Opportunities for beef Eurocarne May 2015 Dr. Phil Hadley AHDB/EBLEX
Overview Current situation for global beef Trends and changes Influencing factors EU/GB position Future?
Current position Global tightening of supplies in major beef producing regions Rise in cattle prices to unprecedented levels- will this temper consumer demand? High returns for rearers as cattle value increases Impacts of earlier weather conditions continue to influence as herds rebuild from high levels of disposal driven by drought Increased demand for beef in Asian markets and import access/fta s
Current position Russian ban impacting trade and distribution of certain products and values Growth in bovine products to expand at a limited rate of 1.9% due to supply limitations- met mainly by India and Brazil (FAO) Demand and prices high in the US make an attractive export destination
Some positive developments for the UK..USA lifts its restrictions, manufacturing beef in high demand, Australia cant fill. Global demand for EU beef is likely to continue to grow but can we meet it?
% change Global production still flat Tight supply in a reasonable demand environment should maintain price levels 4 Australia United States China Argentina Brazil India 2 0-2 -4-6 -8-10 -12-14 Chart: Production forecasts 2015/13 for selected countries Source: EU commission forecasts, USDA and MLA
US drops negate rises elsewhere Source: Gira
Million head 100 98 96 94 92 90 88 86 Surprise US herd rebuild led by retention of beef heifers, suggesting an acceleration in growth sooner than previously expected- how long will demand last? Total cattle (LH axis) Beef cows (RH axis) Million head 34 33 32 31 30 29 84 28 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: USA cattle numbers, January 2005-15 Source: USDA
Current position (EU) Credibility issues following horsemeat crisis Trade discussions inc Russian ban, EU market access to US/Canada/China Consumer spending power in times of austerity Dairy quota removal Export of lower value beef and co-products to markets such as Asia and Africa adds value
tonnes 14.000 12.000 10.000 8.000 6.000 4.000 2.000 Russia bans EU Beef Disruptive NOT catastrophic for the prime beef market, has a price impact in some regions on cow beef markets, important outlet for EU fats is lost Angola Philip Norway Angola Macedonia Switzerland Philippines Hong Kong Bosnia & Herzegovina 0 Russia Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Chart: 2014 EU trade to top 8 destinations Source: GTIS, EU member states
% change 6 4 2 0-2 -4-6 -8-10 -12 France EU-15 production flat Processors operating well under-capacity in many areas, could be positive for finished cattle prices Netherlands Belgium EU-15 Spain Italy Chart: 2015/14 production forecasts for selected member states Source: EU commission forecasts Germany UK Ireland
End of milk quotas.. who wants to expand..? Expectation is for an expansion in EU dairy herds, but focused around a shift to north-west EU, where production costs are lowest: Ireland, Netherlands, Denmark, France, UK and Germany For the beef industry this will mean more dairy beef More cull cows as the herd cycle More by-product calves (could be crossed on beef genetics for a better product)
UK Beef- Headlines Total cattle numbers circa 9.9M Dairy cows 1.78M Beef cows 1.61M Total Production 847,000T Total imports 389,000T Total exports 131,000T Total consumption 1,104,000T 77% self-sufficient
Headlines 167 abattiors killing cattle 64% of beef kill takes place in abattoirs killing 30,000+ per year 9 abattoirs kill 42% of total beef kill Majority of kill is in the hands of a small number of large, retailer focused processors 72% of retail beef sales in top 5 multiples
p/kg Another rollercoaster year??? Prices under some pressure in the past few weeks 390 380 370 360 2014 2015 5 yr ave 350 340 330 320 J F M A M J J A S O N D Chart: GB deadweight average prime cattle price Source: AHDB/EBLEX Market Intelligence
Production up a fraction Q1 2015 up 1% 000 tonnes 100 90 2013 2014 2015 80 70 60 50 40 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: UK beef and veal production Source: DEFRA
tonnes Imports still up with Ireland, still in the driving seat 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 2014 2015 Others Uruguay Australia Germany Poland Netherlands Ireland Chart: UK beef and veal imports YTD Feb Source: GTIS
tonnes 20.000 Exports proving to be difficult for a number of reasons inc exchange rates 15.000 Others Germany Hong Kong 10.000 Belgium Italy 5.000 0 2014 2015 France Netherlands Ireland Chart: UK beef and veal exports YTD Feb Source: GTIS
