June 2016 Market Overview

Beef
UK – The forecast for the remainder of 2016 and going into 2017 are that beef supplies will be up on last year as slaughtering numbers could reach the 2 million mark. However, this increase in production is said to be mitigated by lower carcass weights as finishers respond to retailer specifications. Overall, early estimates suggest that beef and veal production could be up as much as 3%Beef (900k tonnes) this year. From a more short term point of view and traditionally as we enter into June and July, the UK and Irish markets will become tight, which will potentially impact prices.

Argentina – a change in government and new economic policies (not anti-export regime of previous government) is a cause for optimism within the meat industry, although these changes will take several years to have any impact. Strong cattle retention will feature for next years as herd size fallen dramatically over last 5 years. China is now the main customer in volume terms (35% of all exports). Argentina is still a main player in R&L cuts to the German market, but manufacturing meat is for domestic consumption and prices are high, to such an extent that the new government are proposing allowing imports to try and bring prices down. Heavy rain is impacting agriculture, paralysing soya harvest with enormous losses of grain, cattle unable to move to slaughter etc.

Australia – the period July 2014 – June 2015 saw record volume sales and there are concerns that the supply of slaughter ready cattle through 2016/2017 could drop sharply leaving a hole in the market so stock / herd re-building will be required, and according to this exports of beef from Australia are 78000 tonnes down like for like on first 4 months of this year, forecast for the year is that exports will be down 15% against 2015.

Uruguay – with sanitary approval for export to so many markets Uruguay sits in a comfortable position with high demand worldwide for its beef. Packers compete for cattle and cattle prices have remained high, however recent falls in demand from China, Russia, middle east etc. is now a factor and packers in Uruguay are managing to bring back cattle prices, Brazil continue to push low priced beef in to China so Uruguayan packers have had to reduce prices.

China – remains the largest beef importer regionally and globally and imports are predicted to continue to increase over the long term as domestic production is falling, long term demand is steadily rising. It is expected that domestic production in the future should grow due to increased dairy production but this will do little to offset the long term forecast growth in demand, however the current economic slow-down is impacting demand and prices importers are prepared to pay are falling.

USA – despite higher than last year slaughter numbers a decline in imports has meant that the burdensome cold store stocks that created late 2015 have reduced significantly (3.2% drop month on month and 6.6% drop year on year). This decline imports has meant that the US has to look inward resulting in an increase in production of circa 6.1% YOY. For the last four weeks US beef production has averaged 12k tonnes / week higher than the previous year

Europe – EU beef commission forecasts growth in production in 2016 across the EU, mainly driven by France, Ireland, UK and Poland. Economic uncertainties prevail, supply of FQ is relatively high against slow consumer demand which has exerted pressure on price over recent months, as has the strong stg against euro. Brexit looming is causing some nervousness with many buyers contracting forward to secure/ set prices until end of year. We expect to see higher supply of cattle into the autumn, particularly from Ireland. HQ prices should creep upwards during summer months. One must also keep an eye on low pork & chicken prices which obviously impact on beef consumption.

Lamb
Previous forecasts for lamb slaughtering in 2016, based on the June surveys from Defra and the devolved administrations, suggested that lamb slaughtering in the early part of 2016 would be up on the previous year. This now seems incorrect, as slaughtering in the first quarter of the year have been down on 2015 levels, with the early data for April also suggesting a decline. The latest forecasts predict that production in the first three quarters of 2016 will actually be lower than the corresponding periods in 2015. This is partly due to what is now thought to be a lower carryover of lambs from the previous season. In addition, higher numbers of lambs will be required as replacements in the breeding flock and slaughtering will also be influenced by an expected return to a more normal seasonal marketing pattern.
Adult sheep slaughtering in 2016 are forecast to increase as the low levels seen in the past two years have led to an aging breeding flock. This higher level of mutton production is expected to lead overall sheep meat production to rise in 2016.
Trade of sheep meat in 2016 will be heavily influenced by currency fluctuations, which could be affected by the EU referendum in June. At present, with a weaker pound this year, an improved balance of tradeis expected.

PigsInField

 

Pork
Prices have shown signs of accelerating in May, with the prices rising by over a penny / kg. This is the biggest weekly rise since September 2013. The pig price is now more than 2.5p higher than at its low point in mid-March, although still over 16p less than a year before. Reports of a more buoyant EU market, coupled with some weakening of the pound, will have helped support UK prices.

EU exports of all pig meat products were up by more than a quarter in the first three months of 2016,compared with a year earlier.

All the main categories of export were higher, on the back of strong demand from Asian markets, in particular. Fresh/frozen pork exports to China more than doubled, while sales to Hong Kong and the Philippines were both up by a third. Japan and the United States both took around 20% more EU pork than in the same period last year. South Korea was the only major market to take significantly less product this year. Offal sales to the Asian markets were similarly strong. In addition, China bought substantially more pig fat this year which, along with growth to the Philippines, provided some relief to a part of the market which has been struggling since the Russian ban.
All of the EU’s significant exporters experienced year-on-year growth in third country exports during the first quarter of 2016. Spain led the way with shipments up by nearly half, while Germany saw a 31% rise and Denmark’s sales were up 7%. It was a similar story among the EU’s mid-ranking exporters, including the UK, which saw third country volumes rise by more than half, the fastest growth of any Member State.

Poultry
April 2016 saw a 1.6% year on year increase in slaughter numbers (increase to 90.8 million) which will result in firm market conditions and consequently delayed the estimated hike in prices throughout May. However, as we enter the summer retailer demand will increase dramatically which will result in tighter supply.

Download the June Report 2016 as a PDF file