Farm Ireland

Thursday 18 April 2019

Rising kill numbers put the squeeze on beef prices

2/6/2018 Carrigallen Mart
Lot Number 562
Weight 315K
DOB 3/12/17
Breed CHX
Sex Bull
Price €890
Photo Brian Farrell
2/6/2018 Carrigallen Mart Lot Number 562 Weight 315K DOB 3/12/17 Breed CHX Sex Bull Price €890 Photo Brian Farrell
Martin Coughlan

Martin Coughlan

At the start of June, general quotes for bullocks ran from €4.20/kg to €4.30/kg, while heifers were trading at €4.25-4.35/kg.

However by the end of last week, those with bullocks for slaughter early this week were being quoted in the €4.10-4.15/kg price range, while heifers were back to a top of €4.25/kg, but €4.20/kg in places.

The incentive for this price pull appears to be the sudden jump from 32,000 to 34,000 in kill numbers last week. There is no doubt that the factories are intent on getting back full control of prices and from the farmer's point of view, it's never a good thing when the market starts to go in the wrong direction.

Leaving aside last week's unexpected increase in numbers, let's look at how the summer trade has developed thus far. Firstly, I'm not hearing that the market for beef has gone soft; it may have changed with the recent good weather due to less roasts being cooked, but demand for manufacturing beef is still very strong.

The IFA report that R3 grade bullocks in the UK are making the equivalent of €4.51/kg. Secondly, factories have been killing around 32,000 cattle per week since the start of May with no indication that such a number has been a problem. Thirdly, prices prior to last week had actually strengthened week on week.

Cow prices, which are the great barometer of the trade, do seem to be remaining strong. The quotes I was given yesterday morning were R grades still around €3.60-3.70/kg. O grades are on €3.50/kg, and P+s are making €3.35-3.40/kg. However, I was told that some plants were looking at dropping lesser P types further down the scale. On the bull side, under 24-month U grades are being quoted from €4.15-4.25/kg, with Rs on €4.10-4.15/kg. Meanwhile, O grades are generally getting into €4.00-4.05/kg but with some plants quoting as low as €3.90/kg yesterday morning.

So what's actually going on? Is this the start of the annual slippery slide?

Killing power

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Angus Woods of IFA points out that it's too early in the season for oversupply and that what's really going on in his opinion is the factories want the cattle, and to get them, they are using the oldest trick in the book - pull the price or threaten to.

Edmund Graham of the ICSA pointed out that after all the good news of recent times - Chinese contracts, US contracts and more beef exported into the UK than in 2017 - the processing sector now appeared to be "playing games."

It is all a game, but at the back of it though is the factories' fear that numbers might actually run tight and what that might that do to prices.

While numbers remain strong, the end of the shed cattle must surely be in sight. This year that poses a bigger problem than normal for the factories as there aren't meaningful numbers of fit grass cattle. Yes, cows are starting to come but by comparison they don't have the killing power of your bullock.

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