What’s behind the strength in cow prices?

Thursday, 30 July 2020

Cow prices have been rallying across Europe in recent weeks. However, unlike the UK, most major countries are still pricing cows below year-earlier levels.

Despite initial problems caused by the closure of the foodservice market, an important channel for manufacturing beef, cow prices here have recovered well and remain buoyant.

Burger sales are expected to increase over the coming months as fast food outlets reopen, which may be fuelling processor demand as factories get ahead of orders. Although recently steak sales at retail have been strong, mince has continued to be popular in supermarkets, long after shoppers stocked their freezers immediately following lockdown. Together these factors point to strong demand for manufacturing beef, at a time when the cow price typically starts to weaken.

Reports suggest supplies of cows are on the tight side. It may also be that some processors see value in cows, against a strong prime price at the moment. AHDB has been expecting prime numbers to be a little tighter this year than last. Good prices for clean cattle might encourage some farmers to send forward heifers that might otherwise have been replacements, instead retaining some cows for another year. This would support prime production and limit the number of cull cows available. There were 72,500 fewer female cattle over thirty months of age on GB farms on 1 April 2020, compared with the same point in 2019.

UK cow throughput during the first six months of 2020 is now on par with 2019, at 311,000 head. In June however, rallying prices and some farmers perhaps needing to reduce numbers drew out a good number of animals; 19% more cows were killed last month than a year ago. Since then estimated slaughter figures have returned to closer to last year’s levels, despite continued strong demand, which also might indicate a shortage at the moment.

To put things in a wider context, cow prices are showing strength across the seven European countries that slaughter the most cows (see chart). In all but the UK, they remain below year-earlier levels. Cow slaughter across the EU-27 bloc of countries (not including UK) in the year to April was 2% lower year on year, and 12% lower in April alone, as demand for beef across Europe fell as eating out markets closed. Countries across Europe are opening up again now, although the threat of isolated second outbreaks of coronavirus remains.

 

Duncan Wyatt

Lead Analyst - Red Meat

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