Beef Supply - Update and Outlook 2021 - Hybu Cig Cymru Meat Promotion Wales
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Hybu Cig Cymru
Meat Promotion Wales
Beef Supply – Update and Outlook 2021
meatpromotion.wales
Beef Supply – Update and Outlook 2021
Contents
Introduction 3
Background 3
COVID–19 3
Future estimates 3
Prices and demand 4
Current GB cattle population 4
Wales 8
Looking ahead 9
GB supply 9
Global supply 10
Ireland 10
EU 10
US & South America 10
China 10
Australia 11
Conclusion 13
Notes & Glossary 14
1
Beef
Beef Supply
Supply – Update
– Update andand Outlook
Outlook 2021
2021
2 2
Beef Supply – Update and Outlook 2021
Introduction
Today’s position in the beef sector is set against a backdrop of various factors,
from Brexit and the Covid-19 pandemic to consumer influences and worldwide
market trends.
This report highlights the factors influencing the sector’s current supply chain position
and its prospects over the next few months.
Background
Just two years ago, low farmgate prices and low profitability were causing extreme
concern within the beef sector.
During the summer of 2019, a series of summit meetings were held to analyse the
short and longer-term causes. The discussions involved government, farming unions,
processors, and Hybu Cig Cymru – Meat Promotion Wales (HCC), and several factors
were found to be at play.
An increased domestic supply and a rise in frozen imports during late 2018 caused
market prices for all classes of cattle to fall, while subdued demand for beef combined
with weak consumer confidence due to Brexit uncertainty also negatively impacted the
beef sector.
Since that time, a series of external events have affected the meat industry. While the
beef sector was not as exposed to a potential chaotic ‘No Deal’ Brexit as the sheep
sector, such an outcome would still have brought a significant challenge. Fortunately,
the achievement of a deal to avoid tariffs helped restore confidence in the market.
Covid-19
The advent of the Covid-19 pandemic in the spring of 2020 has impacted international
trade flows and consumer behaviour. Panic-buying and the closure of the foodservice
industry initially exacerbated carcase imbalance and added to price instability.
However, retail consumers have since shown great support for domestically-produced
beef, helped by marketing campaigns promoting cooking with premium cuts during
the lockdown.
As Covid restrictions ease, it is difficult to predict if consumer demand patterns will
revert to their pre-2020 state or if increased retail purchasing of premium beef is here
to stay. However, a critical additional factor influencing market prices in the beef sector
is the supply of animals available to the domestic market. It is possible to project
future trends from the data available for the size of the cattle herd.
Future estimates
Current figures for 2021 indicate that UK beef production will fall due to tighter cattle
supplies. Figures released by BCMS suggest the cattle population in GB as of 1st April
2021 is smaller than year-earlier levels.
From these figures, it is expected that supply in the short term will remain tight, while
the potential supply of prime cattle in the longer term may increase slightly as the
number of cattle aged between 0-12 months are up around 1% on the year.
3
Beef
Beef Supply
Supply – Update
– Update andand Outlook
Outlook 2021
2021
Prices and demand
Firm prices were recorded during the second half of last year as prices recovered
from the initial price drop from the first lockdown. As much of the foodservice
industry was forced to shut during the lockdowns in 2020, demand for red meat at
GB retail strengthened. The result was a steer average deadweight peak price of
372.0p/kg during the end of November 2020.
In the second half of 2020, throughput of cattle at UK abattoirs was 1.0% higher
than the second half of 2019, and 2.2% higher than the same period in 2018.
This rise was due to a combination of elevated farmgate prices and strong retail
demand.
During the first five months of 2021, demand for beef in the GB retail sector
remained relatively firm compared to historical levels. However, some demand will
likely shift back to foodservice as the sector begins to open again.
During Quarter 1 (Q1) of 2021, the average deadweight price for steers in England
and Wales was around 45p/kg (or 14%) higher than year-earlier levels, and also 36p/
kg higher than the five-year average for the corresponding period.
In fact, the total volume of beef bought during the 12 week period ending the 16th
of May 2021 was up 12.7% on the corresponding period in 2019 (pre-Covid levels),
and therefore demand for beef at retail was still firm. However, the supply of cattle
onto the domestic market is tight due to the elevated throughput levels recorded
during the latter half of 2020.
The total number of cattle slaughtered at UK abattoirs during the last ten years has
ranged between 2.63 million and 2.84 million head. For 2020, this figure stood at
2.83 million head, with prime cattle throughput accounting for 73% of the total at
2.05 million head.
