Comment

Lower prime cattle supplies are likely to mean a favourable market balance for beef producers for the remainder of the year despite the possibility of a slowdown in the growth of domestic beef demand as consumers increasingly feel the economic pinch and the recent cooling-off of cull cow prices, in particular.

Coupled with a continued shortage of manufacturing beef on the continent, this suggests farmgate prices for prime beef and cull cows should continue to remain firm in the absence of any unusually high autumn marketings off grass.

This is the encouraging forecast of the latest market outlook from EBLEX Ltd, the industry body for beef and lamb levy-payers in England which predicted the strengthening in home-produced beef prices from the start of the year.

The year-on-year decline in prime cattle slaughterings of more than 5% recorded over the first five months of 2008 has been one of the main reasons behind the dramatic increase in beef prices seen so far this year, with R4L steer prices rising by fully 30%.

At the same time, strong European manufacturing beef demand and the weakness of sterling against the Euro has seen cull cow export volumes rise sharply and market prices increase at an even greater rate. Although slaughterings increased by around 10%, indeed, both beef and dairy cull values at auction have climbed by around 60%.

Surprisingly perhaps, given the EU restrictions on beef from Brazil, UK imports rose slightly in the first part of 2008, mainly due to a significant increase in supplies from Uruguay together with smaller increases in imports from Ireland, Germany, Argentina and Belgium.

While import levels are notoriously difficult to predict, most of the main beef exporters are currently expecting lower volumes this year. Providing the euro exchange rate continues to be unfavourable for importers, therefore, overall imports for the year are still forecast to remain below 2007 volumes.

Add to this a continued decline in prime cattle slaughterings over the remainder of the year as a result of the progressive reduction in the national breeding herd and, barring unforeseen disruptions, the market for prime beef looks set to remain strong. So too should the market for cull cows, although the traditional increase in culling towards the end of the year may have an impact and any strengthening of sterling will take a significant edge off export demand.

The reasonable market prospects for producers for the remainder of the year are especially welcome in view of the escalating cost of beef finishing feed, in particular. In this context, EBLEX points out that the ratio between the finished beef price and the cost of feed barley is currently only slightly better than it was this time last year.

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