Markets Opening to EU and UK Beef Products

ANALYSIS - The UK market for both beef and lamb has been declining for several years, but now it appears to be stabilising and prices are rising, writes Chris Harris.
calendar icon 21 May 2012
clock icon 2 minute read

Domestic consumption for beef has been robust but the home consumption of lamb has been suffering, Dr Phil Hadley the southern senior regional manager for the English Beef and Lamb Executive told the EBLEX Northern Conference.

He said that the global supply is changing and the competition and demand for beef and lamb is increasing, while the price gaps are narrowing.

Dr Phil Hadley EBLEX southern senior regional manager

In this market, English beef and lamb has a solid export base and demand is growing and this is offering a great opportunity in new markets Dr Hadley said.

One of the major opportunities for the British and specifically the English beef and lamb sector is that adding value to fifth quarter products along the chain will be a key element in breaking into new markets and finding new consumers.

UK cattle slaughtering last year slid to 2.126 million and this year the slaughter figures are expected to fall slightly to 2.07 million this year and go down further next year to 2.052 million.

The dairy herd in the UK has seen numbers fall from 2.339 million in 2000 to 1.8 million last year. The beef herd has also fallen, but not as steeply from 1.783 million in 2000 to 1.642 million last year. The prediction is for the numbers to stabilise and to run flat over the next two years.

Lamb slaughtering are expected to remain flat at about 12.5 million from last year through to 2013.

UK Prime Cattle Slaughterings

Source: EBLEX

Dr Hadley said that there has been a major shift in global production. The US has reduced its herd numbers to such a degree that they bare at their lowest for 60 years, South America has ceased being a major exporter to the EU, because of concerns over disease and traceability and production difficulties. New Zealand has seen a drop in beef cattle numbers and the Australian market has been hit by both drought and floods.

All this has come together to allow the EU to once again become a net exporter. In 2011, the next surplus of exports reached 312,000 tonnes.

While this shift in the dynamics of the global beef market have been taking place, world beef prices have been rising and sharply since 2010. At the same time the US calf crop has been falling.

"Although there is a slight slowing down in the drop in the US herd, it is still going down," said Dr Hadley.

South American beef imports into the EU hit their highest point in 2005-2006, but they have slumped to have that number now largely because of strategic political changes in the Mercosur states.

Even in the lamb imports into the EU, New Zealand, once considered a threat to UK and Irish lamb exports has seen the amount coming into the EU down so that it is not always fulfilling its quota.

EU Becoming a Net Exporter

With the EU becoming a net exporter, the UK is seeking new markets and many of these are in the developing and emerging nations that have gross domestic product rising at about eight per cent.

The opportunities that are presenting themselves for new exports are because these developing countries have 40 per cent of the global population with increasing wealth. It is estimated that China and India will have a middle class increasing to 1.2 billion by 2035 and this increase in wealth consumers will produce a greater demand for meat.

Dr Hadley said that it has been estimated that a 10 per cent rising n income produces a five per cent rise in beef consumption.

However there is a limited increase in production compared to the rise in demand. There is also expected to be a narrowing of the price gaps between the meat producing nations around the world.

The main regions that are going to see an increase in consumption and consequently will become market targets for beef exporters will be Asia, in particular China, and the Middle East and North Africa (MENA).

China Seeing a Rise in Demand for Protein

China, which has an increasing population and increasing wealth, is already seeing a rise in demand for protein. Already the country has a total meat consumption twice that of the US - although consumption per capita is lower.

China consumes 25 per cent of the total meat production. The favoured meat in China is pork and the country has 50 per cent of the world's pigs and consumes 50 million tonnes a year.

However, China has also been seeing tight supplies of pig meat, resulting in rising prices. Pork prices have risen 25 per cent year on year producing protests from consumers.

The rise in the demand for protein opens the market for beef and lamb into China and in particular fifth quarter products. There is also demand for hides and skins with the UK exporting 11 million sheep skins and 800,000 hides.

Dr Hadley said that the OECD and FAO forecast that the real price of meat is expected to rise by 30 per cent between 2011 and 2020 and this is on the back of a 50 per cent rise between 2001 and 2010. Beef and sheep prices are expected to rise by between 18 and 20 per cent up to 2020.

"The narrowing of global prices will make the EU and the UK more competitive particularly in the new markets," Dr Hadley said.

UK Opening Up More Non-EU Markets

The UK has already opened up 40 new non EU markets since 2010 and it is looking to particularly sell fifth quarter products to the Asian region. The amount of fifth quarter material on each animal - 50 kg on a beef animal and between 3kg-4kg in sheep - makes this market potentially very lucrative to the UK industry.

Currently the fifth quarter products are worth between five and eight per cent of the carcase value for UK processors, but processors in the Netherlands are able to make up to £36.50 more per carcase on the fifth quarter than the in the UK.

"This amounts to a loss to the industry of £96.5 million a year," said Dr Hadley.

He said that part of the problem and the loss of income is a poor perception of the value of fifth quarter products and poor treatment of the products in the abattoir often by meat inspectors, who do not respect the products.

UK domestic offal consumption has risen by 67 per cent from 2003 to 2008 with a market value of £62 million according to market analysts Mintel. The Agricultural and Horticultural Development Board puts consumption stable at 16,500 tonnes a year worth about £40 million.

Liver consumption in the UK is up by eight per cent and worth approximately half of total marketplace.

Between 2008-2010 the UK managed to turn the £2.2 million that is cost to dispose of unwanted or unfit offal and fifth quarter products into an income of £13.3 million - a £15.5 million turnaround following a project by MLCSL Ltd.

This small turn around in profit has shown the UK industry the potential value the fifth quarter could hold and in seeking new markets in Asia as well as well-set markets in Continental Europe, the industry could exploit the full value of the carcase with products that are not generally sold on the domestic market.

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