Beef
Farmgate beef prices have been disappointing all year, only going above the five-year average for a brief spell in May. At the end of September, the GB all steer deadweight price was 47.4p per kg less than for the same week in 2018. As the chart shows, the farmgate price fell last year from the end of September until mid-December. This year the price has fallen, but not at the same speed as in 2018 and there are signs of a slight (much needed) upturn as we head towards Christmas.
Source: AHDB
According to the AHDB, total beef and veal production in October was 3% higher than in 2018 at 86,100 tonnes. This is a combination of an increase in throughputs and also carcase weights for prime cattle; both up by 1% compared to year earlier levels at 186,100 head and 339.7kg per carcase. Grass growth has been good and cattle have done well over the year, leading to heavier carcases, this in turn will have contributed to the lower finished price per kg. In an attempt to stop increasing carcase sizes, some abattoirs are putting a 400kg cap on weights. Finishers will need to ensure weights do not go over this to avoid penalties. An increase in numbers may have been in response to the Halloween Brexit date and also cattle finishing quicker after a good growing season.
Exports of beef to September, show an increase in volume by 20%, although only 7% in value as the price is much lower, although this has meant product from the UK is more competitive. According to the AHDB, exports to the Philippines increased by 310%, possibly in response to the loss of pig meat in the country as a result of African Swine Fever (ASF). Looking ahead, the market could get a welcome boost if shipments to China get underway; the first for over 20 years are expected by early 2020. Imports have remained lower for most of the year. In September, imports were down by 33.5% compared with 2018, mainly due to a reduction from Ireland (34.5% less). This was probably in part due to less availability in Ireland as producers protested over the low beef price.
Lamb
The GB liveweight lamb SQQ has been hovering around the five-year average since June. But since the end of October it has seen a sudden increase, taking it above last year’s levels for the first time since January. So why has the lamb trade been fairing so much better than beef? Over the year we have seen an increase in exports and a reduction in imports. This is mainly due to demand in China, which has been increasing over recent years and is only likely to get stronger due to ASF (see our previous article https://abcbooks.co.uk/african-swine-fever/). Sheep meat prices have been moving higher in New Zealand and Australia due to increasing shipments to China. This means imports to the UK are not only less in volume, but importantly, more expensive, supporting domestic prices. In addition, New Zealand has sent less sheep meat to the rest of the EU. The UK has been able to fill some of this availability. Although domestic supplies are expected to tighten; a good growing season and the Brexit uncertainty leading up to 31st October, may have encouraged farmers to sell their animals earlier; numbers slaughtered from the 2019 crop are up 7% year-on-year. Less availability should continue to support prices up to Christmas, after which Brexit uncertainty may return.
Pigs
Finished pig prices have been on an upward trajectory since April and, with strong demand from China, the outlook looks good for producers into 2020. According to the AHDB, producers’ margins moved into a positive position in Quarter 3 as pig prices continued to rise and the cost of grain (feed) fell. This position is expected to continue through the last quarter of 2019 and going into the New Year. This, however, is not as a result of demand from the domestic market, which remains a challenge, but due to strong demand from the export market. Again, this is mainly through increased demand from China due to the ASF crisis. China is the UK’s biggest pig meat customer. According to the AHDB, around a third of the UK’s pig meat exports have gone to China so far this year, up by 58% on 2018 and it is a market which is continuing to grow both in volume and value. In October all the major UK abattoirs were approved to send trotters to China. Whilst there is a relatively low demand for trotters in the UK they are sought-after in the Chinese market.