Saturday 1 October 2016

The lowdown on beef

Bord Bia analyst Joe Burke looks at the key trends in the beef market

Published 23/09/2015 | 02:30

The beef market has improved
The beef market has improved

The beef market this year has improved markedly on last year, with average prices for R grade steers up 9pc or 33c/kg deadweight. This recovery reflects tighter Irish supplies which are 50,000 head lower, combined with stronger returns from the UK market. However, Continental European markets, which collectively account for almost half of Irish exports, have proven more challenging.

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Following seasonal declines in recent weeks, Irish R3 steer prices are currently averaging €3.92/kg excluding VAT.

Meanwhile, the average R3 steer price in the UK is equivalent to €4.77/kg. In sterling terms, UK prices have been similar to previous years but the impact of currency movements has made the market more favourable for Irish beef with the Euro at 73p, compared to 79p last year.

Elsewhere around Europe, producer prices are generally below those prevailing in Ireland. For example, R-grade young bull prices are €3.74 in France, €3.81 in Germany, €3.80/kg in Italy and €3.61/kg in Spain.

European markets

Beef consumption in Europe has been sluggish over the past three years, declining by over 4pc. Consumer spending power continues to be weak across most markets, while poultry and pigmeat remain competitively priced. On the home market, retail sales volumes for beef fell by 4.5pc for the 12 week period up to mid-August. However, for the year-to-date the Irish market remains slightly ahead of 2014. In the UK, retail beef sales increased by 0.6pc in recent months, with most of this growth coming from steaks and roasting joints, along with a recovery in ready meals. Beef consumption in the German market also shows signs of improving. However, elsewhere around Europe beef sales are generally in decline. Recent sales of beef by French retailers were 4pc lower than last year's levels. Overall within Europe, a decline of 0.7pc in beef consumption is forecast in 2015, although some growth is expected again next year.

British supplies

According to the latest forecasts, European beef production is expected to grow by 1.4pc this year. Much of this is due to recent expansion in the EU dairy herd with 300,000 additional cows in 2014. France, Spain, the Netherlands and Poland have experienced higher cattle supplies, while Ireland and the UK are among the only countries with lower volumes.

Cattle throughput in Britain and Northern Ireland has fallen by 1.5pc and 2.0pc, respectively, to date this year.

Most significantly, Irish slaughterings have been 4.2pc lower, mainly as a result of a 28pc decline in young bull production coupled with an 11pc fall in cull cow supplies. Supplies of steers and heifers have been stronger than expected with animals either finished indoors or early in the grazing season.

However, recent analysis of the Department of Agriculture's Animal Identification and Movement database suggests that prime cattle availability will tighten considerably in the coming weeks. This is evidenced in the number of cattle in the 24 to 36 month age category being 35,000 head lower for males and 27,000 lower for beef-bred females.

Live exports

During the first eight months of 2015, exports of live cattle from Ireland reached almost 139,000 head. This represents a decline of 25pc or 47,000 head on last year's levels. All age categories of stock recorded fewer exports in comparison with recent years.

Calf exports were 16pc lower. Although shipments started off strongly in early spring, the peak calf exporting season ended earlier than usual. This was partly the result of a tighter calving pattern nationally, as well as increased competition for calves from Irish farmers.

Trade levels to the Netherlands and France increased, with good demand for male Friesian calves for veal production. Unfortunately, exports of calves to Belgium were practically suspended this year as a result of new IBR-related restrictions.

Spanish feedlot buyers, who usually buy better quality strong calves for young bull production, imported less stock from Ireland this year. Meanwhile, the number of weanlings (aged three to 12 months) and store cattle (aged 12 to 21 months) exported live has declined significantly in comparison with last year's levels. Again, the lower export activity reflects reduced demand from feedlot buyers in Italy and Spain, along with the troubled political situation in North Africa. Shipments to Libya have fallen sharply, following exports of 18,000 head there in 2014.

Exports of adult cattle, aged over 21 months, have fallen by 12pc. Consignments of forward store and finished cattle to Northern Ireland made up the majority of these animals, and this trade has recovered by 18pc on account of stronger beef prices there and favourable exchange rates. However, exports to Britain, including dairy breeding stock, have fallen by 38pc.

Part of the reason for the decline in live export levels this year relates to the strong increase in the prices paid for store cattle, weanlings and calves. In many cases, export buyers have been unable to compete, such has been the demand from domestic finishers. Competitors such as France, with lower prices and transport costs, have gained market share.

Young cattle

The AIM database reveals a growing number of cattle in the younger age category, signalling higher supplies of beef cattle over the coming years. In addition to the decline in live exports, overall calf registrations show an increase of 110,000 head.

Some 96,000 of these extra calves are from a dairy background while 14,000 are additional suckler-bred stock - 70,000 of the additional calves are Angus and Hereford crosses, which will be potentially eligible for the breed-specific bonus schemes. These products continue to meet with strong demand from premium retail and foodservice customers.

Joe Burke is a beef and livestock analyst with Bord Bia

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