Calls for £5/kg beef price grow as 2022 costs hit

Cereal-based cattle finishing is heading for enormous challenges unless beef prices can match the furious pace of rising costs and smash the £5/kg deadweight mark.

Auctioneers fear a major shock is coming to store and weaned calf prices in the autumn unless processors significantly lift prices. The prediction is for farms to sell cereal rather than feed it (at £350/t) and limited silage stocks are expected in places where fertiliser has been cut back.  

Finishers say the limited availability of cattle – as shown by the tightening of prices across Europe – should drive prices higher.

Just 12p/kg separated average cattle prices across the UK, and the rest of Europe in mid-May, compared with 40-80p/kg historically. Europe’s beef production is expected to fall again this year.

See also: Bullish markets drive wheat futures prices higher

European young bull price averages matched Irish steers in October and now match UK trade after lifting 33% since July.

But the crucial question remains: what will consumers pay for red meat and how much will supermarkets dare charge?

Short term

Processors dropped prices last week (21-28 May) and the short week caused by the Jubilee celebrations may see further short-term prices pressure as more cattle come forward, say analysts.

Trade reports have called for a minimum 470p/kg base beef price, but the range of systems and cost structures in place on British beef units will mean even this is unprofitable for many (see table).

Farmers Weekly has heard of feed costs still below £2.20 a head a day, while compound feeders face paying more than £4 a head a day.

The table below shows the advantage low-cost finishers hold in the current marketplace, although lower-cost rations are also under pressure as by-products are more sought after and silage costs rise.

Longer term 

Alongside the Ukrainian conflict, inflation, and the fortunes of other animal proteins, AHDB lead red meat analyst Duncan Wyatt sees feed price and forage availability being critical this year.

“If nothing improves, as winter housing approaches there will be some particularly difficult decisions to make, and we might see that reflected in markedly increased cow slaughter,” said Mr Wyatt.

“Globally, the beef supply situation seems relatively tight. Irish cattle availability is expected to increase in the second half of the year, which by itself could reduce some support for cattle prices here, as would any decline in beef demand brought about by rampant inflation elsewhere in the economy.”

Autumn concerns

Mark Burgoyne, cattle auctioneer for Nock Deighton said he is concerned about the price of younger cattle come the autumn.

“Who knows how it will all play out, but it currently looks like things will be very difficult in the autumn,” said Mr Burgoyne.

He said small, long-term cattle that will be finished in 2023 had been very difficult to sell and had taken a drop in value of £100 or so a head due to grassland costs.

“You can see the store cattle being the same price they are today come the autumn unless the beef price lifts significantly. And this is not what the store and suckler farmers need. Yes, the finishing costs are going up but the store and suckler farmers costs are going up too.”

Costs hit home 

Thainstone has broken all its records for cow throughputs and prices this year. Numbers are up 60-70% on the year and prices are 35% dearer.

Last year weekly throughputs hit 180 and 280-head in mid-May, which were well below 320 and 451-head this year, said Tim McDonald of Aberdeen and Northern Marts.

He said autumn calvers had been culling “extremely” hard, with mixed demand for breeding stock.

“Cows are worth more not in-calf than in-calf at the moment.” Cow trade was so good even a 738kg feeding-type Limousin-cross cow made £2,270 (307p/kg), he added. 

He also said a worrying trend was appearing of land values being inflated by investment companies looking at land for carbon capture to plant trees.