Beef prices set to drop after the highs of 2020
ABOOST to finished beef cattle prices in 2020 brought muchneeded relief to a sector where the majority of businesses find it hard to make profits, according to agricultural consultants.
Writing in Andersons Outlook 2021, Charlotte Dunn and Ben Burton report that in early May, the average deadweight price was as low as 325p/ kg. However by the middle of August it had reached 375p/kg - a 15% increase - as mince consumption rose during lockdown and favourable spring weather facilitated barbecue demand, offsetting the decline in the eating-out market.
In the short-term supplies of UK prime cattle look set to remain tight, they add, with British Cattle Movement Service data at July 1, 2020 finding that numbers of cattle aged 12-30 months - those mostly likely to be slaughtered in the next few months - are down by 76,000-head (4%) on the year.
Ms Dunn and Mr Burton continue: “Looking further ahead, the number of animals available for beef production under 12 months of age was similar to the previous year. The number of beef cross animals was up and pure dairy males down, reflecting the trend in use of sexed semen.”
The size of the British beef industry - a cornerstone of the Westcountry’s agricultural output - continues to contract, with both suckler and dairy herds dipping by around 1% compared to a year earlier.
The authors explain: “We expect this trend to continue for both dairy and beef cows. The average yield in the UK dairy herd is likely to continue to increase, meaning fewer cows are needed to produce the same volume. With regards to suckler cows, the continued lack of profitability and reducing support payments on which the majority depend are likely to be the main factors driving down numbers.”
Despite this, Ms Dunn and Mr Burton predict that a permanent shift in beef prices to levels significantly above the current long-term average of around 355p/kg deadweight “would seem unlikely”. They add: “Hopefully sufficient protection will remain [after Brexit] to prevent the industry being undercut by lower cost imports whose standards of production may be below our own.
“The true costs of production for many suckler beef producers, to include a return on their own labour, is between 380 and 410p/kg deadweight. If the beef price remains in the current range, a continued decline in suckler cow numbers is likely.”
The report goes on: “We continue to see a huge range in the performance of suckler beef enterprises; feed, forage, labour and machinery costs are the biggest variables and those with the very lowest production costs have typically found innovative solutions for taking costs out of these systems. In the short-term, increases in straw and concentrate feed prices are increasing the costs of production for many in the sector.”
British producers also benefited in 2020 from significantly less beef being brought into the country, particularly from Ireland. Imports from the Republic were down 11% for the first seven months of the year, with fewer shipments blamed at least partly on tight supplies.
Ms Dunn and Mr Burton explain: “In the short-term, Irish data suggests supplies will remain tight, but looking further ahead there is an increased number of calves on farm in Ireland as Covid-19 has limited live calf export opportunities. Supplies may well increase in 12 to 18 months time.
“Whilst the exposure of the sheep industry to trade disruption and tariffs following the UK leaving the EU Single Market at the end of the year [2020] is well trailed, the beef sector is far from immune. By volume, the UK exports around 20% of beef produced and imports around 35% of that consumed.”
They concluded: “Whilst simply replacing imports with home production may sound very appealing, the situation is more complex, not least as the export trade helps to maximise the value of UK production - often exporting unwanted cuts and offal.”
If the beef price remains in the current range, a continued decline in suckler cow numbers is likely CHARLOTTE DUNN AND BEN BURTON, ANDERSONS FARMING CONSULTANTS