Beef Market Outlook Another year on the rollercoaster? Debbie Butcher, AHDB Beef & Lamb AHDB Outlook Conference 9 February 2016
Outline State of the UK market Forecast for supplies Wild cards Global developments
State of the UK market
Another rollercoaster year 370 p/kg 2015 2016 5 yr ave 2011-15 360 350 340 330 320 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: GB deadweight average prime cattle price Source: AHDB Market Intelligence
Overall prime cattle numbers back on last year Down 2% at 1.92 million head 000 head 220 2014 2015 200 180 160 140 120 100 80 60 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: UK monthly prime cattle slaughter Source: Defra
Adult slaughter remained high all year 000 head 80 Up 3% to 620,000 head 70 2014 2015 60 50 40 30 20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: UK monthly adult cattle slaughter Source: Defra
Carcase weights up again Kg dw 360 2014 2015 5 year average 355 350 345 340 335 330 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: UK prime cattle carcase weights Source: Defra
So production just trending ahead year on year 000 tonnes 100 90 2014 2015 Up < 1% at 883,000 tonnes 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
As expected, imports from Ireland did slow down after the summer Tonnes 4,000 3,000 2,000 1,000 0-1,000-2,000-3,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Chart: UK beef and veal imports from Ireland, change on year, 2015/14 Source: Defra
But overall imports still up 6% in the year to November 000 tonnes 260 240 220 200 180 160 140 120 100 80 60 40 20 0 Chart: UK beef and veal imports YTD Nov Source: GTIS 2014 2015 Others Netherlands +22% Ireland +3%
Exports have proven to be a challenge Tonnes 120,000 100,000 Others 80,000 France 60,000 40,000 Netherlands 20,000 Ireland 0 2014 2015 Chart: UK beef and veal exports YTD Nov Source: GTIS
But still some positive developments 2015 2010 Fresh chilled bone in cuts 12% 12% 46% Fresh chilled carcase 18% 42% Fresh chilled boneless cuts 70% Chart: UK beef and veal exports YTD Nov Source: GTIS
That are adding value Frozen bone in cuts Fresh chilled carcase Frozen boneless cuts Frozen carcase Fresh chilled bone in cuts Fresh chilled boneless cuts 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Chart: UK beef and veal exports unit value per tonne YTD Nov Source: GTIS
Hong Kong Ireland Netherlands France South Africa Belgium Ghana Germany Poland Cote d Ivoire Others And 5Q also doing well in volume and value terms. Delivering added value. 000 tonnes 10 9 8 7 6 5 4 3 2 1 0 2014 2015 Value up 2% to 57 million Chart: UK 5Q exports YTD November Source: GTIS
04-Jan-15 01-Feb-15 01-Mar-15 29-Mar-15 26-Apr-15 24-May-15 21-Jun-15 19-Jul-15 16-Aug-15 13-Sep-15 11-Oct-15 08-Nov-15 06-Dec-15 03-Jan-16 Yr on Yr % Change Fresh beef volume and penetration lower 3 2 Penetration % Volume (000 kg) 1 0-1 -2-3 Chart: 12-week fresh beef volume performance 03 Jan 2016, % YOY change Source: Kantar Worldpanel
So supplies on the market increased last year 30,000 25,000 20,000 15,000 10,000 5,000 0-5,000 000 tonnes change y-o-y -10,000 Production Imports Exports Supplies for consumption Chart: Estimated year-on-year change in UK beef and veal supplies, 2015 Source: AHDB forecasts based on data from Defra, HMRC
What about this year? Forecast for supplies
Dairy breeding herd continued to grow despite the challenges of last year 000 head 1 300 1 250 1 200 1 150 1 100 1 050 1 000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: English breeding herd, June Source: Defra
And the suckler herd was reported to have ended its contraction 000 head 780 770 760 750 740 730 720 710 700 690 680 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: English breeding herd, June Source: Defra
Jan-14 Mar May Jul Sep Nov Jan-15 Mar May Jul Sep Nov Calf registrations trending up beef breeds head 12,000 10,000 8,000 6,000 4,000 2,000 0-2,000-4,000-6,000 Beef Females Beef Males Chart: Monthly beef breed calf registrations, change on year Source: BCMS
Jan-14 Mar May Chart: Monthly dairy breed calf registrations, change on year Source: BCMS Jul Sep Nov Jan-15 Mar May Jul Sep Nov And dairy on the back of the bigger herd 8,000 6,000 head Dairy Females Dairy Males 4,000 2,000 0-2,000-4,000
So we have more younger cattle on the ground 35,000 30,000 25,000 head Dairy female Beef female Dairy male Beef male 20,000 15,000 10,000 5,000 0-5,000-10,000-15,000 Under 6 6-12 12-18 Chart: October 2015, GB cattle population under 18 months Source: BCMS