Figures available from Defra for January to May 2021 reveal that a total of 1.12
million head of cattle have been slaughtered at UK abattoirs (see Table 1).
This total is 3.5% (41,000 head) lower than the corresponding five-month period last
year and is the lowest level recorded for this period since 2015 (which stood at 1.10
million head).
So far in 2021, all categories of cattle have recorded a year-on-year decline – apart
from adult bulls, which experienced a 500 head increase. Around 23,500 fewer prime
cattle have been processed so far (a decline of 2.7%), with steers experiencing the
most significant reduction in numbers of around 13,700 head.
Despite the reduced numbers of prime cattle coming forward, this category
accounted for almost 75% of the kill in 2021, a slightly higher proportion to 2020
(74%) and 2019 (72%).
4 4
Beef Supply – Update and Outlook 2021
Table 1: Throughput at UK Abattoirs (Jan – May 2019-21)
2019 2020 2021 21 vs 20 21 vs 19
Total Cattle 1,163,800 1,159,100 1,118,100 -3.5% -3.9%
Prime Cattle 836,700 855,300 831,800 -2.7% 0.6%
Adult Cattle 268,300 261,000 260,300 -0.3% -3.0%
Calves 58,700 42,800 26,000 -39.3% -55.8%
Source: Defra
Adult cattle have been trending marginally behind year-earlier levels, with
throughput currently 0.3% below 2020. This overall reduction in cattle throughput
has supported cattle farmgate prices so far in 2021, with the average deadweight
price for steers in England and Wales reaching £4/kg by the last week of April – a
historically high average.
Due to reduced cattle throughput during those five months, total beef and veal
production is down. It is down by 2.0% on the year at 374,900 tonnes and down
a further 0.6% on 2019 levels. While numbers are reduced, the average carcase
weights for prime and adult cattle over the five months were mixed.
Both steers and heifers experienced a decrease in their average weights (down 0.6kg
and 0.1kg, respectively). In contrast, young bull, adult cow, and bull average weights
were higher than the corresponding period in 2020.
As production is down by 2% on the year, a decrease in available product combined
with firm demand from consumers at retail supports the current firm UK farmgate
prices.
Prices on the global market are also supported by tightening supplies (such as in the
EU and Australia). There is also firm demand for beef and other proteins due to the
African Swine Fever (ASF) outbreak in the Asian regions.
5
Beef
Beef Supply
Supply – Update
– Update andand Outlook
Outlook 2021
2021
6 6Beef Supply – Update and Outlook 2021
Current GB cattle population
According to the latest data from the British Cattle Movement Service (BCMS), on 1st
April 2021, the number of cattle on the ground in GB stood at 7.77 million head –
down 0.8% (65,900 head).
The BCMS figures suggest an ongoing trend, with cattle numbers decreasing for a
second consecutive year. Compared to 1st April 2019, the current cattle population
has reduced significantly by 2.7% (217,100 head).
Both the beef and dairy herds recorded a year-on-year decline as of 1st April 2021,
with the total number of beef cattle declining by 1.0% to 4.91 million head, and the
dairy herd decreasing by 0.6% to 2.86 million head.
Despite the decrease in cattle numbers, the beef herd accounted for 63% of the total
number of cattle in GB, similar to that recorded during both 2020 and 2019.
Within the beef herd, the total number of females declined by around 33,400 head
(1.0%) on the year – accounting for 41% of the total population (see Figure 1). At the
same time, males declined by 16,100 head (0.9%).
Dairy females remained relatively stable on the year and accounted for 33% of the
total number of cattle on the ground. However, the number of dairy males declined
significantly on the year. They were down by 5.2% on 2020 and down by a further
19.4% compared to 1st April 2019.
This figure is likely due to the increased use of sexed semen within the dairy
industry having an impact on the proportion of the sexes.
Figure 1: Proportion of Cattle on the Ground (as of 1st April 2021)
4%
Total Beef Females
Total Beef Males
33% 41%
Total Dairy Females
Total Dairy Males
22%
Source: BCMS
In April 2021, the population of cattle aged 30 months and over stood at 2.95
million head. This number is down 2.4% compared to 1st April 2020 and 4.8% lower
than in 2019. Those cattle aged under 30 months remained stable on the year at
4.82 million head (up 0.1%). However, this figure is 1.4% smaller than in 2019.
The breeding herd (dairy and beef females aged 30 months and over) stood at 2.85
million head. It is 62,700 head (or 2.2%) less than in 2020 and is a further 4.5%
decrease on 2019. This is in line with the June survey conducted each year, indicating
that the breeding herd in GB has primarily been following a downward trend during
the last ten years or so.
