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AHDB Cattle and Sheep Weekly

30 January 2015

EBLEX Cattle and Sheep Weekly - 30 January 2015EBLEX Cattle and Sheep Weekly - 30 January 2015

Cattle trade levels

In week ended 24 January, the prime cattle trade was broadly unchanged on the previous week. AHDB/EBLEX slaughtering estimates indicate that throughputs of prime cattle were around 300 head down on the week at 32,500 head. The levelling of prices suggests that the market is in some degree of balance at the present time, so the modest upwards pressure on trade of the year so far may have tailed off. However, the traditional pattern anticipated for this time of the year would be for some easing of prices, as consumer demand is subdued following
the holiday period. As yet, any slowdown in consumer demand does not appear to have had much of an impact on the trade. With the weather turning colder, it may be that the market continues to be supported.

Mirroring robustness in the finished cattle trade, store cattle prices have started the year firmly. With long-term supply still tight, demand for young stock, particularly suckler types with decent confirmation, is resulting in strong prices. Average prices for yearling Continental steers have been particularly firm, at almost £925 per head in the latest week they were around £75 dearer than in the final quarter of last year and £80 up on a year ago. Prices for Continental heifers are also doing well, particularly in the case of younger stock. Yearling Continental heifers averaged just over £800 per head in the latest week, up £115 on the year. Evidence of the interest in native-breed beef cattle is still clear and as with Continentals, younger Hereford cattle are in particular demand. In the latest week, at £670 per head, yearling steers were around £90 ahead on the year, while yearling heifers were around £120 dearer, at £530 per head. With the short term expectation that the UK beef market will be under less pressure this year than it was for much 2014, the possibility of firmer finished prices is looking more likely, which will give support to the store trade. However, with much still depending on how consumer demand performs, as always, making a profit from store cattle will ultimately depend on finishers accurately budgeting the price they can afford to pay for their stock and controlling their on-farm finishing costs.

Sharp fall in Irish slaughterings anticipated in 2015

Based on the latest forecasts from Bord Bia, a marked decline in cattle slaughterings in Ireland is expected this year. Consequently, as a result of the likely fall in production it is reasonable to expect some downturn in shipments to the UK. More details of how the Irish situation may influence the UK market can be found in the latest edition of Cattle and Sheep Update available on the EBLEX website later today.

Lamb trade remains firm

In week ended 28 January the SQQ at GB auction marts fell slightly to 185.8p/kg. Despite being back around 5p on the week overall, lambs this month have been trading at their highest level in three years. The modest easing of the trade is on the back of more lambs coming forward again this week, compared with a week earlier. However, with inclement weather arriving in some regions, there is the possibility of some movement disruptions which may affect trade.

While trade appears to be remaining firm, there has been a drift downwards as the week progressed. Having started the week at 187p/kg, the SQQ fell to 182p/kg by Wednesday 28 and Thursday’s trade looks set to be continuing this trend. It may be that the relentless rise of sterling is starting to impact on the market. The pound has hit a seven year high against the euro in the last few days. Sterling had already been appreciating slowly but steadily since July 2013 but now, with the Eurozone once more on the brink of recession and growing fears about Greece leaving the Single Currency, it has moved up even further. By 27 January, sterling had appreciated to €1.34 compared with €1.28 at the start of the year and €1.16 in July 2013. This inevitably reduces the price competiveness of UK sheep meat exports to other EU markets.

Whilst also remaining relatively firm and still tracking above year earlier levels, the deadweight lamb trade also levelled on the week. In week ended 24 January, at 424.3p/kg, the SQQ edged up less than a penny. Somewhat unexpectedly, estimates suggest that fewer lambs came forward compared to the week before.

Further fall in New Zealand EU sheep meat quota usage

New Zealand’s utilisation of its EU sheep meat quota fell to below 70% in 2014 and probably represented an unprecedented low. Based on data from the European Commission, until recently New Zealand utilised virtually all of its quota allocation and it was only from 2010 onwards that it started to fall well below it. In 2013, the proportion increased for the first time in four years but at the sacrifice of price, which put pressure on the UK market in that year, and so utilisation fell again in 2014.

In contrast, Australia virtually filled its quota for the second consecutive year; it has a much lower quota than New Zealand and as the EU is a premium market it normally fills it. The EU market only accounts for a small proportion of Australian sheep meat trade, whereas the proportion for New Zealand is nearer one third, although it is falling. Looking ahead there seems no reason to suggest that there will be a significant increase in utilisation by New Zealand exporters. Export availability is likely to remain tight in the 2014/15 season and there is the on-going demand from the Chinese market for New Zealand lamb.

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