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QMS (Quality Meat Scotland)

18 April 2012

QMS Market Report - March 2012QMS Market Report - March 2012

Having been relatively stable since the start of 2012 lamb prices then began to pick up in the second half of March.
QMS - Quality Meat Scotland

Cattle Prices and Supplies

Prime cattle prices edged forward during March, posting a new record high and passing 350p/kg dwt for the first time. Forwards movement in farmgate prices over the past couple of months has occurred despite weak consumer demand; therefore it has clearly been supply-driven. Though auction prices have also edged forward they are yet to pass their 2011 peak and the prime cattle average has stabilised around 198p/kg lwt. Prime cattle are currently 19% more expensive than one year ago.

DEFRA data for slaughterings at UK abattoirs shows that throughputs continued to slide in February compared with last year as 6% fewer prime cattle were slaughtered. In the quarter ending February, average weekly slaughterings were down 7% on the year. Average weekly steer and heifer slaughterings were 5% and 6% lower, respectively, while young bull volumes fell 19% year-on-year over the three-month period.

In Scotland, February slaughterings were also down by 6%. Slaughterings of prime cattle have trailed year earlier levels since the end of August.

Throughputs of mature stock at UK abattoirs have also tightened with numbers down 8.5% on February 2011. Tightening supplies are also reflected in auction market volumes for cull cows. In the first quarter of 2012 (Q1) numbers fell 4.5% year-on-year in England and Wales and by 7.5% in Scotland. Nevertheless, the culling of mature stock remains higher than two years ago.

In addition, there have been far fewer prime cattle killed in Irish abattoirs than at this time last year. Weekly data for February and March indicate that slaughterings have been approximately 20% lower.

Average prices paid for cattle across the EU continued to show stability in March. Irish prices rose 2% during the month and are showing one of the greatest proportionate increases on the year (+21%). Elsewhere in the EU, prices have traded around 12% higher than last March.

UK trade data indicates a sharp slowdown in export volumes during January. Monthly shipments of 8,250t were down by more than 20% when compared with the opening month of 2011 and were at their lowest since May 2010. Though Switzerland purchased 90% more UK beef than a year ago, all other major customers bought significantly less.

Provisional Revenue and Customs trade data for January shows that imports have also made a slow start to the year. At 17,250t, January volumes were at a four-year low and were down 8% on the year. Fresh beef deliveries were down 6% on the year while imports of frozen beef fell by 13%.

The UK’s principal beef supplier, Ireland delivered 12,000t compared with 12,500t in January 2011. Of the other European suppliers France and Germany also delivered less beef, though Holland sent more than a year ago. Brazil and Argentina exported considerably more beef to the UK than in January 2011, but still only sending a combined volume of just 250t. Nevertheless, overall imports from South America were pulled lower by a sharp fall in deliveries from Uruguay.

Sheep Prices and Supplies

Having been relatively stable since the start of 2012 lamb prices then began to pick up in the second half of March. In the third week of the month deadweight values approached 460p/kg after holding around 440p/kg for the previous ten weeks, while auction prices increased 5% having previously been steady at just over £2/kg. This relative stability has meant that despite opening 2012 with a 15% year-on-year premium prices have now fallen marginally behind.

One factor holding prices down has been greater variation in carcase quality. At price reporting GB abattoirs around 48% of hoggs achieved a grade of R3L or better in the third week of March compared with 64% one year ago.

The decline in lamb throughputs which has been evident for a number of months continued into Februay as volumes fell 5% year-on-year in both Scotland and the UK as a whole. The average weekly kill at Scottish abattoirs over the quarter ending February was down 10% year-on-year compared with a 4% fall at the UK level; by implication supplies have been tighter north of the border.

Having shown stability around the £75 a head mark through the opening two months of 2012 cull ewe prices dipped sharply at the beginning of March before rebounding in the latter part of the month. As in the market for prime stock, ewes are now valued a fraction lower than at this time last year.

Slaughter data indicates a continuation of tight cull ewe supplies in February as 14% fewer ewes and rams were slaughtered at UK abattoirs than in the same month last year. With February throughputs at a 10-year low this may prove to be an indication that producers are now beginning to rebuild their flocks.

Heavy lamb prices across the EU have gained around 2% since the end of February to stand at an average of €5.10/kg dwt, up 6% year-on-year. Over the past three weeks French prices have fallen slightly while Irish prices are flat. In contrast Dutch and Belgian hoggs have spiked, showing respective gains of 13% and 16%. Compared to this time last year EU prices have risen by 4% on average. Only Irish producers are receiving less for their hoggs in Euro terms.

With the Euro trading between 83-84p throughout Q1 2012, UK export competitiveness has decreased by around 2% compared with Q1 2011.

January trade statistics for the UK show signs of this reduced competitiveness as monthly export volumes were 5% below year earlier levels following a 4% shortfall in December. However, tight supplies will also have limited trade. Sales to France, the largest buyer of UK lamb, have slowed down after a particularly strong showing between September and November. Though shipments to Ireland, Italy and Holland also declined, trade with Belgium grew for a third successive month. Strong inroads were made into markets in the Far East with deliveries to Hong Kong and Vietnam up 80%.

The decline in lamb imports intensified in the opening month of 2012 as deliveries were down by 31% year-on-year at just 6,600t. Shipments were limited by the combination of the continuing tightness of global supplies plus the resulting high prices which have weakened UK consumer demand. Imports from New Zealand were 26% below year earlier levels, but they increased their market share to 81.5%. This is significantly greater than both the 2011 average of 71% and longer-term average of 73% of UK imports.

Pig Prices and Supplies

Ex-farm pig prices advanced through March after declining during February. Beginning the month at 139.5p/kg dwt they then rose by 3p/kg over the following three weeks. At 142.4p/kg dwt, prices are back to the level at which they closed January and are up more than 4% year-on-year.

Growth in UK production volumes slowed markedly in February to just 0.5% on the year from around 5% in the previous two months, and this fuelled the recovery in prices.

Scottish slaughterings were 8% higher than last February. However, the addition of a processing plant last September prevents a direct comparison.

Weaner values rose during March to stand at nearly £46 a head in the third week of the month, up 2.5% since the month commenced and 11% higher than at this time last year. Rising weaner prices reflect improved producer confidence fuelled by a belief that input costs will remain below their 2011 peaks and finished pig values are set to increase.

Competition amongst domestic processors over a tightening supply of cull sows has allowed values to move forward for a second month. Strong demand and tight supplies on the continent has also helped to underpin prices. Subsequently, prices for export spec sows reached the 120p/kg mark in mid-March for the first time since April 2009.

Despite grain costing 15% more than at the beginning of 2012, it remains cheaper than at this time last year by a similar proportion. The rise of oil prices to record levels in Sterling terms during March will have generated some pressure on margins due to spill-over effects on fuel and energy prices. While it is likely that some producers will have seen margins narrow as 2012 has progressed, market conditions are generally more favourable than last spring.

Producer prices in the EU for grade E pigs in the third week of March were unchanged from where they had finished February, at €1.61/kg dwt. GB prices reopened a 5c/kg (3%) premium over the EU average having fallen behind them at the end of February.

UK pork exports in January 2012 rose by 2.5% year-on-year to 10,250t. Nevertheless, a widened premium for GB prices over the EU average during the month meant that export volumes fell to an eleven month low.

Pork imports contracted significantly when compared to the same month a year earlier with volumes down 13%. Furthermore, imports were at a 23-month low and have now trailed year earlier levels in four out of the last five months.

April 2012

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