No price impact from OTMS end until New Year

Beef prices should remain largely unaffected by the reintroduction of over-30-month cattle until the year-end, but prospects for early 2006 look very different.

Given that only a handful of abattoirs have approval to process over 30-month cattle allowed back into the food chain from next Monday (7 November), the prime market would remain the meat trade’s main focus, said Mark Burgoyne, auctioneer of Bridgnorth-based Nock Deighton.

“I can’t see any reason why that shouldn’t be the case.”

Auctioneers say demand for prime cattle is gradually increasing week by week as abattoirs prepare for a seasonal lift in demand for beef at year-end celebrations.

But early January 2006 will be an entirely different scenario as more abattoirs gain approval for handling OTM cattle and the beef market segments.

“It will really hit once meat plants have dressed the first carcasses and determined what value they yield,” Mr Burgoyne said.

This week buyers were prepared to pay 5p/kg above the OTMS compensation level of 43p/kg liveweight for well-fleshed cows that could enter the food chain from next week, he added.

Recently released Meat & Livestock Commission figures suggest abattoirs in the Republic of Ireland are discounting OTM cattle by 10p/kg compared with prime cattle.

This is partly due to the extra costs of operating OTM-only lines.

Industry forecasts predict next week’s release of OTM cattle will increase domestic production by 185,000t in 2006.

That 27% rise was likely to put pressure on beef values, said MLC officials.

It is expected that half the increase in domestic beef supplies – about 90,000t – will help offset imports “if home-produced cow beef is as acceptable as imported product”, according to the MLC’s report reviewing the likely impact on the domestic market.

But meat agents reckoned predicting the actual effect is all but impossible.

Richard Dey, a Notts-based independent marketing agent buying for catering, food service and retail packers, said there were too many variables.

“My only observation is there will be a clear divide between pricing of primal cuts from under 30-month cattle and the market for mince and dice, whether sourced from older cattle or not,” he said.

The value of prime cattle is marginally influenced by the amount of lower-value mince or forequarter beef derived from each carcass, say traders.

Other factors, such as a surge in the supply of cattle or weaker consumer demand, could have a greater impact.

Given the predicted rise in domestic supply, importers to the UK – notably the Republic of Ireland – are already looking for alternative markets.

Michael Dealy, beef specialist at Bord Bia – the Irish Food Board – said there were opportunities to be seized elsewhere in the EU25 as well as on the world market.

Falls in production in France, Germany and Holland would mean there would not be enough beef to meet consumer demand, providing Irish exporters with new ground, he added.