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AHDB Cattle and Sheep Weekly

24 March 2015

EBLEX Cattle and Sheep Weekly - 24 March 2015EBLEX Cattle and Sheep Weekly - 24 March 2015

Slow retail demand impacts on cattle trade

In week ended 14 March cattle values generally eased compared with the week earlier. This confirms an ongoing downward trend in farmgate prices, largely fuelled by subdued domestic retail demand. The number of prime cattle coming forward is currently ahead of immediate processors and retailer requirements. Prices for most types of prime cattle were back on the week and consequently, the overall GB prime cattle average price was back 2p to at 355.7p/kg

Against a broad backdrop of robust demand lately, processors’ demand for cows is reported to have been varied in the latest week. Those filling domestic requirements were more keenly in the market than those with a range of export customers. The overall cow average came back on the week for the first time since mid-January, being back 3p to 231.7p/kg. Despite this modest easing it is worth noting that the cow trade still continues to trend around last year’s position.

With reports starting to suggest that waiting times at processors could be emerging, unavoidably, concerns about the evolution of farmgate prices will be developing. This is especially after the decline in the summer last year when the supply/demand balance was very unfavourable for producers. In contrast to last year, supplies in the UK and Ireland will both be lower this year. Which, in the broad picture, offers support to the market. However, there is a downside risk, particularly for the shorter term, presented from the current sluggish retail side of the equation. The upcoming Easter holiday offers some potential to deliver additional retail demand, although this could turn out to be tempered by the fact that most promotional activity is likely to be on lamb.

Cuts take a greater share of the export mix According to latest data from HMRC, beef and veal exports in January are recorded as being back 4% back on the year at 8,100 tonnes. The decline was largely on the back of a drop off in trade to the Netherlands as shipments to Ireland and France were both higher. Despite the decline in volume, the continued shift away from fresh/chilled carcase shipments to higher-priced cuts was evident again. Almost 50% of the total export mix was in the form of boneless cuts, while in January last year it was around 40%. With this product trading at £4,400 per tonne, as opposed to £1,650 for fresh/ chilled carcasses, it is clear how important this development is in delivering additional returns to the sector.

Imports were again above year-earlier levels, although the uplift was not as significant as in many months last year. At 20,600 tonnes, volumes were up 8% on the year. There was a notable increase in product from Ireland. It remained competitively priced as sterling continued to gain against the euro. In mid-January, the value of sterling against the euro was up as much as 8% on the year earlier. In contrast shipments from the Netherlands were back significantly.

Lamb trade still relatively firm

As Easter approaches and despite prices tracking just below last year’s position, for another week the lamb trade has demonstrated some degree of positivity. In week ended 18 March, despite more lambs coming forward at GB auction marts, trade still moved up. The OSL SQQ increased 3p on the week to break through the 200p/kg threshold for the first time this year at 200.5p/kg. Firm prices have also continued into Thursday, with the provisional (5pm) SQQ reaching 203.1p/kg. Despite this apparent positivity, in the fortnight prior to Easter last year the SQQ at auction marts averaged around 217.0p/kg. Demand will need to perform well for prices in that range to be achieved this year. The cull ewe market is also continuing its positive performance. With 10% fewer ewes forward the average value in the latest week was almost £85 per head, significantly ahead of this time last year.

The deadweight lamb trade has also been robust in the latest week. With estimates suggesting that fewer lambs were processed, in week ended 14 March the OSL SQQ moved up 5p to average 442.8p/kg, trading close to prices at this time last year.

Sheep meat imports lower in January

According to latest HMRC data sheep meat imports in January were reported to be back 17% on the year at 7,000 tonnes. This came as a result of significantly lower shipments from New Zealand. However, this does seem to be an anomaly in light of production developments and subsequent export data from New Zealand, even with reports of some of the increased product going into stocks. It would to some extent explain some of the robustness on the domestic market during the month. Shipments from Australia were up over 20% on the year.

The export data for January looks like it does not fully indicate the true picture again, showing a decline to the main markets, France, Germany and Hong Kong. Despite the possibility of some difficulties on the French market, with domestic farmgate prices continuing to hold up against the backdrop of increased production, intelligence would still suggest that export trade data in recent months may not reflect the true position of the sector.

Difficulties on the French lamb market

Lamb consumption in France fell last year for the seventh consecutive year. So far in 2015, it has been described as “morose” by the Institut de l’Elevage. Although it should pick up in the run up to Easter it has not been helped by retail prices remaining higher than in 2014, as there have been shortages of both domestic lamb and imported lamb in 2015 so far. For United Kingdom trade with France, the expected on-going strength of sterling could make it increasingly difficult to pass on significant price increases. Sterling has already appreciated by 10% against the euro so far this year and is now up by as much as 18%, compared with mid-March last year. Read more about the situation in France on the EBLEX website.

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