Beef market outlook
- 4% fall in UK beef and veal production expected in 2020
- Imports are expected to remain at similar levels to 2019, due to a drop in demand
- Exports expected to fall by around 2% due to lower production
- Cattle prices will be determined by domestic demand and Irish supplies
In 2020, UK beef production is still expected to fall slightly, due to tighter cattle supplies. Imports are not expected to recover as strongly as first forecast, and could remain at similar levels to last year. But they could be competitively priced. This means that the level of exports needed to balance the market will be higher than previously forecast, however it will ultimately depend on domestic demand.
Both the dairy and suckler herds have continued to shrink in 2020, a trend which is expected to continue for the rest of the year. A lower requirement for replacements has allowed heifer slaughter to remain above 2019 so far. However, lower steer slaughter has meant that in the year to May, prime slaughter is down slightly on 2019.
Slaughter in 2020 is expected to be slightly lower than 2019, due to fewer prime cattle on the ground. Combined with lighter carcase weights, this will reduce beef production for the year by a forecast 4%.
UK beef trade
UK beef exports for 2020 are forecast to be lower than 2019 because of longer-term production declines. However, the fall is not expected to be as steep as previously forecast, due to an anticipated fall in domestic beef consumption caused by COVID-19. UK imports in 2020 are also expected to adjust to be slightly lower than 2019 for the same reason.
This forecast assumes current access to European markets in 2020 and beyond.
The key influencers on GB beef prices in the short term will be domestic demand and Irish supply. With domestic demand looking to remain subdued for the rest of 2020, and higher Irish supplies on the horizon, it is difficult to make a case for support to cattle prices in the next few months. Demand is expected to recover in 2021, based on demand scenario A, and so prices may benefit from that going forwards, coupled with tighter long-term cattle supplies.
Beef consumption trends
Prior to the COVID-19 outbreak, total retail volumes of beef were tracking behind the previous year, down -1.1% (Kantar, 52 w/e 23rd Feb 2020). The year-on-year performance of burgers struggled compared with a strong summer season in 2018, while volumes of steaks and corned beef also faltered as they lost shoppers. Losses for steak also impacted the eating-out market, with overall beef volumes down -3.4% (MCA, YE Dec 2019)
However, beef has proven to be an important staple for consumers during the COVID-19 outbreak, with the greatest volume percentage increase out of all the proteins, at +22% (Kantar, 12 w/e 17 May 2020). The main driver of this was the rise in mince-based meals during lockdown, due to its versatility. The sunniest spring on record also helped kick off barbecue season early, boosting sales of beef burgers. The previously declining trend for steaks also reversed.
The challenge for beef comes from its heavy presence in the eating out market, with burgers and steaks popular choices when dining out. Out of AHDB’s meat sectors, beef has the highest share of volume in the eating-out market, at 19% in 2019. Eating out volumes of beef reduced significantly between March to May, contracting to less than a quarter of what they were in 2019. And while consumers have been using takeaways more, the temporary closure of big burger brands at the start of lockdown resulted in a contraction of the takeaway market for beef during spring.
Retail volumes will remain elevated in to H2 2020 in all scenarios, continuing the trend seen under lockdown. Despite this uplift in retail, foodservice losses will result in an overall decline for beef. Under Scenario A, overall beef volumes will reduce by 4%. More information about demand scenarios can be found here.
In Scenario A, the eating out market will contract by half, as many consumers are not comfortable returning to bars/restaurants. With almost a fifth of beef volumes going via this market, beef will be hit hard by this. Not only will the sector have significant volumes to compensate for within retail, consumers do not directly replicate what they would eat out home, creating issues in balancing the carcase.
The return of big fast food chains to the delivery/takeaway market will ease pressure on burger volumes. An uplift is expected in the second half of the year, as it becomes more accessible and meal occasions that might once have taken place in a pub or restaurant transfer to the takeaway market.
As beef has the highest share of volume via foodservice, further restrictions for the foodservice market, in Scenarios B and C, would be detrimental for the beef sector. Under Scenario B, overall beef volumes would reduce by 8%, while Scenario C would result in a loss of 10%. There would also be further implications for the value of the beef sector in both these scenarios, as heightened financial worries will result in shoppers trading down to cheaper products, such as mince, than in Scenario A.
To mitigate losses:
- Inspire consumers to replicate food service experiences at home, as demonstrated in AHDB’s beef steak night campaign.
- Encourage shoppers to purchase cuts that will help with carcase balance issues, particularly those with higher price points, by utilising an effective price and promotional strategy
- Inspire stews/casseroles as we enter Autumn/Winter 2020, playing on affordability and health messaging as concerns about COVID-19, as well as the usual winter illnesses, lead to heightened interest in health
- Address health concerns by communicating the health benefits of beef
- In the longer term look to maintain and build consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers
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