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Agribusiness News August 2022 – Beef

3 August 2022

Finished price eases backwards

Finishers welcomed a price lift in June, although still not enough to offset the inflation of production it would have helped lift moral among cattle finishers that prices were moving in the right direction. However, the current finished beef price has since trickled downwards. In the week ending 16th July for the second consecutive week cattle prices fell, with the price for Scottish R4L steers sitting at approx. 456p/kg/dwt. Although prices in Scotland are around 10% higher compared with this time last year, in inflation adjusted terms they are a mere 1% higher than 2021. And as we have alluded to before breakeven prices for finishers are estimated to be in the region of 470-500p/kg.

July’s price drop is not unusual as demand drops with school holidays and people holidaying abroad which sees consumers buying routines change. This slowing in demand will no doubt lead to downward pressure on prices which will feed back to processors and producers.

Input costs remain a real concern for finishers. While the price of straights has started to fall back from the highs seen after the start of the Ukrainian war feed prices remain well above pre-war levels and higher than 2021. The lag time with compound feeds mean it will take time for a rebalance in price meaning finishing margins will continue to be squeezed in the coming weeks and months.

Dry hot weather puts pressure on

As well as inflated input costs, more recently farmers have had to contend with the recent spell of dry, hot weather putting pressure on livestock systems, which is affecting production. Continuing dry, hot weather is a potential threat to food security and food prices during a time of rampant inflation. Some areas are now extremely dry with concerns over forage availability, which will have a knock-on affect with cattle being finished off grass. This could potentially lead to additional slaughterings at lower carcase weights.

Forage availability is a concern both now and looking toward the autumn store and weaned calf sales. In some areas farmers are being faced with a choice between winter forage or grass for grazing cattle. The main store sales are now passed, with numbers forward at store sales less. Short-keep, heavier cattle continue to be a good trade. However, if the recent hot weather continues and grass availability drops, farmers will look to sell off stores and wean calves earlier to ease grazing pressures.


Cost of living crisis

In line for the time of year cull cow price has fallen back, however it is remains in a strong position as the continued demand for manufacturing beef and less cull cows currently available has contributed to the strong trade for cows. National BBQ week (July 4th) supported the demand for burgers and BBQ meat. Going forward the cull cow price will drop further as scanning results will see more cows come onto the market.

The cost of living remains a threat to consumer demand for beef, as consumers cut back on the amount of meat they buy in an attempt to save money on the weekly shop. It is predicted there will be a downturn in retail sales of meat compared with last year as consumers tighten their belts. Worth remembering that there was a time in 2021 when restrictions meant eating at home was above average, so retail meat sales were higher than normal. Recent consumer insight conducted by AHDB showed that mince, traditionally regarded as a budget friendly meat option for families is now perceived to be getting expensive. If these once cheaper meat options are now thought of as expensive where does that will leave the demand for cuts such as roasting joints and steaks.

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