7Beef
Beef Supply
Supply – Update
– Update andand Outlook
Outlook 2021
2021
Wales
In Wales, the number of cattle on the ground on 1st April 2021 stood at 1.12 million
head. This number was 1.2% (13,400 head) more than on 1st April last year. Also,
according to the latest data from BCMS, it was 0.7% higher than the population
during 2019.
The total number of cattle in Wales accounted for 14.4% of the total cattle in GB,
similar to 2020 (14.1%) and 2019 (13.9%).
Both the beef and dairy herds recorded a year-on-year increase, with the total number
of beef cattle rising by 0.5% to 632,800 head. At the same time, the dairy herd rose by
2.1% to 483,350 head. However, unlike in GB, the proportion of beef cattle to dairy
cattle is slightly more even, with the beef herd accounting for 57% of the total cattle
in Wales as of 1st April 2021.
8 8Beef Supply – Update and Outlook 2021
Looking ahead
GB supply
When comparing the number of cattle aged under 30 months in GB between 1st
April 2020 and 1st April 2021, dairy females aged 0-12 months displayed the most
significant year-on-year increase of 5.8% (26,000 head).
This rise will lead to an increase in the number of dairy heifers, which could, in turn,
aid in the recovery of the future dairy breeding herd.
In terms of percentage change, the largest decline was seen in the dairy males aged
18-24 months category. Their numbers fell by 18.5% when compared to year-earlier
levels. As previously mentioned, this is likely due to the increased use of sexed
semen.
Regarding the potential supply of prime cattle onto the market in the short term - i.e.
beef cattle and dairy males aged 12-30 months - BCMS figures indicate there are
2.5% fewer on the ground. This data suggests that supply in the short to medium
term will remain tight, while noting that some of these cattle may be used as suckler
replacements.
All categories within the 18-30 month age bracket remained tighter on the year.
While the number of beef cattle aged 12-18 months were slightly higher than on 1st
April 2019 – beef females up 3.0%, and beef males up 3.3% (see Figure 2).
Looking at the potential supply of prime beef production on the domestic market
during the longer-term (i.e. beef cattle and dairy males aged 0-12 months), the
picture is slightly different. The BCMS figures indicate that numbers are up 1.0% on
the year at 2.0 million head (although again, some of these cattle will be used for
suckler replacements).
The figures suggest there could be a slight increase in prime cattle supply onto the
market in the future, with both the beef sexes experiencing the most significant
gains. Female numbers were up by over 8,000 head (but again, some of these
animals will not be entering the food chain), and beef males were up by 6,200 head.
Figure 2: Change in GB Cattle Population Under 30 months (1st April 2021)
15,000
10,000
5,000
change y-o-y (head)
–
-5,000
-10,000
-15,000
-20.000 0-6 months 6-12 months 12-18 months 18-24 months 24-30 months
Dairy Female Dairy Male Beef Female Beef Male
9
Source: BCMSBeef Supply – Update and Outlook 2021
Global supply
Ireland
The UK is around 80% self-sufficient in beef and veal production, with robust
domestic demand for beef hindquarter cuts. During 2020, the UK imported
approximately 33% of the beef and veal consumed, with Ireland being the dominant
supplier with a market share of 79%.
According to HMRC data, in Q1 of 2021 (January to March), beef imports into the
UK trended below year-earlier levels. It resulted from tightening in the Irish cattle
supply following the higher than expected cattle slaughter during the second half of
2020.
Bord Bia reports indicate the result was due to total Irish cattle throughput during
Q1 of 2021 being down by 13.6% (434,100 head) on the year.
It is expected this tight supply of cattle will persist for the remainder of 2021,
which will lead to an estimated 3% fall in total throughput. This pattern may impact
supplies available to the UK. Although, much of this depends on the foodservice
sector’s demand and the level of domestic beef production.
EU
As with the UK, the EU beef market is also experiencing firm market prices due to
the declining herd size, leading to tighter supply. Around 95% of beef imported to
the UK originates from EU countries, with over 75% of UK beef exports destined for
the EU – therefore, changes seen in the EU will likely influence the UK beef market.
US & South America
At a global level, the latest outlook published by the United States Department
of Agriculture (USDA) forecasted a near 2% increase in worldwide beef and veal
production during 2021 as supply chains recover after Covid-19 related disruptions.
