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QMS (Quality Meat Scotland)


17 April 2015

QMS (Quality Meat Scotland) April 2015QMS (Quality Meat Scotland) April 2015


QMS - Quality Meat Scotland

Cattle

Prices and Supplies

Deadweight prime cattle prices fell back steadily through March. One of the key contributing factors was a significant weakening in the market for lean manufacturing beef. With processor requirements falling, there was an excess of cattle supply over demand, pushing producer prices lower. That producer prices fell despite numbers at price reporting abattoirs running 7.5% behind year-earlier levels during March emphasises the fall in demand. After falling by around 5p/kg dwt during February, the average steer price declined by 10p/kg during March to trade at 361p/kg dwt in the final week of the month. This was down 4% from a year earlier. Increased price competition from Ireland, due to exchange rate movements, may well have played a part.

Prime cattle prices have been fluctuating significantly in recent weeks at Scottish auctions. However, the overall trend has been for values to slip back. Indeed, prices averaged 199p/kg lwt in March compared with 205.5p/kg lwt in February. Compared to a year earlier, prices were around 3% lower through March.

At UK abattoirs, prime cattle slaughterings fell marginally behind year earlier levels in February. This was the first decline since April 2014. Numbers totalled 155,500 head. Whereas plants in England & Wales (E&W) handled 2% more prime cattle, there were declines of 4% in Scotland and 2.5% in Northern Ireland (NI).

A shift from young bulls to steers continued to show up in the slaughter data. Indeed, whereas the young bull kill fell 32% year-on-year in February to 12,500 head, the steer kill was 7% higher at 80,400 head. This indicates that farmers have reacted to the market signal of increased penalties for out-of-specification young bulls. For a second consecutive month, the heifer kill rose 1%; 62,600 were slaughtered.

A seasonal increase took the average UK prime cattle carcase weight up to 351.5kg. This was 5.3kg higher than in the same month last year; an increase of 1.5%.

As noted above, prime cattle throughput at Scottish abattoirs was down by 4% on a year earlier in February. Slaughter numbers totalled 31,650 head. For the first time since February 2014, steer numbers were lower than a year earlier. Meanwhile, the young bull kill was down for a fourth successive month and the heifer kill was down for an eighth month.

At Scottish abattoirs, the average prime cattle carcase weight was 5.5kg heavier than a year earlier in February at 368kg. This partially offset the decline in slaughterings and meant that prime beef production fell 2.5% to 11,650t. Steers averaged 3kg heavier at 389.5kg, heifers 7.5kg heavier at 345.5kg and young bull carcase weights increased by a kilo to 335kg.

Deadweight cull cow values held up in March, trading relatively steady through the month. At price reporting abattoirs, the average cow sold for 258p/kg in the final week of March. This was up 5p on the month and 7p (2%) on the year. By contrast, auction prices cooled. With marketings also falling back, this indicates sluggish demand. A sharp fall in the last week of March saw prices average 5% below year earlier levels at 117p/kg lwt.

At UK abattoirs, the mature cattle kill has begun 2015 ahead of its early 2014 levels. Slaughterings were 4% higher than 12 months before in both January and February. However, with cow carcases averaging 5-6kg lighter, cow beef production volumes rose by a slightly slower 3%.

During February, UK abattoirs produced 70,900t of beef. This was up 2% year-on-year and was the 10th consecutive month to show an increase. It was also a 4-year high for the month. Prime beef accounted for 77% of the total.

The latest household purchases data from Kantar Worldpanel shows that volumes declined 1.5% year-on-year during February. With prices averaging the same as a year earlier, the amount of money spent on beef was also 1.5% lower. This followed two 4-week periods of volume growth and three 4-week periods of growth in spending. However, the number of households buying beef continued to increase (for the 10th time in the previous 11 4-week periods), suggesting that beef is becoming more popular, but that it is being bought in smaller quantities. Looking at the different cuts of beef shows that roasting joints proved popular in February, rising by 10.5% in volume terms. This was helped by sharply lower prices. However, the volume of mince and stewing beef fell by 5%. This decline in mince sales came despite cheaper prices. Although the volume of steaks bought fell by more than 2%, households continued to spend more on them.