Chart: Forecast year-on-year change in UK prime cattle supplies Source: HMRC, AHDB MI (actual), AHDB MI (forecasts) Impact on prime cattle supplies to be felt later this year % change y-o-y 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0 Forecast up 2% to 1.96 million head Q1 Q2 Q3 Q4 2016
Cow numbers to be high for another year 4.5 4.0 3.5 % change y-o-y Forecast up 3% to 635,000 head 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Q1 Q2 Q3 Q4 2016 Chart: Forecast year-on-year change in UK adult cattle supplies Source: AHDB MI (forecasts)
Chart: UK beef and veal production forecasts change on year Source: AHDB Market intelligence forecasts For the UK this means that production will be up % change 3 2.5 2 1.5 1 0.5 0 Q1 2016 Q2 2016 Q3 2016 Q4 2016
Chart: Irish forecasts, cattle at export plants Source: Bord Bia In Ireland production also up this year % change 2016/15 20 Jan - Jun Low High Jul - Dec 18 16 14 12 10 8 6 4 2 0-2 -4-6 Steers YB Heifers Cows Steers YB Heifers Cows
Chart: Forecast year-on-year change in UK beef and veal trade Source: AHDB MI (forecasts) UK exports could do better but imports still likely to be robust 2.5 % change y-o-y 2.0 1.5 1.0 0.5 0.0 2.2 2.0 Exports Imports
Supplies on the UK market will increase again this year 000 tonnes change y-o-y 2015 2016 30,000 25,000 20,000 15,000 10,000 5,000 0-5,000-10,000 Production Imports Exports Supplies for consumption Chart: Estimated year-on-year change in UK beef and veal supplies, 2015 and 2016 Source: AHDB forecasts based on data from Defra, HMRC
Wild cards
Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 How competitive will Irish product be? 420 p/kg 400 380 Ireland UK 360 340 320 300 280 260 240 Chart: Irish and GB steer price, 2011-2016 Source: Eurostat
In part, the answer to that will lie with exchange rates 1.45 : 2016 2015 1.43 1.41 1.39 1.37 1.35 1.33 1.31 1.29 1.27 1.25 09-Jan 09-Feb 09-Mar 09-Apr 09-May 09-Jun 09-Jul 09-Aug 09-Sep 09-Oct 09-Nov 09-Dec Chart: Euro:sterling exchange rate Source: Pacific exchange rate service
How will beef perform with the consumer? 1980 60 minutes 1990 45 minutes 2015 31 minutes Source: Kantar Worldpanel usage
Given that price is the main driver of product choice 1 Price 2 Special offers 3 Quality or performance 4 Taste or smell 5 Use by or sell by date 6 Familiar 7 Healthy option 8 Brand 9 Ease of using 10 Ethical or eco-friendly Source: IGD ShopperVista
Italy Germany Neth Spain France UK Bos&Hert Others Poland - continued competition Tonnes 100,000 2014 2015 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Chart: Polish exports YTD Oct Source: GTIS
Global trends
Chart: Brent spot prices Source: EIA Impact of the oil crisis in some parts of the world $ per barrel 130 120 110 100 90 80 70 60 50 40 30
Chart: Chinese beef imports Source: GTIS China s momentum has picked up, will it continue? Tonnes 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2013 2014 2015 Australia Uruguay New Zealand Brazil Argentina Canada
Some global trends (not so wild for the UK beef sector) 000 Tonnes 1,300 1,250 1,200 1,150 1,100 1,050 1,000 950 900 850 800 2011 2012 2013 2014 2015 2016 2017 Chart: Australian beef and veal production Source: MLA Australia production down 13% in 2016. Exports back Cattle herd is forecast to decline to 26.2million head by 30 June 2016, making the unusual sequence of two consecutive years with 5% year-on year declines. Extreme forces throughout the year. US prices corrected could limit price movements but weak A$ will benefit as will supply situation.
The US cow herd up 3%. Impetus for herd rebuilding strong. Most significant upturn in the US cattle cycle in 20 years. Potential for exports from South America to increase this year. Brazil dependent/us access? Elimination of curbs on exports from Argentina, and the liberation of the currency could provide a boost. The rise of the Paraguayan beef industry has been helped by investment and expertise flowing in from Brazil. Small quota to the EU Uruguay exports up last year, increase in trade with the US and China. Lower reliance on the Russian market and access to the US market gave Uruguay the upper hand over Brazil.
Conclusion Increased production Increased Imports PRICE? Meeting market requirements More positive exports
Thank you Debbie.Butcher@ahdb.org.uk 024 7647 8851