Range of Factors Behind Recovery in Prime Cattle Prices
The arrival of summer has seen a significant rebound of prime cattle prices which have risen by eight percent in the past four weeks, according to Quality Meat Scotland analysis.
This sharp recovery is, said Stuart Ashworth, QMS Head of Economics Services, almost unprecedented and will have been warmly received by producers, if not processors.
“Scottish producers are seeing prices for cattle which are seven per cent higher per kilo than this time last year,” said Mr Ashworth.
“Given the continuing trend for carcases to be heavier than last year, the market return per animal will have increased by more than seven per cent on the year.”
Compared to 12 months ago, Scottish price-reporting abattoirs show a 25% decline in the number of young bulls slaughtered and a seven per cent decline in heifer numbers slaughtered, while steer numbers are little changed.
A number of factors have been driving change in the marketplace over the past month.
“Compared to a month ago steer and heifer slaughter numbers are down and young bull numbers are up. Historically, though, this is the time of year when young bulls are most important in the overall kill,” said Mr Ashworth.
In contrast, English and Welsh price-reporting abattoirs have seen numbers increase for both heifers and steers over the past month.
Nevertheless, compared to a year ago, young bull numbers in England and Wales are down but steers and heifers up.
“In broad terms then, cattle are in tighter supply in Scotland than in England and Wales. So the basic rule of economics – namely reduced supply chases price higher – is currently at play,” observed Mr Ashworth.
“But if we look back a month, or indeed a quarter, the number of cattle being handled by Scottish abattoirs was also lower than 12 months earlier and despite heavier carcase weights the volume of beef leaving abattoirs was also lower than 12 months earlier – but prices were sliding,” he said. Across the UK as a whole, beef production ex-abattoir has, since March, been lower than levels a year earlier.
“So if tighter supply is driving price higher just now, why wasn’t that the case earlier in the year?” asked Mr Ashworth.
One answer, he said, may lie in the balance of trade. “Unfortunately trade data takes some time to be collated, but reviewing the data available to the end of May shows us the combined effect of changes in trade and changes in abattoir production.
“This resulted in more beef on the home market than in 2014 for the first quarter of 2015 but less, and an increasing deficit, through April and May. So basic economics is at play, in that the total amount of beef on the home market has now fallen below the levels seen in 2014 and producer price has responded as expected,” said Mr Ashworth.
Prime cattle supplies in GB are expected to remain lower than last year for much of the remainder of 2015.
“However, supplies of animals – if not meat which is dependent on carcase size as well as animal numbers – will begin to increase as we move into 2016.
“At the same time our main source of imported beef, Ireland, is also predicting lower slaughter numbers for the rest of 2015. The collective impact of these factors will see the negotiating strength swing back to the producer for a while.”
