Mince at £3.60/kg shows beef is supermarket loss leader

Retail beef prices at odds with record cattle trade have left farmers in no doubt of beef’s role in many supermarkets as a loss leader.

Latest Kantar data from December shows heavy discounting on standard mince, priced 47p/kg lower in the shops on average than it was in December 2019.

This is despite a price rise of more than 30% in prime cattle and more than 50% for cull cows.

See also: Outlook 2023: Beef prices likely to ease as input costs soar

Elsewhere, steaks lifted 11-19%, and diced beef was the closest to matching the cattle price increase, at about 40% inflation over the period (see table).

National Beef Association chief executive Neil Shand said the beef industry must understand that commodity beef is currently a “loss leader” to get shoppers through the door.

Many were familiar with the idea of supermarkets selling milk and bread as loss leaders, but this had now extended to beef and beer, claimed Mr Shand.

Mince demand

He said the phenomenal demand for cheaper manufacturing mince from cow beef was helping the industry through a time of suckler herd contraction.

A higher proportion of cull cows going through the abattoirs in relation to clean cattle could be helping retailers keep costs down on the shelf.

“The number of cows going to slaughter is not just due to the fact they are being pulled out by strong prices,” he said. “Costs and forage supplies have led to bad cows being shifted on.”

He noted the premium Scottish beef had over the rest of the UK had been eroded and was on par with many base prices in northern England.

However, Scotland’s suckler-heavy cow slaughter had bucked this trend, with the country’s cull cow average 35p/kg higher than the average of England and Wales average (see table).

He highlighted the massive market within the London metropolitan area, with a population of 14.3 million, as a source for value-added beef products – a population more than 2.5 times greater than that of Scotland.

“Scotland produces far more beef than it needs, which is why the market of south-east England remains so important and should not be forgotten,” he added.

New year trade

Early indications for 2023 are that cheaper manufacturing beef has stayed in demand after Christmas spending, as expected.

Carlisle’s prime sale on Monday (2 January) saw 10 bulls pass the £2,000-mark and five pass £3/kg. An 896kg Luing made £2,289, a 911kg Limousin topped the trade at £2,783 and an 858kg Angus cross made £2,269.

But clean cattle have also maintained strong prices, with some smaller yardings early in the week due to holiday disruption.

On Monday, Mold saw averages up on the previous two sales. A total of 29 steers levelled at 240.5p/kg, 37 heifers made 242.2p/kg, and a small entry of six bulls took the headlines at an average of 258p/kg.

Newtown St Boswells posted strong averages for a new year entry of 13 steers at 272p/kg and 83 heifers at 278p/kg on the same day.  

Short-term confidence

Many store buyers expect cattle at 420-450kg and above to be fiercely bid for this month, as demand is helped by empty sheds, tight supply, and a slight ease in the barley price.

Reports are that processors remain desperate for cattle, with no waiting lists. Scottish finishers sending big, uniform numbers had achieved 465p/kg base prices since Christmas.

Another 2-5p/kg is expected this week in some areas, with many larger finishers able to get 450p/kg.

Finishers will also be hoping exports – up 26% year-on-year for the first 10 months of 2022 – continue performing strongly. Sales to France, Germany and the Netherlands grew considerably last year.

Falling imports have been driven partly by fewer Irish shipments, which, despite Irish beef production being up 6% and cow kill up 16% last year, dropped 10%, equating to 71% of UK beef imports.

But Quality Meat Scotland lead analyst Iain MacDonald noted a disappointing trend in non-EU exports, because of fewer shipments to the Philippines and Covid-19 restrictions in Hong Kong.