Reduced availability drives farmgate price rise

A drop in availability has led to farmgate prime cattle prices in Scotland rising modestly over the past couple of weeks. 

According to analysis by Quality Meat Scotland (QMS), they stand some 10-11% higher than this time last year.

“The prices paid to producers have been supported by a lower availability of prime cattle reaching the Scottish market,” said Stuart Ashworth, QMS head of economics. “Throughput in both auction markets and price-reporting abattoirs over the past couple of weeks has been running at lower levels than last year. Carcase weights are also falling, so the volume of beef produced is lower than last year.”

This increase in prices isn’t entirely unexpected as prime stock supplies have historically tightened during April and into May before hitting a seasonal low in July and August.

“Last year farmgate prices started to rise in the first week of May and, two years ago, it was at the beginning of June, so the 2017 movement is slightly sooner than last year,” said Ashworth.

In contrast, prime stock prices in England and Wales have lacked direction in recent weeks, with the market there being slightly better supplied than a year ago. As a consequence, the premium found in the Scottish market over that in England has widened to its current position of 10p/kg deadweight for an R4L steer, compared to 3-4p/kg in February.

“Across Europe, in the main beef-producing countries, farmgate prices have risen at a more modest rate of less than 1% over the past two weeks, suggesting the sterling exchange rate may be supporting UK prices,” said Ashworth.

The consumer market continues to be extremely competitive, added Ashworth and passing higher farmgate prices further down the chain “remains a challenge for meat wholesalers”.

However, despite recent increases, average beef retail prices during March were little different from a year ago. Some of the more expensive retail cuts are lower-priced than last year and cheaper cuts like mince are slightly higher, leading consumers to do some switching from roasting joints to stewing beef and mince.

“Overall, because for the past six months beef prices have been lower than they were during the equivalent period a year earlier, there has been some growth in retail purchases of beef,” said Ashworth.

In contrast, lamb retail prices have been higher than 12 months ago, contributing to reduced fresh lamb purchasing. Meanwhile, pork and poultry retail prices have fallen compared with prices a year ago and poultry meat, in particular, is still seeing growth in retail demand.

Based on the experience of lamb, any significant increase in retail beef prices without similar disposable income inflation, would be likely to limit retail sales. Consequently, Ashworth observed that margins in the beef supply chain post-farmgate remain slim and farmgate prices will be sensitive to the number of cattle and volume of beef in the market.

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