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QMS (Quality Meat Scotland)

23 August 2012

QMS Market Report - August 2012QMS Market Report - August 2012

In contrast to 2011, throughout July and into August prime cattle prices have exhibited their historical seasonal trend: falling through July before picking up again in August.
QMS - Quality Meat Scotland

Cattle Prices and Supplies

In contrast to 2011, throughout July and into August prime cattle prices have exhibited their historical seasonal trend: falling through July before picking up again in August. Having opened July at their record high of 358.3p/kg dwt, Scottish steer prices then slipped back to 353.6p/kg at the end of July before rising to 356.3p/kg dwt in the week ending 11 August. By contrast, auction prices have shown more stability. The average price paid to acquire prime cattle at Scottish auctions has fluctuated in a narrow band around the 200p/kg mark since the beginning of June.

Cull cow prices slowed significantly at Scottish auctions through July and cooled further as August began. In July, they averaged 5% lower than in June, and, at 125.5p/kg lwt in the week to 8 August, they were 11% lower than their peak at 141p/kg two months before. However, they then rebounded to 131.8p/kg in the week to August 15. Deadweight prices for cows have shown similar movements; falling significantly before recovering in the week ended August 11. Nevertheless, at 280p/kg, they were still 4.5% lower than at the end of June. Compared to the same week last year deadweight prices are nearly 7% higher, while liveweight prices are up 5%.

According to the latest UK slaughter statistics, throughputs of prime cattle tightened further in June. Numbers were down 11.5% year-on-year, an even greater contraction than in the first half of the year (H1), during which volumes were 8.5% lower than a year earlier. However, within the figures the divergence between the volumes of steers and heifers being slaughtered remained. While the June steer kill fell 7% on the year, the heifer kill was down by 15%. This may be an indication that producers are retaining more heifers for future breeding with the likely explanation being that strong steady prices have encouraged producers to expand their operation.

In Scotland, the supply of prime cattle to abattoirs was down by 10% in June, matching the cumulative deficit for the whole of H1. Like in the UK as a whole, the data for Scotland also suggests that a herd rebuilding phase is underway. While 3% fewer steers were killed in June 2012 than a year earlier, the supply of heifers to Scottish abattoirs was down 15.5%, following a 13% decrease in the previous month.

UK level data for mature stock supports the implication that the herd is stabilising or even that farmers are beginning to expand their breeding herds. In June, the cow kill was down by 13% year-on-year, and over H1, numbers were down by 7%. In Scotland, the first signs of a similar process became apparent in June as monthly volumes of mature cows and bulls slaughtered were down 3% on the year, having run ahead in prior months. This, coupled with the reduced heifer kill, suggests that producers are replacing cows, and hence, the Scottish breeding herd may also begin to show some signs of stability.

Though supplies of prime cattle to Irish export abattoirs continued to remain tight through July, slaughterings were down 11% year-on-year compared with 17% lower in the year-to-date. It may well be that the increased numbers of cattle under one year of age at the time of the December census are now starting to arrive on the market.

The latest data available from market research firm, Kantar, indicates that beef consumption declined by 3% year-on-year in the 12 weeks to July 8. However, it took a 7% greater outlay in cash terms for consumers to acquire this smaller volume. A long period of poor weather pushed burger sales down 13.5% on the year.

Average cattle prices in the EU for heifers, young bulls and cows rose around 1% during July and then strengthened slightly into August. In contrast, steers fell during July by 1% as they are more heavily weighted towards the Irish price, which fell by 5% in Euro terms. Irish prices have stabilised at the beginning of August and this allowed the EU average for steers to rise marginally. Currency effects mean that while UK cattle prices are up 9% on the year in Sterling terms, they are 20% higher when quoted in Euro. On average, EU prices are approximately 15% higher on the year, with French producers achieving closer to 20% growth, but Irish producers seeing more modest growth of 11%.

Lower domestic production continued to place downwards pressure on the volume of product available for export into May. Provisional figures showed a 31% decline in monthly volumes compared with May 2011. Shipments in the opening five months of the year were 21% below year earlier levels at 45,400t. Ireland and Belgium were the only major customers to import more UK beef year-on-year in the January to May period; purchasing 14.5% and 0.5% more, respectively. Looking further afield, shipments to Ghana were nearly three-and-a-half times higher than in the same period of 2011 with strong economic growth driving beef demand.

The combination of lower UK production and exchange rate movements presented trading partners with an increased opportunity for market access. Consequently, imports increased 6.5% on the year to 95,850t between January and May. 1.5% more fresh beef has been sourced from overseas than a year ago, while imports of frozen beef are up one-fifth.

The composition of imports has subsequently shifted towards frozen beef in 2012. Compared with the first five months of 2011, frozen product has increased its share of total imports by 3.5 percentage points to 30%. It is likely that the lower UK cow kill has forced food manufacturers to look abroad, particularly given the increased requirement for burgers over the period of the Olympic Games. With Ireland being the UK’s principal source of manufacturing beef, its exports to the UK have risen nearly 30%, while imports of frozen beef from the Netherlands and Germany have increased by more than 40%.

August 2012

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