In euro terms, Irish prime cattle prices fell back slightly between mid-February and mid-March before firming again towards the end of March. At €4.05/kg dwt (296p/kg), Irish R3 steers reached a 5-week high in the final week of March. Compared to a year earlier, they were up by 7.5%. Looking at Irish price movements in sterling terms reveals a different situation. Indeed, due to a significantly stronger sterling, the increased euro price translated into a 5% lower sterling price when compared with the same week last year, underpinning the competitiveness of Irish beef. As March drew to a close, Scottish prices were 22% above Irish levels. However, with Scottish prices falling in March, this gap has eased back to its smallest level since August of last year.

Most countries on the continent favour young bull production over steers. The average price for an R3 grade young bull in the EU fell 1.5% during March to trade at €3.80/kg dwt (278p/kg). In Germany and the UK, prices fell by 4% and there were small decreases in France, Italy, Poland and Spain. However, there was a small increase in Ireland and Swedish prices rose by nearly 3%. Dutch prices surged by 11%. Whereas Irish prices closed February 4% ahead of the EU average, UK prices were 19% above it. Although the EU average R3 grade young bull was around 1% higher than a year earlier in late March, there was wide variation across Member States. Of the major producers, Ireland had the largest euro terms increase of 16%. The UK followed closely behind with a 12% increase and Swedish producers were paid 13% more. Other countries to see gains included Germany (2%), Poland (5%) and Holland (5%). By contrast, young bulls were valued 2-4% lower year-on-year in Spain, Portugal, Italy and France.

There were further seasonal increases to cow prices in the EU during March. The average O3 cull cow sold for €2.99/kg dwt (219p/kg) in the final week of March; 2.5% higher than in the final week of February. The UK was one of just three member States to see a small decline. Meanwhile, there were small increases of 1-3% in most of the main producing nations, but Italian and Dutch producers saw stronger gains of around 7%.

The average O3 cow price was 1.5% ahead of last year’s levels in late March. Irish and UK cow prices showed significant gains of 22% and 16%, respectively. There were also strong increases of 6-9% in Germany, Holland, Poland and Sweden. By contrast, cow prices traded 6-7% lower year-on-year in Spain and France.

In the opening month of 2015, UK beef exports trailed year earlier levels by 4% at 8,100t. Hindered by a stronger sterling against the euro, this was a 5-year low for the month. Exports accounted for 9.5% of domestic production; down from just over 10% in January 2014.

Reflecting the difficulty caused by unfavourable exchange rates, UK beef exports to the EU were down 8% year-onyear in January at 7,500t. Trade with Belgium, Germany, Italy and Holland fell by 20-40%. However, this was partially offset by higher sales to France, Ireland, Spain and Sweden.

Export sales to non-EU markets made a stronger start to 2015 than they had to 2014, more than doubling to 600t. Within this, Hong Kong was the principal market, accounting for nearly 40% of shipments. It was also the main driver of the increase given that sales more than trebled. Of the other regular trading partners, sales to Ghana were down sharply, but more UK beef went to Switzerland.

UK beef imports rose strongly in January. This was despite increased domestic production and lower exports. Deliveries were up by 8% year-on-year at 20,600t; an 11-year high for the month. Breaking this down into fresh and frozen product showed that whereas fresh beef imports increased by 12% to 15,500t, frozen imports decreased by 2% to 5,150t.

Ireland continued to be the UK’s largest supplier, delivering 14,750t of beef in the first month of the year. This was up by 10% year-on-year and is likely to have been influenced by the weaker euro making Irish beef look attractive in price sensitive markets. Splitting imports from Ireland into fresh and frozen product showed that both showed significant increases – 11% for fresh and 8% for frozen. Other EU suppliers to increase deliveries included Holland, Poland, Spain, Belgium and Italy. On the other hand, Denmark, Germany and France shipped less beef to the UK than at the beginning of 2014.

