2013 outlook: Beef

What does 2013 hold for UK farming? Farmers Weekly and farm business consultant Andersons have teamed up to provide an outlook. Today we look at beef.

Beef supplies look set to remain tight, both domestically and globally, which may help maintain prices.

UK production is unlikely to recover with the continued decline in the national herd, says Andersons consultant Ben Burton. It is also probable that bull beef production will fall as a result of recent cereal price inflation.

Although prices have risen from just over 200p/kg deadweight in 2007 to almost 350p/kg today, beef margins are under pressure. EBLEX figures for 2011-12 suggest the average extensive finishing unit in England had a total cost of production after non-cash items of 399p/kg deadweight. For intensive finishers the figure was 309p/kg, but this had increased by 30p by August 2012.

“Efficiency is the key – with production costs typically exceeding sale prices there could be a challenging year ahead for the sector,” says Mr Burton

“Understanding your market requirements, in terms of weights, classification, genetics and so on, is critical.”

Key points and management advice

Margins under severe pressure despite high market prices

Many producers making a loss

Understand your market

Calculate costs of production

Prepare for lower SPS receipts (Scotland, Wales and Northern Ireland)

Following an exceptionally wet summer, forage quality will have suffered and rising feed prices will mean higher costs of production. Working these out, together with fixed costs, to get a full cost of production on a per kg basis will be well worthwhile, Mr Burton advises.

The shortage of stock and high finished prices have resulted in strong prices for both beef calves and store animals. The likelihood of making a margin at some of the prices being paid looks dubious at best, Mr Burton believes.

In terms of policy, TB continues to pose challenges. “The sector may find itself subject to some form of cost-sharing mechanism, perhaps in the form of a levy.”

In addition, farmers in Scotland, Wales and Northern Ireland should prepare for a reduction in single payment receipts.“Historically beef payments have been high per occupied hectare. CAP reform may well see a transition to a regional single payment and this will result in some quite significant declines, adding pressure at an already tight time.”

Commentary based on Andersons’ Outlook 2013

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