Quota lease trend

21 May 1999

Beef prices not boosted by shortage

PRICES for UK beef remain under pressure despite first signs of a predicted shortage of UK supplies. This is seen by some commentators as a signal that supermarkets, which sell 70% of fresh retail beef, are determined to maintain their margins and low shelf prices by holding the producer price down, using readily available imported beef as a lever.

The National Beef Association claims supermarket buyers are telling abattoir suppliers that they will not pay more for beef, no matter what happens to the price of UK cattle. This has meant the largest slaughterers have been forced to cap prices to maintain their margins, the NBA claims.

Peter Scott, chief executive of the British Meat Federation (formerly the Federation of Fresh Meat Wholesalers) says volume sales of fresh beef by supermarkets now depend on special, cut-price offers – and it is not the supermarkets who are making price concessions.

"Multiples will often say to suppliers, Well take it, but we cant pay you any more for it. They are offering shelf space, but on their terms." he says.

Chippenham markets Peter Kingwill confirms the steady improvement in premium steer and heifer prices, maintained since the turn of the year, was arrested last week, with price levels slipping back to those of the post-Christmas period. Unfortunately this reflects the availability of imported beef to UK buyers, he says. "If its 1p/lb less, theyll go for it for the non-premium market."

A steadily increasing proportion of beef is used in processed and pre-prepared form.

"Neither the buyer nor the consumer is much concerned about the source of the beef in a pre-packed meal," he notes. "The noise coming down the line from wholesalers is that some of the bigger supermarkets will fill in with beef from the Republic of Ireland at times when ours is dearer."

The British Retail Consortium, which represents food retailers, denies its members are manipulating the economics of beef production. "We get it from both sides," says a consortium spokesman. "When market beef prices are low, we get accused of not passing that on to customers. When they harden, we meet sales resistance and are unable to raise our retail prices."

"Dont forget that all the beef produced here has to be eaten here," says producer Bill Sinks, who has an 80-cow suckler herd near Ellesmere, Shropshire. "The retailers always have the upper hand. They want their 15% profit and they know what they will charge the customer."

Mr Sinks is chairman of the directors of Traditional Beef, a group of 1800 producers supplying cattle to ABP for Sainsbury. "The music Im hearing is that theyll slowly whittle the price down," he says, claiming the supermarkets aim is to get the producer price down to 155p/kg dw. &#42

Down-calvers not in demand

WITH the prospect of plenty of milky summer grass, demand for heifers favours animals able to maximise on production immediately – and that does mean two-year-old down-calvers. But depressed milk prices are limiting overall demand.

Auctioneer Derek Biss, of Greenslade Hunt, Taunton, was unable to report a rush to buy replacements this week, even with a liberal supply of Holstein heifers available.

Those milk producers who follow management consultants advice to get heifers in-calf in time to be in production at two years of age are realising lower prices for their surplus down-calvers than producers who have adopted a more relaxed approach to heifer rearing.

"Priority demand is for young cows or heifers capable of producing what cows would produce, and that means 35 litres a day, not the 25 litres yielded by a two year old," says Mr Biss.

This is important for herds planning dispersal sales. "When we go to take details of a sale, the first thing I do is to ask how old the heifers are. People who run flying- or nearly-flying herd replacement policies arent interested in two year olds."

As a rule of thumb, he says, current prices for two-year-old down-calvers are in the £500s, while those six months to a year older attract £700 or more. A heifer aged 2.5 years and giving 35 litres/day reached £920 in a farm sale last week.

Milking heifers and cows with calves at foot averaged £995 at the recent Reaseheath sale, reflecting the herds 10,000 litre average. "Theres a big difference between quality and non-quality," commented Clive Norbury, of Crewe auctioneers Wright-Manley. "People are looking for a quick return on their investment, and they want a lot of milk. But the animals have got to look as though they will last." &#42

Quota lease trend

MILK quota prices appear to be defying gravity at present, as the trade heads into the quiet season and farmers minds are more preoccupied with silage-making.

However, buyers, no doubt encouraged to make the investment by last weeks predictions that the quota regime would be extended to 2008, have been able to arrange fixed-term loans at fairly favourable rates.

Reviewing the rash of May and June dispersal sales, Townsends Mark Dyson detects a trend for those quitting the industry to hang onto their quota and lease it rather than to sell it when milk production ceases.

Mr Dyson considers this is due to recent budget changes which are making it progressively more attractive to retain the asset and treat is as an income-yielding fund. Reduced interest rates are also making it harder to find a better alternative investment. &#42

Dont jump! Haulier John Lee, from Bridport, waits for the coast to clear before letting out the next consignment of Dorset Horn ewes. They were destined to join 5000 other females and 200 rams at the annual Dorset May sale held at Hornchester Livestock Centre on Tuesday.

May 21 Troutbeck sale of over 1000 Blackface and Herdwick ewes with lambs at foot. Penrith. Penrith Farmers & Kidds

(01768 862323)

May 22 17th annual collective sale on behalf of Peacock & Binnington of modern tackle. Brigg. Brown & Co

(01652 654833)

May 22 Sale of Landrovers, parts and tools. Barrow. Clitheroe Auction Mart (01200 423325)

May 22 Dispersal of Elmstone flock of pedigree Texel sheep with some store cattle. Ludlow. McCartneys (01905 769770)

May 24 Annual show and sale of pedigree Dorset Horn and Poll Dorset sheep. Liskeard. Kivells (01579 345543)

May 25 Dispersal of Holsteins (243 head). Marlborough. Greenslade, Taylor & Hunt

(01935 423474)

May 25 Dispersal of animal feed milling equipment. Poole. Singletons (0161 876 0748)

May 26 Liquidation sale of potato grading and handling equipment. St Boswells. John Swan & Son (01835 822214)

May 26 Dispersal of Debenvalley herd of Holsteins, 10/10 parlour and grassland equipment. Woodbridge. Bruton Knowles (01452 303441)

May 26 Annual show and sale of pedigree Aberdeen Angus cattle (170 head). Carlisle. Harrison & Hetherington (01228 590490)

May 27 Dispersal of Greenmere herd of Holsteins (132 head). Lichfield. Bagshaws

(01335 342201)

May 27 Dispersal of arable machinery, outdoor pig equipment and grain bins etc. Heythrop. Tayler & Fletcher

(01451 830846)

May 27 Dispersal of 180 beef suckler cows, heifers, youngstock and store cattle. Clevedon. Alder King (01249 655921)

May 27 Collective dispersal of arable kit, ground maintenance and quad bike. Reading. Thimbleby & Shorland

(01189 508611)

May 28 Dispersal of Ile de France x Poll Dorset breeding ewes (400 head), Newquay. Kivells (01579 345543)

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