Multiple factors affect farmgate price movements
Published:  10 August, 2015

Recent inconsistent farmgate prices can be attributed to volume and currency fluctuations, according to Quality Meat Scotland (QMS).

Between May and late July, prime cattle prices climbed strongly. However, the past fortnight has seen them relax. Meanwhile, after seeing a dramatic decrease during July, sheep prices crawled back during the first week of August. Furthermore, pig prices have remained steady, although they are considerably lower than those of 12 months ago.

“We have seen considerable movements in the prices for cattle and sheep and one starting point – when looking for explanations for this volatility – is the volume of animals reaching abattoirs,” explained Stuart Ashworth, QMS’ head of economics services.

“In the past couple of weeks the volume of cattle handled by price-reporting abattoirs increased slightly, with the exception of young bulls, and prices have slipped 1.5%. Nevertheless, at current levels, stock availability in Scotland is still around 3% lower than 12 months ago compared to around 9% down in mid-June.”

Trade data demonstrates that beef imports trailed year-earlier levels during May. Regardless of struggles in the export market, UK total beef supplies tightened, subsequently providing support to domestic producer prices.

“What the current beef trade is suggesting, therefore, is that the market is very volume-sensitive, which in turn suggests that retail demand remains fickle with a small increase in production quickly cooling prices,” explained Ashworth.

“In the short term, cattle availability can be greatly influenced by cattle growth rates and the small increase in numbers may reflect the rate at which cattle have grown over the past two months.”

According to Ashworth, the “wider expectation is that prime cattle supplies will remain below year-earlier levels for a further three to four months”.

Auction market throughput of SQQ (standard quality quotation) lambs have been 15–18% lower over the past couple of months compared to last year.

“In contrast, GB lamb slaughterings in June were reported to be 3.5% higher, reflecting two peculiarities – a longer tail of hogs than normal and a higher number of heavy lambs that fall outside the SQQ by being over 45kg liveweight,” added Ashworth.

Ashworth claimed these two factors, alongside the continuing strength of sterling, will have influenced the trade.

Recently, the number of heavy lambs has fallen slightly, although they still account for more of the total lamb sales in auction markets compared to this time last year. SQQ average price have also risen.

Ashworth added: “Despite the many factors affecting market returns that are outside the control of producers, what the current market conditions bring sharply into focus is the importance of producers putting forward livestock to the market that best meet the needs of their buyers. This will help to minimise the impact of the other factors influencing the market.”