AHDB Outlook Conference addresses market predictions
Published:  11 February, 2016

Industry delegates gathered on Tuesday 9 February to hear what 2016 will hold for the livestock market. 

The agriculture and horticulture development board (AHDB) presented industry forecasts to agricultural professionals at the event in London.

The levy board’s chairman, Peter Kendall, welcomed guests to the meeting. As well as addressing 2015 as a tough year for farming due to prices coming under pressure, he also highlighted the UK’s position in the EU as having an effect on the agri-food sector: “The prospect of a June referendum could mean a significant impact on trade and our industry,” he said.

“A year of two halves”

Debbie Butcher, senior analyst for AHDB, discussed what the yearly forecast was expected to look like for the beef market.

She highlighted that prices have been drifting down, as opposed to a dramatic drop, which is slightly better than five or six months ago. Butcher did acknowledge that it was only natural for the early stages of the year to experience easing of prices as a result of consumers tightening their belts after the Christmas period.

According to Butcher, the prime cattle herd stands at 1.92 million head.

Addressing the marketplace for 2015, she labelled the year as “a year of two halves”.

“For the first half of the year, numbers were trending about on par as the year before,” she explained. “Turning into the second half of the year, we were culling cows at quite some rate.” This data was provided by Defra and, according to Butcher, there will be more information coming later in the year which will provide further details.

2015 was recognised as another strong year for carcase weight as they were well (10/15kg) above the five-year average across the board.

“What that means is despite fewer prime animals slaughtered, the balance, when we take into account the increased number of cows that we put forward and the higher weight, means that we actually produced a little bit more beef than we did a year earlier.”

Meanwhile, during the first half of the 2015, the beef tonnage coming from Ireland was still trending just above of where it was a year earlier. However, come July, volumes started to slow down. By the time September came around, we were bringing in less beef from Ireland.

Despite this, imports were still up by 6%.

Butcher said that the UK was seeing increased competition from Eastern Europe. “Poland is actually our third supplier now after Ireland and The Netherlands,” she told the audience. “It’s still very small in volume terms, but it accounts for 5% of our imports where two years ago that was 2%, so they have grown.”

Although producers and farmers may be challenged by competition from Poland, Butcher did stress that there was a “positive flavour” for British beef exports.

“Over 70% of our fresh, chilled trade, which accounts for 80% of our overall trade, is now in the form of boneless cuts. Five years ago, it was less than half. So that’s a significant development. When we first came back into the export business in 2006, it would have been a fraction. In 10 years, we’ve really moved that segment of our export business on. Why’s that important? Because that’s where the value is.”

Even though the industry faced challenges, Defra stats from June showed that the breeding herd continued to grow.

Butcher’s analysis revealed that she expected prime cattle numbers to be up 2% for the coming year: “Although I forecast an increase in numbers for this year, in the big picture we are still in a fairly tight supply situation.” Her forecast also revealed that exports will increase in line with production levels.

“We’re definitely going to be producing more beef in the UK, and Ireland is going to be producing more beef,” Butcher told Meat Trades Journal. “I do think we stand a chance of having a better export position, which is good. We’re still going to have some competition though, especially from Poland.”

The British industry may face challenges from Poland, but Butcher did recognise opportunities within the UK. “We have a strong home market,” she said. “Beef is a staple part of the diet in the UK, whether it is mince or roasting joints. It’s not all doom and gloom and sterling is going in our favour. Not only will that give us a benefit on the export market but it might just soften the competitive position of the Irish market.”

Positive sheep outlook

Following an overview on the beef market, senior analyst Mark Kozlowski discussed the market outlook for the lamb industry.

Kozlowski said that UK prices were below year earlier levels for most of 2015, with October prices being the lowest since 2009.

However, he explained that things are looking more positive for the coming year. “In 2016, we’ve seen a good start to the year in terms of prices, which have been increasing in the past few weeks. They’ve actually moved above the five-year average for the first time in a while last week,” Kozlowski told attendees. “They’re moving generally more towards the 2014 levels.”

One of the reasons that led to a low level of prices in 2015 was an increase in production, although it did fall off quite significantly towards the end of the year which led to prices increasing.

Despite many within the industry believing that there was a large number of lamb imports, Kozlowski said that this was not the case last year.

“When it comes to imports, a lot of people were suggesting last year that we were being flooded by products coming in. Actually in the first 11 months of the year we saw imports into the UK decline. On the flipside to that, we saw more products coming in from New Zealand.”

During the early stages of the year, slaughtered lambs were still moderately low, according to Kozlowski. However, he expected this to grow compared to last year.

“A lot of this will be due to an increase in the number of ewes culled,” he explained. “There’s also the small increase in the number of lambs, before falling back in 2017.”