Arrivals of non-EU beef fell significantly from a year earlier in January. Imports were a quarter lower at 1,650t. Trade with Oceania and Brazil fell sharply, but imports from Uruguay, Namibia and Botswana picked up.

Sheep

Prices and Supplies

Until the final week of March, when an increase in supply saw prices cool slightly, deadweight hogg prices at GB price reporting abattoirs had been rising steadily since early February. They ended March at an average of 450p/kg dwt, having traded at 428p/kg dwt in the last week of February. A seasonal lift in demand ahead of Easter is likely to have been the main driver. However, since the market had risen faster last spring, prices have fallen 6% behind 2014 levels.

Carcase quality followed its historical trend through the opening quarter of 2015 (Q1). Until the second half of March, when it reached a 4-year high, carcase quality had generally been slightly lower than in recent years. In the final week of March, 57% of hoggs graded at R3L or better. 57% was also the Q1 average; this was down 1 percentage point on Q1 2014.

At Scottish auctions, prime hogg prices picked up through the first three weeks of March before slipping back. It is likely that prices moved in line with the Easter trade, dipping back once the peak procurement period had drawn to a close. At the end of March, prices had fallen back to an 8-week low of 191p/kg lwt. Compared with a year earlier, hoggs were valued around 9% lower.

It is likely that in addition to a well supplied market, hogg prices have failed to match last year’s levels in the run up to Easter due to exchange rate movements. In the three weeks after the European Central Bank began its bond-buying programme on March 9, sterling averaged 16% stronger than a year earlier against the euro. As a consequence, exporters will have had to accept significantly lower sterling prices in order to keep their euro price competitive on the continent. In turn, lower margins on exports will have limited the price processors have been willing to pay for hoggs. However, the euro did regain some ground in late March after some positive economic data was released. This has pushed the euro up to 73.5p, its highest value since late February, and down 11% year-on-year.

February slaughter data for the UK showed that the hogg kill was up by 11% year-on-year in February at 889,000 head. Nevertheless, it remained slightly below February 2013 levels. Abattoir throughput in E&W continued to drive the overall increase, rising 13%, while there was a 3% increase in Scotland. By contrast, NI plants killed 16% fewer lambs than in February 2014.

The average carcase weight of the hoggs slaughtered in UK abattoirs during February was 20kg. Compared with a year earlier, this was up by 0.4kg. As a consequence, UK prime sheepmeat production was up by 13% year-on-year at 17,750t.

In terms of the Scottish abattoirs, February data from the Scottish Government shows that kill numbers were relatively stable through the month at 27-28,000 head. This meant that although they were running behind 2014 levels after three weeks of the month, they ended the month 3% higher because slaughterings had fallen back significantly in the final week of February 2014.

Scottish Government figures for February showed that hoggs reaching Scottish abattoirs continued to prove heavier than a year earlier. At 20.7kg, the average hogg carcase was 0.6kg heavier than 12 months before. This resulted in prime sheepmeat production rising by 6% year-on-year.

Cull ewe prices rose sharply at the beginning of March, reaching £79 a head. After falling back in the following week they then settled around the £75 mark for the remainder of the month. However, since prices had been on a seasonal upturn through March 2014, the premium over last year narrowed to 5%; its lowest level since late August. With auction volumes remaining much lower than last year, this suggests that demand has begun to cool.

Ewe slaughter at UK abattoirs was down by more than one-fifth year-on-year at 114,400 head. This was the lowest February kill since 1988. With latest census figures reporting an increased UK breeding flock in December, the continued low level of culling indicates that flock rebuilding is underway.

