost at the abattoir which slaughtered around 350,000 cattle per year. However, Cargill has kept its further processing plant at the same location in operation, keeping 200 people in work, while the six remaining Cargill abattoirs across the US will also continue trading. Another consequence of tight supplies has been much higher producer prices. Deadweight steer prices traded at $5.64/kg (333p/kg) in the week ending August 3. This means that the average steer price is 3.5% higher in the US than in England & Wales, having been 23% cheaper at the turn of the year and 28% cheaper one year ago.

Also placing upwards pressure on the US market will have been strong overseas demand. Indeed, during the opening half of 2014, US beef exports rose by 7% year-on-year to 417,400t. This was despite shipments to the largest market, Japan, falling by 7% to 94,300t, while the Canadians bought 19% less US beef (65,650t). However, the other large export markets of Hong Kong (69,700t), Mexico (71,300t) and Korea (52,850t) all purchased much more beef from the USA than in the first half of 2013, with deliveries rising by 63%, 34% and 20% respectively. However, the pressure on supplies resulted in export shipments exceeding year earlier levels by just 230t (0.3%) during the month of June, at 78,000t.

Meat & Livestock Australia has released its mid-year projections for the country’s beef industry. At the end of June this year the total cattle population was estimated to have fallen to 26.7m head; a 9% decline compared to the 3-decade peak of 29.3m head in June 2013. Going forward, a further decline is expected in the next year, taking the cattle herd to its lowest level for more than twenty years of 26.1m head. The main driver of this sharp decline has been an 18-month long drought affecting the key cattle producing regions of northern New South Wales and Queensland. With feed tight, producers have been sending more breeding animals for slaughter than usual, while the difficult conditions have led to higher mortality and fewer calves have been born. In addition, the country’s live export trade has picked up again after animal welfare concerns caused the main Indonesian market to close for a while back in 2011 and 2012. Further support for the live trade to Indonesia has come through the loosening of Indonesian import barriers, aimed at reducing beef retail prices. As a consequence, in 2014, live exports are set to reach a new record of 1.13m head, up one-third year-on-year. The combination of high slaughterings and the substantial increase in live exports are believed to have pushed up cattle ‘turnoff’ in 2014 to 35% of the national herd; its highest level since 1979 and considerably higher than the 28-29% seen in 2011-13. It is this high level of turnoff that has driven the cattle population lower. Although tight supplies will limit slaughter and live exports in 2015, turnoff is forecast to remain above its 2011-13 level, easing slightly towards its long-term average of 32% in the next couple of years, meaning that any herd rebuilding will be a very slow process. Indeed, although MLA predicts that the herd will begin to expand again from 2016 onwards, it will remain 4% smaller at the end of the decade than it was in June 2013, reaching 28m head.

In terms of Australian beef production, MLA is forecasting that supplies will begin to tighten up in the second half of this year, pushing annual slaughterings down 0.7% in 2014 to 8.3m head. With the dry conditions leading to lighter carcase weights for a second year (down 0.7% to 278kg), this will see total beef production fall by nearly 1.5% to 2.291m tonnes. Next year, slaughter is expected to fall by nearly 11% to 7.4m head, taking it back close to its 2012 level. However, with carcase weights not expected to recover fully, beef production is predicted to still be lower than in 2012 at 2.087m tonnes. This would be a 9% year-onyear decline. The considerable tightening of supplies expected next year have led MLA to suggest that producer prices may rise by as much as 40% in 2015.

August 2014

DOWNLOAD REPORT:- Download this report here

Our Sponsors

Partners


Seasonal Picks

Animal Welfare in EPS - 5m Books