Cattle prices set to continue downward slide in 2016

Cattle supplies are likely to continue their downward trajectory as supplies look set to increase in 2016, says AHDB.

Debbie Butcher, senior analyst at AHDB Beef and Lamb, said the swelling supply would come from the large number of young cattle on the ground – both beef and dairy – and an increase in the number of dairy cattle culled as milk prices continue to bite.

On top of this, Ireland, which is the UK’s main overseas beef supplier, has forecast a 50,000-80,000t increase in beef production this year.

Irish cattle prices are way below those in the UK, making its beef much more cost competitive compared to domestic beef.

But Ms Butcher said a change in the sterling-euro exchange rate could change that, particularly if sterling continued to weaken.

  • More young cattle will add to supplies. Calf registration of beef breeds is on an upward trend and the growth of the dairy herd last year led to more dairy male calf registrations. The suckler herd also grew last year for the first time since 2011.
  • This is forecast to start affecting prime cattle supplies in the second quarter, with supplies expected to be up 2% on 2015 to 1.96 million head.
  • The number of adult dairy cows slaughtered is expected to increase 3% to 635,000 head as milk prices continue to add pressure.
  • These factors mean UK production is forecast to rise 2% to 900,000 head, steadily increasing each quarter.
  • In terms of imports and exports, Ireland’s beef sector will continue to have a large bearing on the UK market, with Irish production forecast to rise, particularly in the second half of the year. This could be slightly offset by better UK beef exports, off the back of a weakening sterling. However, UK produce may have to increasingly compete with cheap Polish beef, as production is rising in Poland.
  • Overall, supplies on the UK market will rise by 25,000t year on year.

 

UK-beef supplies-graph

The beef sector still had the challenge of persuading shoppers to buy red meat however, with convenience and price still major factors, said Ms Butcher.

Export opportunities for British beef may open up however, with Australian production forecast to be down 13% in 2016 and China’s beef imports having picked up.

Key areas to watch however, which could put more beef on the international market, include a rise in the US cow herd (up 3%) and the growth of beef exports in Latin America.

In particular, Uruguay now the 7th biggest beef operator in the world, Paraguay and Argentina where export tariffs were recently lifted.

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