Brazil is forecasted a rise in production due to firm domestic and export demand,
particularly from China because of the ongoing ASF outbreak. During a given
year, Brazil accounts for around 1% of total UK beef imports. Therefore, increased
production of Brazilian beef will not directly impact the UK beef sector, but it may
have an indirect impact.
The USDA also predicts production within the EU to fall for a third successive
year from the continued contraction of the beef herd. This fall may limit import
volumes into the UK; however, on a global scale, the increased production of beef in
Brazil, the US, Canada and India is set to offset decreased production in the EU and
Australia.
10Beef Supply – Update and Outlook 2021
China
It is expected that the ongoing demand for protein from the Chinese market will
continue to influence global beef prices and availability. Last year, fresh/frozen beef
imports into China rose by 28% on the year, with imports during Q1 of 2021 also
strong.
For the UK, beef sent to China accounted for just over 1% of total export volumes
during 2020. Therefore, demand from the Chinese market will likely have a more
significant influence on the global market.
Australia
Due to the 2019/20 drought, the beef herd in Australia is currently the lowest on
record for 30 years. As a result, during Q1, Australian beef exports were down over
20% on the year.
Currently, this short-term tightening in supply supports Australian farmgate prices,
while the US is experiencing strong prices due to firm demand from both their
domestic and export markets (mainly from China).
11Beef
Beef Supply
Supply – Update
– Update andand Outlook
Outlook 2021
2021
12 12Beef Supply – Update and Outlook 2021 Conclusion Although current farmgate prices for prime and cull cattle are firm compared to year-earlier and five-year averages, many factors may influence prices during the coming months. As this report has discussed, the BCMS figures indicate a tighter supply of cattle on the GB market in the short term, along with tighter supplies in Ireland. This position could support farmgate prices, especially if the demand for locally sourced beef at retail stays relatively firm. Consumer buying patterns during 2020 showed that increased demand at retail (due to the closure of the foodservice industry) can positively impact domestic prices. Eating and shopping habits changed dramatically last year during the Covid-19 pandemic, and continued economic uncertainty may further impact during 2021. Some industry reports predict that beef may not maintain the high retail sales seen during 2021 but will likely support growth compared to 2019 levels, while demand from the foodservice sector recovers. In the longer term, the potential supply of cattle in GB may increase slightly, but much will depend on the demand for beef in the UK and the global market. Beef is in demand in most parts of the world due to a combination of the foodservice industry re-opening in many countries and firm consumer demand from the Asian market. Additionally, a 30-day ban on beef exports from Argentina (in place during the start of June 2021) may increase demand further in the short term from the Asian regions as Argentina has a 22% share in the Chinese market. Australia is also heavily export-focused in the beef sector; however, as many beef producers re-stock following the drought periods, production will be limited in the short and longer term. Current strong global demand (following the pork shortage in China) has soaked up additional beef supplies on the worldwide market and supported prices. However, potential new Free Trade Agreements (FTA) with beef-exporting nations may increase global competition and competition in the UK domestic market. While the uncertain international context will pose challenges, the growing consumer interest and awareness of provenance, health, sustainability, and animal welfare provides vital opportunities for Welsh Beef to build on its excellent reputation. Welsh Beef is produced on marginal land, which is largely unsuitable for other productive purposes. Farming systems in Wales are non-intensive and rely on abundant grass and rainfall. This environment means that the meat has a lower carbon footprint than beef produced in many other countries across the globe. Furthermore, a recent partnership between world-leading food technology specialists Oritain and HCC adds a further layer of reassurance to an already robust traceability system from farm to fork. Using forensic science methods, Welsh Beef may be tested to trace and analyse its origin at any point in the supply chain. With its strong focus on sustainability, the ‘Welsh Way’ can be a global beef production blueprint. 13
Beef Supply – Update and Outlook 2021
Notes
Data obtained from HMRC, Defra, and BCMS were reported at the start of June 2021
and are subject to revision.
Volume data is shown in tonnes (carcase weight equivalent).
Registration data obtained from BCMS does not include ‘blank’ data.
Figures in tables have been rounded.
Glossary
ASF African Swine Fever
Bord Bia The Irish Food Board
Defra Department for Environment, Food & Rural Affairs
EU European Union
FTA Free Trade Agreements
GB Great Britain
HCC Hybu Cig Cymru – Meat Promotion Wales
HMRC HM Revenue & Customs
UK United Kingdom
USDA United States Department of Agriculture
14meatpromotion.wales © Copyright Hybu Cig Cymru – Meat Promotion Wales, 2021
You can also read
