Increased global demand for beef – need for £5/dwkg to ensure future supplies

That was the stark warning from National Beef Association chief executive, Neil Shand, who told The Scottish Farmer there would be a double digit retraction from the industry in the next two years if producers don't receive a much improved margin in the near future.

"We need more retailers to take the example of Waitrose, when they ensure their producers receive a margin above the cost of production and enough for future investment, to ensure long-term supplies of home-produced beef," he said.

"Farm-gate prices are better than they were but they need to be higher when it is very difficult to feed cattle with cereal costs soaring alongside all other input prices.

"The global demand for beef is high and particularly for minced beef, but if the processors continue to pay out big prices for cow beef without increasing the value of clean cattle, there will not be the cows to produce the progeny for the future of the industry," he warned.

Mr Shand added that Beef Calf Scheme numbers are already 10,000 head down on the year, which is already affecting future supplies, that are only going to get worse unless clean cattle values improve.

"The beef price needs to be nearer £5 per deadweight kg to cover increasing input costs and investment. It certainly needs to be around 480p per kg by the Highland Show and there needs to be £1 per kg difference between clean cattle and cows."

He also argued that there is scope to increase prices in the shops. At present, while ex-farm prices have improved somewhat since 2020, retail values remain similar. However, with 50% of carcases ending up as minced beef, few would quibble a 50p increase in the value of a 0.5kg pack.

"I still think consumers who would normally buy high quality proteins are better off than pre covid, because most are still working from home or at least part of the week."

In saying that, Mr Shand also believes deadweight values will improve in the coming weeks as the weather improves and supplies tighten further.

"There is not a lot of beef in storage and if we get a spike in the weather, that will set the ball rolling with more barbecues and eating out."

Scott Ferrie, livestock auctioneer at Darlington Farmers' Auction Mart, also believes the trade will improve with warmer weather.

"This is just a blip," he said. "Wholesale demand for the top end prime cuts has slowed a bit with the cooler weather, but the demand for beef is still there."

He added that Scottish cattle continue to attract some of the highest prices at Darlington being 100% beef bred. This was reflected in last week's sale where the top 11 young bulls all of which sold for more than £2000 per head, were from consignors north of the Border.

Murray Lyle sold a 16-month-old Charolais for £2003; Robert and Maimie Patterson, received £2151 for a 38-month-old British Blue. The remaining nine were Limousin young bulls – Four from Andrew Burnett averaged 252p or £2320; Dougie and Lynda Graham sold three at 258pp or £2262 and Robert Graham sold two at 265p or £2575. The Retties also topped the natives at £1806 with an Angus.

Read more: Beef price rockets to new record

Scottish steers from WM Fleming, Mosstower, were in the money too with six selling to average 259p per kg or £1711.

Further afield, demand for beef is strengthening worldwide, according to a report from Quality Meat Scotland, which pointed out Scottish R4L steer prices reached a new record high of 447.5p/kg for the last week in April.

Iain Macdonald, QMS senior economics analyst, added that record farmgate prices have been seen across large parts of the world, resulting in a more competitive global marketplace.

“The EU beef market has been particularly strong since the second half of 2021, without any obvious market signals. As a result, it points to firm demand being the driver, possibly as the economy reopens and people begin to eat out more often again.”

Market forces have seen young bull prices approach 475p/kg in Germany and 440p/kg in Poland, while Irish steer prices reached 415p/kg in late April. Across the EU, the average R3 grade young bull price has been up by around 35% on last year in recent weeks, while coming within 5% of the Scottish R4L steer price.

Rising prices in the Irish Republic have seen the price gap with Scotland narrow to around half its autumn 2021 average, with Scottish R4L steers priced 8% higher than Irish R3 steers in late April.

The EU cow market has also surged, with O3 grades priced more than 50% higher than a year ago and converting to around 435p/kg in Germany and as high as 445p/kg in the Netherlands. While overall EU beef production has been relatively flat, cow beef production did slip back in early 2022, providing additional momentum to cull cow values.

“As a result, it will currently be more challenging for traders to find cheap beef to import to Britain, while supporting EU demand for exports. It will also have underpinned values in price sensitive segments of the domestic market, particularly in food manufacturing and catering,” Mr Macdonald added.

This general market strength will have also helped support cull cow prices in Scotland, with O+3 grades reaching 392p/kg in late April.

Beyond the UK and Europe, the global beef market remains strong despite the USDA forecasting that production will rise for a second year and pass its recent high in 2019.

Steer prices in the USA have passed the £4/kg mark and are up more than 20% on last year while in Uruguay, steers are selling for around £4.25/kg. In Brazil, currency movements mean that steer prices in Sao Paulo region have jumped more than 20% from this time last year when quoted in sterling, approaching £3.30/kg.

Meanwhile, in China, wholesale beef is trading at the equivalent of nearly £9.50/kg compared to nearly £8.50/kg for lamb and under £2.50/kg for pork, making it an attractive destination for its main beef suppliers in South America, despite some challenges in getting product into the market in recent weeks due to tightened coronavirus restrictions