Beef Market Outlook
- Beef production is expected to be up 2% for 2022, bolstered by higher than anticipated cow throughput
- Overall beef consumption is forecast to drop by a moderate 4% in 2022, dominated by a slowdown in retail sales
- Beef imports are forecast to increase as foodservice demand remains in growth year-on-year
- Exports of beef are still forecast to grow, helped by higher domestic production and the tight supply situation facing the continent
Current market situation
GB cattle prices have stayed at record highs since the beginning of the year, generally strengthening week-on-week as the year has progressed. Prices have found support from a combination of tighter cattle supplies and generally higher foodservice demand for beef (manufacturing beef in particular), a trend mirrored across Europe and around the world, as eating out markets reopen after the COVID slumber.
GB deadweight cow prices averaged 365p/kg in June, up 93p from January’s average, standing 80p ahead of where they were a year ago. Prime cattle prices gained 36p on average during the first half of the year to stand at 442p/kg during June, up 50p year-on-year.
Higher farmgate prices will have gone some way to abating the impact of increased input costs facing producers. The industry was already facing inflated costs for feed, fertiliser and fuel when we released our previous outlooks in January. However, the war in Ukraine - a new and incredibly volatile development in markets since our last release - has exacerbated the situation.
For the first six months of the year, slaughter of prime cattle in the UK has been lower compared to the same period a year ago. Supplies were particularly tight during the first quarter but increased into the second. According to Defra’s figures, prime slaughter balanced at -1% year-on-year overall for the first half of the year, with 984,000 prime animals processed. This is largely in line with our previous forecasts from January.
Despite the tighter supply situation so far this year, UK prime cattle slaughter is expected to show slight growth for the year overall vs 2021, by 1.6%. Population data from the British Cattle Movement Service suggests that year-on-year, more cattle will be available for marketing in the second half of 2022 and into 2023. Typically, cattle slaughter is higher in the second half of the year than the first, spurred on by pre-Christmas buying, and producers managing stock levels heading into winter.
Higher input costs may also lead to cattle being marketed sooner rather than later to ease pressure on forage stocks. However, so far this year, average weights have been largely unchanged from a year ago, and indeed slaughter cattle appear to be marginally older. Feed prices have eased back recently, however there is little sign that prices will return to more recognisable levels, due to a tighter global supply outlook.
Cow kill during the first half of the year has been higher than anticipated, potentially reflecting a combination of incredibly attractive cull prices and pressure from more expensive inputs. Cow prices have likely been supported by increased demand for manufacturing beef in both the UK and the EU, against a global backdrop of higher demand and tighter supply.
How producer returns keep pace with input costs will be a key determinant of stocking levels heading into winter, with culling policies likely to come under increased scrutiny. Considering the increased level of kill seen so far, and the seasonal uplift in cow throughput in the second half of the year, we would expect more cows to come forward for the year overall. Stronger milk prices may limit slaughter levels somewhat, depending on how well they keep pace with costs. Slaughter of cull cows is forecast to increase by 3% in 2022.
Both the dairy and suckler breeding herds are forecast to remain in a state of steady decline, pressured by issues including loss of direct subsidy, increased input costs and associated effects on profitability.
These slaughter forecasts are expected to contribute to a 2% increase in total UK beef production for 2022, compared to 2021.
Data on calf registrations and calf slaughter suggests that UK beef production in 2023 could see further moderate growth, as changes in dairy bull calf management are implemented. More calves are expected to be made available for prime slaughter during the year as a result of these changes.
Increased use of beef semen on dairy cows will mean that more beef-type cattle with increasing meat quality will come from the dairy herd, contributing to overall production. However, countering this is the expectation of ongoing contraction of both the dairy and suckler herds, due to issues including loss of direct subsidy, increased input costs and associated effects on profitability. This could act as a limiter for further growth in beef production.
Beef consumption trends
Food trends over the last few years have been dominated by the impact of the COVID-19 pandemic and recovery. However, over the last six months, the cost-of-living crisis has come to the forefront as shoppers are impacted by significant economic challenges.
High food price inflation has started to be seen in both retail and foodservice, and has resulted in market volumes suffering as inflationary behaviours begin to kick in. Meat was already a higher price food category, and many proteins and cuts have seen above-market price increases. We predict there could be further price rises, which have been taken into account in our outlook. This has already led to an increase in people cutting back on meat because of price, with 35% of people who ate less red meat in the past month claiming expense as the reason compared to only 16% last year (AHDB/YouGov Tracker, May 2022).
Before the cost-of-living crisis hit, beef was already starting to decline in retail as shoppers moved back to eating out, and cooking fatigue in home meant shoppers looked for more variety in their meals. Volumes in retail were down 10.6% year-on-year as we compare back to a period in 2021 with more COVID restrictions (Kantar, 52 w/e 12 June 2022). In the last year, primary beef has seen volume declines of 15%, with mince accounting for 38% of primary losses, despite having the lowest average price per kilogram of all beef cuts. Processed beef is down 9%, with burgers and grills accounting for most of the decline. This reduction in sales has been seen across all cuts, and more detail can be found on our beef retail dashboard.