As lower ewe culling partially offset increased prime production, UK sheepmeat production rose at an annual pace of 6% in February. Volumes totalled 20,800t.

During February, Kantar Worldpanel data indicates that GB households bought 12% less lamb than a year earlier. This was despite lamb averaging 2% less expensive to buy. Looking deeper into the data shows that while chops & steaks and leg roasts struggled to sell, shoulder roasts and lamb mince performed much better than in the same period of 2014. While average prices for leg roasts were flat year-on-year, chops & steaks and shoulder roasting joints were 2.5% cheaper and mince prices averaged 8% lower. Sales volumes for both home produced and New Zealand lamb declined, falling 9% and 29%, respectively.

At the end of March, EU heavy lamb1 prices were 6% ahead of their late February level, averaging €5.74/kg dwt (£4.20/kg). UK and French prices rose slightly slower than the average. In Ireland, there was a stronger 10% increase and Romanian prices surged by more than 15%. By contrast, farmgate prices slipped back in Spain.

Compared to a year earlier, heavy lamb prices averaged 5.5% higher across the EU28 in the final week of March. Prices rose at a similar pace to the average in France, Spain, Ireland and the UK. However, in Romania, despite rising sharply in recent weeks, prices remained nearly 20% below year earlier levels.

The average light lamb2 price in the EU edged up through March. By the end of the month it stood at €6.24/kg dwt (457p/kg). Increases of 4% in Greece and Hungary and 14% in Italy were nearly offset by falling prices in Spain (-8%) and Portugal (-2%).

Light lamb prices continued to hold well ahead of last year in most reporting countries and the overall average was 16% higher. This was led by Italy, where prices ended March a third higher than 12 months before, and Hungary, where they were up by a fifth. Although prices rose more slowly than the average in Greece, Spain and Portugal, the gains were still significant at 6%, 12% and 14%, respectively.

The latest trade data shows that UK sheepmeat exports were down by 22% year-on-year in January. The slow start to the year came despite higher domestic production and reflects the difficulties caused by exchange rate movements. Export volumes totalled 6,300t and were at an 8-year low for the month. As a proportion of sheepmeat production, exports fell to 30%; down from 42% in the first month of 2014.

Export shipments to EU markets fell 10% year-on-year in the opening month of 2015. Sales to the key French market were down by 15% to 3,400t. Meanwhile, other important markets of Belgium, Germany and Holland showed declines of 21%, 13% and 10%, respectively. However, trade with Italy and Ireland increased by approximately 40%.

Non-EU trade was also lower than a year earlier at the beginning of 2015. Sheepmeat exports fell by 70% with most of the decline the result of reduced opportunities in Hong Kong. Although the Swiss market did pick up strongly, this growth was from a low base.

With UK production well above last year’s levels and the export trade struggling due to the strength of sterling, UK sheepmeat import requirements fell back in January. Import volumes totalled 7,000t; down 17% year-on-year.

At 4,450t, the volume of sheepmeat arriving in the UK from New Zealand (NZ) decreased by 19% year-on-year in January. This was despite it averaging 4% cheaper. The share of NZ product in total imports fell by 3 percentage points to 63%. By contrast, import volumes from Australia rose by a quarter to 1,850t, pushing its share of the total up 9 percentage points to 26.5%. In terms of the smaller suppliers, whereas imports from Ireland fell significantly, there were increases from France, Spain and Chile.

Pigs

Prices and Supplies

Farmgate pig prices finally showed some signs of stabilising in March after a prolonged period of decline. Indeed, having opened the month at 132.7p/kg dwt, the SPP averaged 132.6p/kg in the final week of March. During February, prices had fallen by 6p/kg (4%). Despite steadying, prices remain around 18-19% lower than a year ago. Historically, prices have tended to pick up through the spring and into summer as supplies tighten.

In the market for weaners, prices have been more stable during the first quarter of the year than in the finished market. This may have been influenced by producer expectations of a seasonal increase in prime pig prices. Industry sources have also suggested that supplies of 30kg weaners have begun to tighten up. Even so, prices have remained a fifth lower than last spring.

