Sales of low-value cuts increase due to virus
Over 60% of all beef sold through mainstream retailers during the ongoing Covid-19 crisis was mince and other low-value cuts, according to recent data from Kantar.
At the height of the recent coronavirus panic buying, Kantar data for the week ending 23rd March showed a 45% increase in the amount of beef mince being sold. This means that over 60% of all beef sold through mainstream retailers was mince and other low value cuts.
According to the British Meat Processors Association (BMPA), retailers have been ordering a significant amount more mince and other low value cuts, instead of their usual mix of mince plus other cuts such as steaks and roasts.
In addition, the Government enforced lockdown has meant that family gatherings for Easter and Ramadan are having to be cancelled so people are not buying more expensive cuts.
Without sales of other parts of the carcase, including hides, skins and byproducts, the market for which has also collapsed, to balance out cheaper mince sales, the pricing model for meat processors stops working. Those expensive cuts can’t be sold into the food service market as that has all but shut down. Nor can they be exported because our largest export market, Europe, is having exactly the same problem as the UK.
BMPA has also reported that cold stores are almost full to capacity with more expensive cuts of meat, for which there is currently no market. Most retailers are still avoiding ordering other cuts in favour of buying more mince.
As a result of this, meat processors are sitting on an unsustainable amount of fresh meat that will have to be frozen and therefore de-valued in the hope that food service demand will come back at some point in the future.
The BMPA also said that panic buying has resulted in well stocked home freezers so, for now, that means demand from retailers will take a sharp slide. With a loss of workforce capacity in meat plants approaching 20% due to staff absences and the consequent slow down of processing lines, there is currently a drop off in the number of animals being bought.
“The current situation all points to lower livestock prices. In a normal, balanced market a processor would only want to turn about 40% of a carcass into mince.”
According to the BMPA: “The current situation all points to lower livestock prices. In a normal, balanced market a processor would only want to turn about 40% of a carcass into mince. The reason for this is that every increase in the amount that has to be put into mince devalues the whole carcase substantially because mince is typically sold by processors at zero or near zero profit margin.
“As an example, if you take flat brisket, a relatively low value cut anyway which accounts for about 3.5 % of the carcase, and mince it, this reduces the overall value of the carcase by 14p a kilo. The same applies when meat has to be frozen instead of being sold chilled. A fillet steak that would normally sell for £20 a kilo will only fetch a fraction of that when frozen.
“While processors can absorb this distorted market demand and price shocks up to a point, it will be impossible to shield producers from a lowering of farmgate prices using mechanisms in the food supply chain alone. It may require intervention from the Government to support farmers through the current crisis, so we emerge with our farming industry intact and preserve Britain’s essential food security. Alternatively, retailers could help by buying a range of cuts and bring that wider choice to consumers through promotions.”