Market continues to favour producers
Prime cattle prices up 40% on last year while cull cow returns surge ahead
Published:
The value of prime and mature cattle is running well ahead of the same point a year ago.
Prime cattle prices are about 40% up at 285p per kg (£1.29 a lb) deadweight, while older cows and bulls have seen a significant 80% rise to 260p per kg (£1.18 per lb).
The dramatic improvement in cow prices has resulted in cull livestock prices in the UK almost matching those in France. At this time last year the French price for an O3 grade cow was 22% higher, in euro terms, than the UK price, but by early July the differential was 1%.
The improvement in cull cattle prices has been achieved in spite of supplies to the UK market increasing by 9% during the first half of this year, compared to the same period in 2007.
While some of this increase in numbers is to be expected as we are one year further away from August 1, 1996, the birth date that allows mature cattle to enter the food chain, it is likely that the strong price has drawn some extra cattle on to the market.
The deadline for the older cattle disposal scheme is looming. Any stock born before August 1, 1996, and destined for the burner needs to be booked in before September 30 to guarantee a slaughter slot as the scheme closes on December 31.
Any animals born before August 1, 1996, that remain on farms on January 1 next year will have to be disposed of at a cost to the farmer.
Looking forward, and based on experience from the first half of the 1990s, cull livestock slaughterings in the UK could increase by 2,000-3,000 head per week between July and October.
Increased supply and the relative current price position between the UK and France, an important market for cow beef, would suggest further improvement in cull cow prices might be difficult to achieve.
Prime cattle prices are showing some signs of having reached their seasonal peak. Deadweight prices eased marginally in Scotland, England and Wales last week, and have also fallen in Ireland, Germany and Spain. Nevertheless, when set against current consumer demand, prime cattle supplies remain tight and will remain so for some time.
The challenge, however, is how consumer demand reacts to the current credit squeeze and how any fall in demand, or switch to lower-cost cuts, will affect carcase realisation values for processors and butchers and their ability to sustain current farm-gate prices.
Comments coming from this link in the supply chain highlight that there has been some switching to lower-value cuts and a reduced demand for high-value cuts, but the current lower availability of prime cattle continues to mean that despite this change in the retail market the supply and demand balance still favours producers.
