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LMC: Beef Under Pressure but Spending Holding

25 January 2012

NORTHERN IRELAND, UK - In the last few weeks, there have been ongoing anecdotal reports of weak beef demand. Concerns have been raised about consumers’ willingness to buy beef at higher retail prices and some pundits are pointing to a weaker demand to explain the recent pressure on farmgate beef prices across the UK.

Demand was certainly a concern in the last quarter of 2011, although higher prices and reduced volumes have combined to ensure that consumer expenditure on beef has held up, at least in the last quarter of 2011.

The latest monthly report from Kantar Worldpanel shows that retail beef prices in GB, our largest market, have risen sharply in recent months. The Kantar data is based on a large panel of GB shoppers who record details of their purchases when they arrive home with their shopping. The figures for all shoppers are aggregated and extrapolated to give an indication of the national picture with regard to shopping habits. These figures are a useful indication of GB beef demand trends.

While farmgate prices had increased sharply early in 2011, there was no immediate response at a retail level and consumer prices remained unchanged earlier in the year. Indeed, it was only in the late summer that participants in this ongoing survey started to record discernable increases in retail beef prices. In the four weeks ending 27 November 2011, prices were 10 per cent higher than in the same period last year. This was not a short-term blip. Retail prices were seven per cent higher over the 12 weeks ending 27 November 2011.

With higher prices, demand ultimately gave way to a certain extent and volumes sold fell sharply in the last quarter of 2011. In November sales were down by nine per cent, driven to a large degree by the 10 per cent price increase mentioned above. Over the longer 12 week period from September - November, volume sales were back by six per cent. The reduced sales in November have been characterised by a reduced proportion of consumers buying beef on their shopping trips.

Around 56 per cent of GB consumers purchased beef in November 2011. This was down from 60 per cent in the same period in 2010. It also appears that those producers that did buy beef, bought less of it. The average weight per purchase in November 2011 was 1.7kgs. This was down slightly from 1.8kgs in the same period in 2010.

During November, sales of all beef cuts were under pressure relative to the same period last year. Volumes of beef frying / grilling cuts were down by 19 per cent year on year. Beef roasting volumes were down by 13 per cent, with mince (- 6%) and stewing (-8%) beef volumes also down sharply. Given that this data only represents sales over a four week period, it is also worth remarking that similar (albeit smaller changes) trends are also evident in the longer 12 week period.

The combination of reduced volume sales and increased prices has meant that consumer expenditure on beef was unchanged during November 2011 compared to the same period in 2010. During the 12 weeks ending 27 November, expenditure increased by one per cent. Beef supplies are known to be tight at present, but at a time when there is much uncertainty around the demand side of the price equation, steady expenditure figures for the end of 2011 should provide some reassurance to producers.

Further Reading

- You can view the full report by clicking here.

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