£15m cut from prime cattle value, AHDB study shows
© Tim Scrivener About £15m was knocked off the value of the prime cattle market in the year to February 2016, according to a study by AHDB.
A fall in the base price paid for cattle meeting target specification accounted for the bulk of the drop, according to the report.
It found 84% (£12.6m) of the loss of value to producers was a result of cuts in the base price.
This amounted to just under 30p/kg deadweight (DW) for steers and heifers and a 22.8p/kg drop for young bulls, based on average prices paid for R4L specification.
The report is the second stage of an AHDB investigation aimed at improving transparency in the beef sector.
See also: Beef producers losing thousands for beef spec changes
The second most significant factor contributing to the decline in value was a decrease in the number of cattle slaughtered.
However, this was partially offset by an increase in average carcass weights and a small improvement in carcass quality.
Payment grids
The introduction of new payment grids, which have imposed tougher penalties for heavier cattle, was identified as the next most important factor adding downward pressure.
These changes, which have been fiercely criticised by the farming industry, are estimated to have led to a loss of about £1m for producers.
In the week ending June 25, the price for R4L steers was 337p/kg DW compared with 353.6p/kg DW a year ago.
An AHDB report published earlier in the year found two-fifths of steers were killing out above tougher 380kg weight limits and less than 60% of young bull carcasses hit the 260-380kg target range this spring.
See also: Rushed spec changes unfair on beef producers
Farm leaders said the results showed farmers had not been given enough time to change their rearing and finishing systems in response to processors’ new requirements.
“The [latest] analysis emphasises the importance of producers understanding and responding to processor requirements.
“This is particularly pertinent in a falling market, where delivering the right kind of animals will minimise any loss of value,” said Stephen Howarth, market specialist manager for AHDB Market Intelligence.
“As specifications have tightened and penalties for missing target ranges increased, it appears that some producers have not responded to these market signals, contributing to the reduction in the value of the GB prime cattle market over the period.”
In the face of lower prices, questions are also being raised about whether farmers are being paid a fair share of the retail price of beef.
NFU Scotland has highlighted that over the past 12 months less than half of the retail price for beef has ended up back at the farmgate.