Beef cashflow concerns mount as costs hit 470p/kg

Beef producers calling for an extra 20-30p/kg from processors may have to settle for flatlining factory prices as supermarkets strive to offer consumers value for money.

A plateau in price would be preferable to further reductions, which is the aim of some firms reported to be targeting 430p/kg.

Commercial beef prices have dropped 12-15p/kg since early July, to 440p/kg. This is stoking concern about cashflow positions, particularly on dairy-beef rearer-finisher units faced with huge milk powder costs and with capital tied up in animals for 18 months or more. 

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Fiercely competitive supermarkets will strive to avoid passing costs on to shoppers who face soaring energy costs, food price inflation and high rents and mortgages. 

And while cattle slaughter remains tight in the UK (July slaughterings were down 0.3% on the year to 160,000 head), availability is greater across Europe, including Ireland. This gives processors a lever to pressure the beef price.

Even more serious is the stark shortage of forage in southern and eastern regions. Stuart Vile of Meadow Quality said some farms were hugely dependent on late-autumn grass growth. “Businesses could be forced to sell cattle at the wrong time, either when the market is weak, or the animal is underweight,” he said.

Strong stores sell well 

Store prices have continued to track last year’s levels despite beef prices being as much as 13% higher on the year. Some short-keep stores are dearer.

Cattle at 500kg or more are trading strongly at Ayr, where auctioneer Willie Hamilton of Craig Wilson Livestock has seen steers average 230p/kg or more.

He said heifers were dearer on the year, at 225-230p/kg, reflecting a better forage situation in south-west Scotland this summer than last, with cattle being sold with more flesh at heavier weights.

Autumn supply

Many predict an autumn surge in cull cow beef, which could supply cash-strapped consumers with the beef they need. 

Jonny Williams, joint operations director for the co-op FarmStock, said: “A combination of herds dispersing, downsizing and culling hard is expected to see a lot of cows come out.”

He said consumers were “trading down”, characterised by a clear shift to processing cuts from processors. Whether consumers would eat out less remained to be seen.

“It’s worth remembering that the restaurant sector is, overall, not a good supporter of British agriculture on product sourcing,” he said. “A return to the supermarket could be positive for farmers.”