Beef prospects remain cautiously positive following strong price growth throughout most of 2011, which has put finished prices at historical highs.
Despite significantly increased domestic supply, finished steers were worth about 345p/kg deadweight at the end of November, largely due to higher exports, says Andersons consultant Ben Burton.
“While volumes have not yet returned to pre-BSE levels, they increased by over 40% in the first five months of 2011 compared to the same period in 2010, mainly to EU destinations,” he notes.
Store cattle prices have strengthened by up to £150 a head and this trend is likely to be maintained through 2012. Conversely, calf prices have weakened on lack of export markets and high cereal prices.
Although the national beef herd grew by 2% in 2010, its long-term downward trend continues owing to higher input costs and the relative increase in arable profits.
This, coupled with high beef export demand and reduced bull beef supply due to the cost of feed, is expected to tighten domestic supply. “Domestic prices could hold if continental demand compensates for a potential reduction in domestic demand following government austerity measures and higher inflation,” says Mr Burton.
Strong feed, straw, fertiliser and fuel prices are a concern. Recent EBLEX figures puts costs of production for an English lowland suckler herd for April to September 2011 at £2.96/kg liveweight, and for an extensive English finishing unit £4.11/kg deadweight. These are up 4.2% and 3% respectively on the figures for the year to March 2011.
The feared trade deal with the Mercosur trading block, opening the EU market to South American imports, looks unlikely to be agreed in 2012. South American production costs are rising and if world prices strengthen, the longer a deal is delayed the less the impact will be on UK producers.
TB is a further political challenge. “Despite these negatives, the beef industry continues to face the future with optimism, with quality replacement stock continuing to command high prices.”
• Export recovery has boosted ex-farm values
• Domestic supply set to tighten
• Cost of production remain real concern
• Export demand, impact of domestic austerity and higher inflation are main influences on price prospects
* Commentary for this article is based on Andersons’ Outlook 2012. Copies can be obtained free of charge by calling 01664 503200 or it can be downloaded from the Anderson’s website – see ‘Publications’.
* The Andersons Centre will be running its popular series of spring seminars on the prospects for UK agriculture in more depth at locations around the UK in spring 2012. These briefings are aimed at farm business managers as well as professionals working with companies in the agricultural sector. Detailed overviews of each of the main sectors of UK agriculture will be covered as well as comprehensive discussion of the latest agricultural policy developments. For details go to the Andersons Centre.