10 May 1996

Beef markets stay weak despite the government schemes

By Philip Clarke

BEEF markets are likely to remain very weak for the foreseeable future, despite government schemes to remove older cattle from the food chain, increased use of intervention and lower imports.

According to the Meat and Livestock Commissions latest Cattle Outlook report, taking out cattle over 30 months old will remove 230,000t of meat from the balance sheet, contributing to a 17% decline in total beef supplies this year to 745,000t.

Some traders have suggested that, with so much going to the incinerators, coupled with the calf processing scheme (estimated to remove another 307,000 animals), beef could be in short supply.

But this view is disputed by MLC economist Duncan Sinclair. For even though these schemes make up for the loss of exports, domestic demand is far from fully recovered and there is also the threat of imports if the UK trade does pick up.

The MLC is currently assuming 130,000t will be imported this year, compared with 173,000t in 1995. But this is relatively modest and supplies from the Irish Republic still pose a threat, says Mr Sinclair. "Lower prices in the Irish Republic, problems exporting to some third country markets and branded promotions in the UK will mean the UK should remain an attractive export destination."

The availability of beef for human consumption will also depend on the benefits of the slaughter scheme, relative to the real market. The current top-up for prime beef of 25p/kg lw (50p/kg dw) above the cull cow value of 86p/kg lw (171p/kg dw) is in excess of market values, but is only guaranteed for four weeks.

If the premium then falls, more animals would be slaughtered before they reached 30 months, putting extra pressure on prices. "Although values have crept up recently, there are still significant numbers of cattle in the system. It would be optimistic to assume that prices are likely to be anything other than weak for some time."

The MLC is also assuming there will be no further exports of beef for the rest of this year. "Even if the ban is lifted, it will take an awful long time to regain a presence in any markets," says Mr Sinclair.

As such, he estimates 83,000t will need to go into intervention this year to make good the shortfall in demand.

Looking further ahead, the MLC is anticipating a 9% increase in prime cattle slaughter in 1997.

There may also be some recovery in exports next year (the MLC has pencilled in 80,000t compared with 274,000t in 1995) but markets are expected to remain weak.