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AHDB Cattle and Sheep Weekly

09 January 2015

EBLEX Cattle and Sheep Weekly - 9 January 2015EBLEX Cattle and Sheep Weekly - 9 January 2015

Trade strengthens over the holiday period

With a fluctuating degree of activity over the past couple of weeks, it is difficult to ascertain a realistic picture of trade. However, reports suggest that processors have been active in the market, securing enough cattle to replace stock depleted over the Christmas holiday period.

With the weather turning colder, it is possible that the robust demand of the holiday season could be maintained as the New Year gets underway, which has the potential to add some support to the market going forward. However, on the flip side, the traditional pattern for January and early February would be for some easing of prices as consumer demand is subdued, with budgets tighter following the holiday period. As such, this could temper any upwards pressure on prices.

With the slow and steady recovery in prices continuing in the run up to Christmas, deadweight cattle prices have strengthened notably over the two-week holiday period. In week ended 3 January 2015, at 361.9p/kg, the all prime average was up almost 8p, compared with the last uninterrupted week before Christmas. Prices moved up across the board and R4L steers and heifers both averaged over 370p/kg for the first time since March last year. Young bull prices also continued their upwards momentum. Gaining more of the ground they lost in the summer, R3 young bulls strengthened another 10p over the fortnight to average 350.4p/kg, a price level last achieved at the very start of last year.

Producer share of retail price increases

The share of the final retail price of beef going to the producer in December increased, compared with a month earlier. With seasonal demand giving some support to farm gate prices in the latter stages of 2014, the spread between the two price levels narrowed. This came at a time when retailers were competing to secure festive sales with discount price promotional activity. At 52% in December, the producer share has increased substantially since the summer. The EBLEX Retail Price Survey suggests it was a drop in the price of roasting joints, such as topside, that drove the downwards trend in the overall retail price of beef in the month, as prices of most other cuts, including mince, were unchanged on the month before. Despite this move upwards, as for most of 2014, the producer once again received a smaller share of the final retail price year on year. Throughout May to September 2014, producers were consistently receiving below half of the final retail price, a situation which has not occurred since 2009. Going forward, with the market fundamentals pointing to tighter supplies in the medium term, it is possible that the balance may be more firmly in producers’ favour than for much of last year.

Positive lamb trading for the start of the New Year

With the Christmas and New Year holiday periods over, the liveweight lamb trade is back to a more normal trading week. The fluctuating trade over the holiday fortnight appears to have been replaced by a return to some positivity in the trade. In week ended 7 January the OSL SQQ averaged 187.6p/kg. At this price, in the first week of the year lambs have been trading around 7p ahead of the corresponding week last year which appears to confirm the seasonal uplift evident throughout December has been maintained. As the week progressed, throughputs at GB auction markets picked up but prices continued to hold up. The SQQ averaged 187.5p/kg on Monday 5 January but had moved up to 188.6 by Wednesday. Current indications for Thursday’s trade suggest a continuation of the stability in the trade. Additionally, the cull ewe trade at auction marts has also started the year robustly. Averaging over £85 per head in the latest week, cull ewes are trading over £30 up on a year earlier as demand remains firm.

Despite the fine balance in the market at the moment, the tighter than expected supply of lambs through the autumn gives rise to the expectation that the market will be well supplied in the short term. Demand, at home and abroad, will need to respond to the higher supply if price falls are to be avoided. The relatively early date of Easter could help, at least limiting the length of any subdued prices.

Producer share of retail price highest for six months

The producer share of the retail price of lamb in December increased on the month before. Up four points on the month, the measure reached 54%, its highest position in the last six months and its biggest December share since 2011. This was a direct consequence of a fall in in the average retail price, on the back of promotional activity, against the backdrop of a return to a seasonal increase in farmgate lamb prices. Not reflective of the position throughout much of the second half of the year, when the producer had received a lower share than a year earlier, at this level, the measure was three points ahead of its level in December 2013.

According to the EBLEX retail price survey the fall in the average retail price of lamb was driven by whole legs in particular, as well as diced lamb for stewing being discounted ahead of the festive season.

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