International backdrop to beef price volatility
A “complex international market” has highlighted price volatility in the Scottish beef market, according to Quality Meat Scotland (QMS).
Although the farmgate price has fallen 14% in the past six months, QMS reported that it rose by 10% in the first six months of 2013. Similarly, in the first six months of 2010, the beef price fell by 7%. However, in the first six months of 2008 the price rose by 24%. “This volatility, coupled with the backdrop of the long production cycle behind beef production, brings sharply into focus the need for better communication throughout the supply chain, from farm to retail shelf,” Stuart Ashworth, head of economics at QMS, commented.
Ashworth highlighted an array of issues causing a fluctuating beef market, including consumers’ perceptions after horsegate; bad weather; international currency movements; and lower consumption.
He explained: “Equally challenging for food businesses is managing supply against a retailer’s activity plan, which may not recognise the lengthy production process behind the raw material. These elements play on the market price in the short term, but over an extended period supply and demand balances play a greater part.
“Similarly, moves to increase the national breeding herd will reduce beef availability in the short term, but increase it in the longer term. Combining this biological time frame with market volatility in planning a way forward is not easy and reflects the need for greater communication throughout the supply chain from retail shelf to farm.
“International currency movements are also outside farmer and processor control. With sterling currently strengthening towards 80p buying one euro, imports of European beef become cheaper while at the same time it is tougher for exporters. Sterling’s relative strength against the dollar does, however, make imported grains and proteins cheaper.
“Equally, we know retail prices have moved forward slowly and did not reflect the speed of movement in farmgate prices during 2013. However the recent slide in farmgate prices mean that, over an extended period of three years, the relative movement in farmgate and retail price is similar.
“The challenge for the whole industry is that, over the past 12 months, increased retail prices have led to reduced consumption of fresh beef cuts.
“The latest information from market research company Kantar Worldpanel suggests that the volume of beef retail cuts sold has fallen by 5% over the past year but the volume of cheaper cuts, for example, has fallen more slowly than the more expensive cuts.”
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