Outlook 2014: Beef prospects

Beef prices reached historic highs in 2013, exceeding £4/kg deadweight for an R4L carcass. This is a doubling of prices in a little over seven years.

Lack of supply has been a major price driver, says Andersons consultant Ben Burton. The 2013 June survey shows the UK beef herd shrank by 2.8% year-on-year and the dairy herd by 1.6%. Beef production across the EU-27 was 5% down in the first six months of 2013, according to Eurostat figures. Of the major European beef producers only the Republic of Ireland shows an upward trend.

“Looking to 2014, forecasts show UK and EU output is unlikely to increase next year,” says Mr Burton. “However, further price rises may be limited by an expanding, confident, Irish beef sector eager to develop the UK market further. This might be exaggerated if the pound strengthens against the euro.”

Longer-term, the end of EU milk quotas in 2015 could lead to a rise in dairy cow numbers across Europe, resulting in a knock-on effect in the beef market. “On the plus side, South American beef exports continue to find better prospects for their product outside the EU.”

UK consumer demand for beef remained robust over the past year, despite higher prices and the horsemeat scandal. However, there has been little overall growth in the market in the past 20 years – beef consumption per head of population has actually declined, he notes.

Key points

  • Lack of supply a key price driver
  • Further rises may be limited
  • Profitability remains marginal
  • Know your market
  • Calculate cost of production

At the farm level, profitability is still marginal at best, with last winter’s high feed prices eroding the benefit of high output prices. Cereal prices have eased, providing an opportunity to review purchased feed options. But the cost and working capital requirement of store cattle remains a major issue for many producers, says Mr Burton.

“To help maximise margins, three core principles are worth observing, regardless of production system: Know your market; know your costs of production; and pay attention to detail on key factors like nutrition, health and forage management. For example, consider using a nutritionist to deliver the most cost-effective diets. Even tiny changes can produce significant financial gains.”

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