Shock price drop

Confidence in the livestock sector has been rocked, after falling consumer demand for beef saw deadweight cattle prices drop.

The falls have again led farmers to question their futures in the beef trade, industry leaders have warned.

Supermarkets have reported drops in volume demand for beef, with Sainsbury's describing them as "significant", although the cause remains unclear. Some point to the ongoing 'credit crunch', while others blame the holiday season and poor summer weather.

Henry Burgess, Sainsbury's category manager, said the increase in retail beef prices was leading to people to trade down or out of beef entirely. "We're now seeing two for £5 on mince, when previously it was two for £4, so people are trading down to our basic range."

He said promotions were failing to have the expected impact, as any deals were simply bringing product back down to their pre-inflation prices. And he noted that the pork category was benefiting, with more consumers turning to pork. However, with prices on pork also increasing, he warned there could well be a tipping point on pork, as seen in the beef sector.

Asda's Chris Brown played down the effects of the economic downturn, saying it was hard to tell whether it was down to the economy, holiday season or poor summer weather. Yet recent figures from the Consumer Price Index suggested that meat prices had gone up by an average of 16%, contributing to rising inflation.

However, he said, offals were up 10%, and he could only speculate that this was an effect of people trading down. He added that there was increasing demand for dark poultry meat, a product traditionally exported. Mark Withers, commercial manager for Tesco's meat and fish counters, said the chain was seeing growth in its value ranges and, while people were still increasing their purchases at the premium product end as well, there was evidence of customers switching to cheaper proteins, such as turkey and pork.

The drop in the deadweight prices - of around 30p/kg on average - has shaken farmers, who had been enjoying the recent price rises. Dylan Morgan, NFU chief livestock advisor, said: "The drop in prices has severely knocked the confidence of beef farmers. We had seen prices firming and, while input costs were up, things were at least moving in the right direction. Now, people are starting to question their long-term future in the sector."

He said farmers were hoping the fall was a short-term issue and that prices would pick up again in the autumn. And he called on retailers, processors and farmers to work together to match up supply with demand.

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