LMC: English Prices Feel Pressure, NI More Resilient

NORTHERN IRELAND, UK - The cattle trade was exceptionally strong in 2011 with prices in all regions of GB and Ireland rising strongly over the course of the year. In GB in particular these prices increased very steadily over the year, peaking in December at unprecedented levels of 350p/kg in Scotland for R3 steers. Since then GB prices have been under pressure.

6 February 2012

3 minute read

Europe

NI prices did not reach the peaks hit in Scotland, and the trade here peaked slightly earlier. In the last week of November NI R3 steer prices hit a high of 330p/kg. Since then the trade has been up and down. Prices eased back in early December before rising again around the turn of the year and falling again in mid-January. Last week 326p/kg was the average price paid for R3 steers, a slight increase on the previous week. Higher farmgate prices started to translate into higher retail prices in the autumn and by December concerns were being raised about lower volume sales. This may provide some explanation of the slippage in prices as December progressed and these declines were most obvious in GB.

There are usually significant price differences across the GB regions, with the highest prices generally in Scotland and Northern England and the lowest prices in the Midlands and Southern England respectively. It seems also that when pressure came on the GB trade in recent months, the trade further north was much more resilient than the trade in the south.

Since the last week of November 2011, Scottish R3 steer prices have eased back by 6p/kg. Corresponding prices in Northern England and in the Midlands and Wales have eased back by about 9p/kg with the sharpest declines in Southern England where the trade was back by 15p/kg during that period.

In contrast, prices in NI have been somewhat more resilient. In the same period that prices in Southern England fell by 15p/kg, NI prices have come back by just 4p/kg.

All of this means that the differential between NI and GB prices has narrowed in the last two months. The differential was at its (recent) widest in the third week of October 2011. At that time, Southern England R3 steer prices were 16p/kg higher than NI levels. This situation has now reversed and NI prices are 4p/kg higher than R3 steer prices in Southern England. Scottish prices were 27p/kg higher than NI prices in mid-October. The differential now is 17p/kg. In overall terms, GB R3 steer prices were 22p/kg ahead of the NI trade in the week ending 22 October. That gap has now narrowed to just 8p/kg.

It is worth remarking that in the last three years the difference between NI and GB prices is typically lower in the first half of the year and widens out in the second half of the year as more cattle come off grass. The differential between NI R3 steer prices and GB levels is now similar to 2011 levels. This picture will undoubtedly change further in the coming months.

While GB prices have been under pressure, ROI prices have been quite buoyant and the strong southern trade may have been one driver that has allowed NI prices to hold up. It is certainly positive for local producers that NI prices are holding up in spite of the obvious pressure on the GB trade and reports of weak demand. This more resilient trade is probably an ongoing indication of weak supplies in the beef sector throughout Ireland. Estimates suggest that NI slaughter numbers will be lower in 2012 with ROI supplies also expected to be under pressure.

In the first three weeks of January 2012, NI prime slaughter numbers were back by 16 per cent year on year. This is a significant reduction and while there may be pressure on demand due to the recession and the higher retail prices, this tight supply situation clearly remains an important driver of the trade and this along with some seasonal influences may help explain why NI (and ROI) prices have managed to hold up relative to overall GB levels in the last month.