The eating-out market has recovered well for beef, with volume sales up 105% year-on-year, as more consumers ventured back out for meals. Meat-centred meals, such as steaks, roasts and ribs are contributing the most to growth, with burgers also performing well. Takeaway/delivery has started to decline from the heights of last year, down 8.8%, as shoppers no longer have to order in their favourites. AHDB estimates show that eating-out recovery has made up for takeaway losses, with total out-of-home volumes still up 32.7% year-on-year, and up 0.8% on 2019 levels. For full details see our beef foodservice dashboard.
The continued strain on shoppers’ budgets is going to have the biggest impact on behaviour going forward. This will not only affect retail, but will also slow down eating-out recovery as 36% claim they are planning on eating out less, with money saving being the top reason for this (AHDB/YouGov Tracker, May 2022).
Beef through retail may benefit from some shoppers moving their out-of-home spend in home. However, we predict more shoppers will be lost to cheaper proteins as well as a return to the pre-COVID trends of shoppers cutting back on meat for health, and factors such as the environment and animal welfare.
For this reason, beef volumes via retail are predicted to slow. Levels have been tracking below 2019 for the last 6 months and we expect this trend to continue during the second half of 2022. Positively, roasting joints may benefit from a small boost at Christmas if we are completely restriction free. Out-of-home, we predict beef will have the strongest recovery of the red meats. However, we believe eating out will still not return to 2019 levels, but takeaway and delivery will remain buoyant.
The beef outlook might be mitigated, if the industry:
- Encourage consumers to continue to eat out-of-home. Opportunities in the eating-out market include personalisation, indulgence, quality cues and pushing reputational factors such as health, sustainability and backing British. Takeaway/delivery is also an important trend for beef to capitalise.
- Encourages shoppers in-store by improving the experience of the meat aisle, find out how here.
- Cater to different meal types by providing recipe inspiration for cheaper cuts of meat such as mince and the forequarter to emphasise more affordable options for those on a budget and at the same time target more indulgent options, such as steaks and roasting joints, towards those looking for a treat but that is cheaper than eating out.
- BBQ inspiration is key during the summer months and then as we head into winter inspire warming stews/casseroles, playing on affordability and health.
- Addresses health concerns by communicating the health benefits of beef, such as B12 and iron.
- In the longer term, looks to maintain and build consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers. See our consumer reputation landscape hub for more information.
Visit the retail and consumer page for more insight
Taking into account the forecast increase in domestic production, and lower forecast consumption, we now need to consider how imports and exports could change to balance the market.
Both imports and exports showed exceptionally strong annual growth in the first quarter of the year, as trade recovered from the initial disruption caused by Brexit at the beginning of 2021. Volumes have remained in growth since then, buoyed by increased foodservice demand in the UK and on the continent.
While lower domestic beef consumption is forecast overall, demand through the foodservice sector is expected to remain in growth compared to a year ago. Imported beef tends to do well in the eating-out market, with home-grown product having a strong presence at retail. However, for the rest of the year, imports are not expected to maintain the rate of growth recorded in the first quarter, and indeed may be tempered by higher domestic production.
Ireland - the UK’s main supplier of beef - is forecast to have increased cattle availability in the second half of the year, with Bord Bia forecasting that cattle kill could increase by around 100,000 head for the year. Indeed, Irish slaughter has been running above year-ago levels for most of 2022 already. However, the price difference between Irish and British cattle has closed over recent months; how this price relationship develops will be a key watchpoint.
On the export front, volumes are expected to remain in growth for the rest of the year, but not to the levels seen during the first five months. Higher production and lower domestic consumption could lead to more supplies available for export. Foodservice demand in the EU is expected to remain firm, while being set against a backdrop of lower production, as forecast by the EU Commission. The EU market is expected to be less affected by the rising cost of living than the UK, which could also lend a hand to demand for meat.
So, what could all this mean for farmgate prices? Indeed, GB cattle prices have continued at record highs over the last 18 months or so. However, it would be wise to be aware of some of the potential downside price risks in the market.
An expectation of additional killing in the second half of the year could weigh on prices somewhat, not just as supplies increase nationally, but also potentially as more cattle are offloaded to ease pressure on over-winter costs. In addition, the anticipated move in demand from retail back into the out-of-home market could see less support for home-grown cattle.
However, retail may see a benefit from some consumers choosing not to eat out; a similar (but magnified) trend was seen during the height of the pandemic (although this time, for cost reasons, more-so than COVID-19). Regardless, the potential “trading-down” by consumers into cheaper cuts, cheaper proteins, or out of beef (and indeed red meat) altogether remains a key risk to prices and carcase balance.
Despite this, prices for cattle globally (and more pertinently, in the EU) remain historically firm, with global import demand forecast to remain robust in 2022. This could potentially soften any downward movement in domestic prices. Of course, how price-competitive UK beef is will be an important factor determining the success of our exports.
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