Beef market outlook
- 4% fall in UK beef and veal production expected in 2020
- After a significant drop this year, imports may recover slightly, perhaps by 5%. Irish production and prices will be key
- 9% fall in exports due to lower product availability
- Domestic demand will again be important in determining cattle prices
In 2020, UK beef production is forecast to fall slightly, after a strong year in 2019. Imports are expected to recover, although not to the levels of 2018. Together these mean the level of exports needed to balance the market will be lower, but ultimately will depend on domestic demand.
Both the dairy herd and the suckler herd appear to have contracted in 2019. With fewer replacements needed, this has allowed heifer slaughter to remain elevated in 2019, and prime slaughter has been slightly higher than last year.
Added to this, heavier carcases have led production to grow around 1.5%. Prime slaughter may well top 2 million head in 2019, a number not seen since 2011.
In 2020 however, slaughter is expected to be lower, and combined with lighter carcase weights will reduce production by a forecast 4%.
Further contraction in the breeding herd is expected, continuing the trend of recent years, as low beef prices have provided little incentive to expand.
An increased use of sexed semen has allowed dairy farmers to increase their use of beef semen. Longer term, this puts some pressure on the beef suckler herd.
Calf registration data shows the number of new beef heifers that could be used as breeding replacements is falling year on year, and indicates further contraction ahead in the beef herd.
In the shorter term, a shrinking herd allows greater prime slaughter, whereas stabilisation in the herd would reduce prime slaughter with more females retained.
Domestic beef demand performed well in 2018, but was not able to repeat itself in 2019. Sales of beef were lower, both in and out of the home, and demand also shifted towards cheaper cuts.
The situation seems to be stabilising now, but unless this pattern reverses, exports will play an increasingly important role in setting domestic beef prices.
UK beef trade
Trade helped to balance the UK market this year. In response to lower market prices, imports fell by around 18% and exports increased.
Production on both sides of the Irish Sea was higher year on year at the beginning of 2019 and this weighed on prices. However, higher levels of calf exports from Ireland over the last couple of years could reduce available supplies, which might help support cattle prices going forward, reversing some of the declines seen in 2019.
Despite this, UK imports are expected to recover slightly in 2020, driven by the forecast reduction in UK supplies. For the same reason, after performing strongly in 2019, export volumes are expected to fall by around 9%.
Sterling has been strengthening lately, and if this continues, it would also help the competitiveness of EU product in the UK, and by the same token deter some UK exports.
This forecast keeps supplies available on the market fairly stable in 2020, compared to 2019, but a risk to it would be further weakening in domestic demand. If this were to happen, then the challenging conditions seen this year would be more likely to repeat themselves.
This forecast assumes business as usual access to European markets in 2020 and beyond.
Beef consumption trends
Chicken and fish continue to record strong long-term growth within the protein market, highlighting the competitive landscape for red meat.
Primary beef volumes are down 0.7% year-on-year (Kantar 52 w/e 06 Oct 19). The heaviest reduction was within roasting joints and frying/grilling steaks, while beef mince volumes sales are up 3.1% year-on-year.
There has been slight growth in pork volumes. Meanwhile, sales in the lamb category continue to prove challenging.
We expect a modest decline in primary red meat consumption in the short term, with ongoing pressure from the gradual shift from traditional meat and two veg options (such as roast dinners) towards dish-based cuisines.
There is further pressure from consumers aiming to moderate consumption, often referred to as flexitarians. Kantar defines flexitarians more tightly as consumers cutting down on red meat for health reasons, and sizes this group of people at 9% of the population (July 2019).
The beef outlook might be mitigated, if the industry:
- Continues to innovate products to meet consumer needs of convenience and health
- Inspires relevant beef dish-based cuisines
- Addresses health concerns by communicating the health benefits of beef
- Maintains and builds consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers.
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