Once again, UK abattoirs proved well supplied with prime pigs in February. Throughput was up by more than 4% year-on-year at 815,800 head and was at a 13-year high for the month. In Scotland and E&W, slaughterings rose 3.5% while NI plants handled 6.5% more prime pigs.

Though the average carcase weight at UK abattoirs for prime pigs dipped back half a kilo on the month, at 82.3kg, it remained well above year earlier levels. When added to the rise in throughput, the 1.5% (1.1kg) increase in carcase weights resulted in prime pigmeat production rising nearly 6% year-on-year to 67,200t in February.

A 3.5% year-on-year increase in prime pig slaughterings at Scottish abattoirs took numbers to 24,050 head in February. Nevertheless, supplies still trailed February 2013 levels.

The total volume of pigmeat produced by UK abattoirs rose by more than 6% year-on-year in February. Although the sow kill fell, carcase weights were higher and this added to the increase in prime pigmeat production, having mostly subtracted from it in recent years.

GB household pork consumption volumes fell significantly compared to a year earlier at the beginning of 2015. In both the 4 weeks to February 1 and March 1, the volume retailed was down 5%. This was despite falling prices and suggests that demand for pork has been very sluggish. Indeed, households have consistently spent around 10% less than a year earlier buying pork since October. During February, the most expensive category, chops & steaks and the cheapest, shoulder roasts, both saw falling consumption despite lower prices. However, lower prices did appear to have underpinned an increase in leg roasts. The only category to see rising prices, loin roasting joints, had the largest decrease in consumption of nearly 20%.

During March, the EU average farmgate price for grade E pigs initially edged lower before steadying. This followed strong gains during February. At the end of March, prices averaged €1.41/kg dwt (103p/kg); 1.5% lower than in the final week of February. In recent weeks, prices have been trading at their highest levels since late October/early November.

Price changes across the major pig producing nations in March were generally either up 2-3% or down 3-4%. Denmark, Spain and France were in the former category while Belgium, Germany, Holland and Poland were in the latter.

Compared to a year earlier, pig producer prices were 10% lower on average. Countries falling closely in line with the average included Denmark, Germany, Holland and Poland. However, there were more significant declines of 13% and 20%, respectively, in France and Spain. In the UK, the euro terms decline was 5%.

UK pigmeat exports were 10% lower in January 2015 than 12 months before. Volumes totalled 15,400t, of which 14,400t was pork and the remaining 1,000t, bacon & ham. Pork exports were down 7.5% and bacon & ham sales fell 36%. Given a strong increase in domestic production, it seems likely that a surplus of supply over demand in the European market coupled with a stronger sterling held back UK exports.

However, this may not necessarily have been the case. Looking deeper into the trade statistics shows that the decline was mainly down to a sharp fall in sales to China and Hong Kong. By contrast, trade increased slightly with three of the four main EU buyers of UK pork – Denmark, Germany and Ireland. Adding in a decline in sales to Holland meant that sales to the main EU markets were only marginally lower.

Moving on to imports, the UK brought in 1% less pigmeat from overseas than it had in the opening month of 2014 as deliveries slipped to 48,500t. A 3% rise in imports of cured pigmeat to 19,800t was more than offset by a 3.5% decrease in deliveries of fresh and frozen pork to 28,700t. It seems likely that the combination of an expansion of domestic production and weak demand limited imports despite exchange rate movements and the wide availability of cheap pigmeat in the EU market.

Denmark and Holland, both grew sales of fresh and frozen pork to the UK in January when compared to a year earlier. However, this was more than offset by declines of around 3% from Belgium, 9% from Spain and 15% from France, Germany and Ireland.

In terms of bacon & ham, Holland delivered a quarter less but this was more than offset by increased arrivals from Denmark (26%) and Germany (15%).

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