Lack of supply results in strong farmgate beef prices

Strong farmgate prices for Scottish beef are expected to continue, due to a low number of cattle available on the market.

Quality Meat Scotland (QMS) analysis has shown that low carcase weight and a lack of outlets for beef from young bulls have also contributed towards the strong prices.

QMS’ head of economics Stuart Ashworth said that, historically, young bulls supported the supply chain most during the months of July to September. The animals account for 15%-16% of the prime kills. From winter through to spring, they historically contribute towards 8%-9%.

“This year the supply of young bulls has reduced as abattoirs have indicated less interest in young bulls over the past year and farmers reacted to the market signal,” explained Ashworth.

“Historically, the age of prime cattle at slaughter peaks in August and September. However, this year the current availability of steers has been reduced as producers have reacted to the call for smaller carcases by selling steers younger and lighter.”

According to the red meat body, average steer carcase weights during June were 8kg lighter than this time last year, coming in at 383kg.

“Young bulls were also marketed at lighter weights and heifers have also been in tight supply, although their carcase weights were unchanged as they have historically been well within the abattoirs' preferred weight ranges,” said Ashworth.
 
It was highlighted that the industry has had to adapt to face up to the reduction of domestic supply. Ashworth added: “Calf registrations show that in the second half of 2015 Scottish calf registrations were 1% higher than 2014 and these animals will make a significant contribution to the supply over the next six months. However, as calf registrations in the second half of the year are less than one-third of annual Scottish calf registrations, the effect on overall supply is reduced.”

The increase of calf registrations continued to increase into 2016, albeit modestly, indicating a slight increase in stock availability as the year developed. Calf registrations with the rest of Great Britain represented a similar pattern. “However, with a higher proportion of calvings in the second half of the year in England and Wales than Scotland supplies may lift in England and Wales before Scotland.”

Traditionally, carcase weights are at their lowest in October and November as younger spring-born cattle between 18- and 22-months old begin to have a presence on the market. “They make up a higher proportion of the prime kill and the year-on-year change in average carcase weights at this time may be more modest,” said Ashworth. “Consequently, the reduction in beef production seen earlier this year, as a result of lighter carcases, may not be as significant as we move towards Christmas.”

The weakness in sterling has also been supporting the market, as it has encouraged more export activity and reduced the competitiveness of imported product. Ashworth said that the latest Customs data showed a 3% growth in the volume of beef exports during May, with an increase of shipments to destinations outside the European Union. The EU does, however, remain the most important export market.

“Across Europe, producer prices are currently around 3-4% higher than this time last year, while after adjusting for exchange rate movement, the Great Britain producer price is similarly around 3% higher,” added Ashworth.

QMS analyses also showed that Ireland exported more beef to the UK than last year between February and the end of May. Ashworth concluded by saying: “Nevertheless, overall beef imports have declined and, with exports increasing and domestic production falling, there has been a basic strength in the market which has supported firm prices for most of this year and is likely to continue to do so in the short term.”

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