Expectations push store prices higher?

By Simon Wragg

STORE prices are being encouraged by prospects of fewer finished cattle but buyers must be realistic about returns.

Emptying of intervention stores and the aftermath of the calf processing aid scheme are adding to optimism, say auctioneers.

As a result prices are accelerating away from finished beef prices, after a lapse during autumn, in contrast with last year.

Then, values mirrored the finished price of 79p/kg in a depressed market.

Todays prime cattle are hovering at 88-90p/kg liveweight while stores have moved ahead to 95-100p/kg over the last fortnight.

“Were looking at a £50-80 head increase on last year, but theres still money in it,” says Hexham-based auctioneer Scott Donaldson.

Well-grown spring-born suckled calves trading at £430 a head could collect over £200 in beef subsidy (including extensification payments) before slaughter in 18 months time, he adds.

If price prospects do achieve £1/kg liveweight as buyers are hoping, finished stock could achieve an optimistic maximum gross margin of £400 each. “Shouldnt stand a loss at that.

“But theres only one thing governing prices; what retailers are prepared to pay,” concedes Mr Donaldson.

Norman Tweddle of Uttoxeter-based Bagshaws agrees. “Im sceptical of any major rises. Prices may go to £1, but theyll come back. Retailers will decide a price and stick to it.”

Buyers at Uttoxeter displayed caution as prices rallied with a good entry of store bullocks for the Saturday market.

But a return in heifer entries last week – which attract no subsidies – calmed overall trade to suit buyers, comments Mr Tweddle.

That caution could pay dividend, believe economists. Rather than increase domestic prices, tighter supplies have already seen imports rise sharply in the first half of this year.

They are up by over 5000t, much of it from Northern Ireland where markets are running at least 20p/kg behind the mainland centres.

However competition could subside.

A smaller number of cattle are expected to cross the border from the neighbouring province either as stores or chilled carcasses following the rise in store cattle exports to other EU counties.

Irish Food Board figures show exports to the Continent rose to 265,000 head (a rise of 148%) while numbers sold to non-EU destinations also rose to over 57,600 head (up 210%) for the same period.

“Thats encouraging, but the value of sterling continues to do us no favours and imports are inevitable,” says SAC economist Stuart Ashworth.

Also the margin between farm-gate and retail prices has closed marginally and retailers will not welcome a rise in beef prices.

“I suspect industry will have to re-base itself to accept lower prices with a short-term rise to a maximum of possibly £1.05/kg, but that will be followed by a gradual fall. We still have to face an over-supply of beef in the EU,” he adds.

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