Strong Scottish cattle prices add pressure to processor margins
Strong Scottish cattle prices add pressure to processor margins
Recent movements in farmgate cattle prices, which have made Scottish prices the highest in Europe, continue to pile the pressure on processor margins.
According to the latest analysis by Quality Meat Scotland (QMS) the average price for R3 prime steers in the Scotland last week was reported as £4.14 per kg deadweight (dwt), compared with the GB average of £3.93 per kg.
“These are the highest prices for steers or young bulls reported across the EU,” observed Stuart Ashworth, QMS Head of Economics Services. “The next highest price was £3.65 in Greece for young bulls and £3.45 for steers in France while the Irish price stands at £3.30.”
European prices are also the highest of the major beef producing areas of the world.
“For example, prime cattle in the USA are trading at £2.85 per kg dwt while Brazilian farmers struggle to receive £2 per kg dwt. This goes some way to explaining why UK beef exports have been running lower than 12 months earlier each month since March and are down 9% so far this year. However, so too does a decline in UK beef production of over 4% so far this year,” Ashworth said.
Equally, however, UK imports of beef have fallen by 2% below last year’s levels, as UK retailers committed to using UK and Irish beef in their stores and demand for beef-based ready meals fell in the aftermath of the horsegate scandal.
“The indication from these trade statistics is that the quantity of beef on the UK market has fallen by 3%. The tighter supply has contributed to some increase in retail price with the latest price information from the Office of National Statistics showing retail beef prices are 7% higher than 12 months ago,” said Ashworth.
However, despite higher retail prices Scottish beef processors remain under significant financial pressure, he observed, as the year-on-year increase of 15% on Scottish producer price swamps the increase in wholesale and retail beef prices. Lower production is further aggravating the situation as the other costs of processing have to be carried by a lower quantity of meat to sell.
With the highest raw material cost in Europe, the ability of processors to recoup margins by exporting is limited. This is despite the opportunities that exist – for example French beef production is down 4-5% so far this year.
In contrast, processors in France have seen retail prices increase by 3.5% over the year while farmgate prices for cattle have increased only 1.4%, said Mr Ashworth. Thus helping them to absorb the challenge of a decline in cattle availability.