000 tonnes Exports to edge up as a share of production global market robust in many areas, in particular for manufacturing beef Price Chart: Actual and forecast UK beef and veal exports (cwe) Source: HMRC, AHDB Market Intelligence
Forecast for supplies
Suckler breeding herd has continued its decline 423K UK 1.54m -1% -1% (y-o-y) 254K -2% 1,041K -4% 168K -4% 695K -1% Chart: 2014 December census Source: DEFRA and Regional Departments
While the dairy herd continues to moves in opposite direction 175K UK 1.89m +4% +4% (y-o-y) 306K +9% 1,128K +4% 244K +5% 1.16m +2% Chart: 2014 December census, Source: DEFRA and Regional Departments
head 15.000 10.000 Positive outlook into Q4 of 2015 and 2016 Dairy female Dairy male Beef female Beef male 5.000 0-5.000-10.000 Future supply -15.000 Under 6 6-12 12-18 Chart: January 2015, GB cattle population 0-18months Source: BCMS
% change 3 Production to come back down 2% at 862,000 tonnes 2015 2 1 0-1 -2-3 Recovery in tonnage -4-5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 (f) 2016 (f) Chart: Actual and forecast UK beef and veal production, change on year. Source: DEFRA and AHDB/EBLEX Market Intelligence
% change y-o-y +8 +7 +6 +5 +4 +3 +2 +1 0-1 -2-3 Exports may struggle on the back of strength of sterling Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year 2014 2015 2016 Chart: Actual and forecast year-on-year change in UK beef and veal exports Source: HMRC, AHDB MI (actual), AHDB MI (forecasts)
% change y-o-y +10 While imports will be lower may not be back as much as Irish production given weak euro +8 +6 +4 +2 0-2 -4-6 -8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year 2014 2015 2016 Chart: Actual and forecast year-on-year change in UK beef and veal imports Source: HMRC, AHDB MI (actual), AHDB MI (forecasts)
000 head 1.700 Lower supplies in Ireland Slaughter back 8%,120-150,000 head Lower again in 2016 1.650 1.600 1.550 1.500 1.450 1.400 1.350 1.300 1.250 2010 2011 2012 2013 2014 2015 (f) Chart: Actual and forecast Irish cattle slaughter Source: Bord Bia, CSO
Commitment to British sourcing is still strong Likely to continue? 81 82 85 85 86 86 Jan-13 Jan-14 Jun Aug Nov Jan-15 Chart: British share of beef facings in major supermarkets Source: BeefWatch AHDB/EBLEX
% change 14 Retail performance better more recently Beef Roasting joints Stewing Frying/Grilling Mince 12 10 8 6 4 2 0-2 -4 Spending more Change in Spend Buying more Change in Volume -6 Chart: Change in household purchases 12 weeks to March Source: Kantar Worldpanel
Shoppers concerns about their financial situation are switching from day-to-day living expenses to longer-term issues this could free up some short-term discretionary spend Reasons shoppers say they ll be worse off in the year ahead 85% Jan-12 Jan-13 Jan-14 Jul-14 81% Shopper Outlook Items shoppers say they re going to spend a bit more on this year compared to last year to treat themselves* 72% 68% 70% 50% 46% 40% 30% 29% Food prices Utility bills Fuel prices Wages Tax / benefit Base: All main grocery shoppers who say they will be worse off in the year ahead, Jul 14. * Base all main grocery shoppers, Aug 14
Beef is a fashionable luxury The Steakhouse 2.0
West Country PGI PGI s are a European labelling scheme to acknowledge and protect traditional food and drink production methods and regional specialities Designed to prevent imitation and misleading labelling that may undervalue or damage the products reputation Very detailed requirements for registration
West Country PGI To obtain PGI status you must identify the long history of a product, highlight why it is special and its exclusivity, explain why protecting the product name will preserve the history behind the product/region PGI s inc some of the most recognised products across the EU: Champagne, Parma ham, Parmesan cheese, etc
West country PGI Based on the forage fed nature of West Country production Includes the 6 counties- Cornwall, Devon, Somerset, Dorset, Wiltshire and Gloucestershire Recognises the long history behind livestock production in the across the region Needs to have some restrictions to ensure quality and integrity of the product
West Country Circa 25% GB production of beef and lamb Highest min and max temperatures means grass grows 300+ days/year in some areas and 220+ across the region Higher than average rainfall 57% of UK s flower rich meadow area Recognised AONB Grass based diets result in changes to chemical composition of meat and fat profile
Science behind PGI Grass and forage based diets alter fatty acid profile in ruminant meat Increases level of unsaturated fats and increases the ratio of unsaturated to saturated Unsaturated fats are more healthy Better fresh meat colour for longer (Vit E) Positive consumer image of extensive production