Global price outlook positive for UK beef farmers

Global demand for beef is growing, but production in key parts of the world is nearing capacity, industry consultant David Evans told EBLEX’s recent producer conference in Bristol.

High food inflation was, therefore, likely to continue, but volatility was a real threat to producers.

“There are serious profitability problems in the animal production sectors all around the world, and global economies are reviewing protection of domestic production and food security,” said Mr Evans. These included moves to stimulate domestic production and action to protect consumers from price increases, through controls like export barriers.

The EU was the second biggest beef consumer in the world, producing 8m tonnes and importing 725,000t in 2007, he said. So controls like the CAP would continue to have a huge influence on international trade. “We cannot underestimate the effect the sudden removal of direct subsidy will have on the medium- to long-term development of the beef sector, not just here, but globally.”

Consumption

Consumption in the EU was likely to keep rising, but production was falling due to CAP reform, poor profitability and recent high feed costs, said Mr Evans. Although imports would meet some of this rise in demand, trade barriers were likely to continue for some years, meaning EU production would have to increase to keep pace with consumption.

Demand from importers like Russia, Japan and South Korea, was also continuing to grow, meaning greater competition for supplies from key exporting countries like the USA, South America and Australia.

“It’s not that easy to get beef into the EU. Globally, beef production is confined to regions that have a comparative advantage and, apart from Brazil, we’re at capacity. In my view global beef producers will really struggle to increase their exports by 2m tonnes, which means it’s got to be produced here.”

Dairy beef

Two-thirds of the EU’s beef came from the dairy herd, and Mr Evans expected that to increase to 80%. “I fully expect the suckler herd to continue to contract, both on an EU and a UK basis.”

With dairy profitability improving, the natural result was more beef from the dairy herd, he said. “Eastern European expansion is being driven by the dairy sector.

“Systems can be highly competitive due to scale, lower feed costs, adequate land for effluent management and fodder production,” Mr Evans added.

The UK is 70% self-sufficient in beef, about half of production coming from suckler producers and half from the dairy herd. Tight supply has helped push carcass prices up currency exchange rates have shifted in UK farmers’ favour and imports from Brazil and Ireland were restricted.

“But the market is unsettled, with high feed costs and low profitability. A price of 270p/kg is not enough – these high feed prices are crippling,” said Mr Evans.

UK farmers had the potential to produce a high-quality product, and the time was ripe for a change in production and grading systems to improve profitability. “The UK can be more competitive.”

Feed conversion efficiency declined as animals became heavier, and with high feed prices the cost of that weight gain increased even more, said Mr Evans. “If animal feed remains high, then finishers may need to review their strategy buying younger and finishing at a lower carcass weight. They may also need to look at alternative feeding systems to lower dry-matter costs.”

Global, European and British consumers were also changing, with a move towards minced, diced and processed products, he added. “Beef specifications will, therefore, change.”

Despite the splits between intensive and extensive steer, heifer, bull or cow beef under and over 30 months old and the range in carcass weights, specifications and prices, most beef ended up in the same pack. “I find it amazing that we have such variations in what comes into the abattoir,” Mr Evans said.

“We need to review grading systems, as what we have in place affects consumer perceptions and generally devalues the product against competing animal proteins. It also does not allow specialist suckler breeders who produce high-quality beef to differentiate their product in the market.”