“Downwards pressure is not unusual at this time of the year, with prime cattle prices being lower in mid-December than in mid-November in eight of the last nine years,” explains Iain Macdonald, QMS Market Intelligence Manager.

Some of this pressure in Scotland is likely to reflect a seasonal upturn in prime cattle slaughter, with weekly throughput at price reporting abattoirs averaging 3% higher in November than October and reaching a 22-week high at the end of November.

Nevertheless, at 455.5p/kg, R4L steer prices were still around 9% higher than last year and 19% above the five-year average – a picture which has been similar for much of 2022.

Iain says: “A significant influence behind increased farmgate prices this year is likely to have been a 2% reduction in supply added to the UK market over the first ten months compared to the same period of 2021. While domestic production rose by 1%, this was more than offset by a shift in external trade balance, as export volumes rose by 26% and imports fell by 1.3%.”

Taking imports first, after a strong start to the year, volumes have been trailing year earlier levels since June despite a tightly supplied domestic market. Having been up 22% year-on-year at the end of May, five consecutive monthly declines were enough for imports to fall behind 2021 in October.

“It is also interesting that import volumes have dipped behind 2021 levels despite a strong increase in beef production in the Irish Republic, which is the main external supplier of beef to the UK, providing 78% of UK imports in 2021,” Iain highlights.

In Ireland, prime cattle slaughter was running ahead of 2021 levels by more than 6% at the end of October while the cow kill was up by 16%. 

Despite this expansion of Irish abattoir output in 2022, HMRC data shows a 10% reduction in the volume of beef arriving in the UK from the Irish Republic in the first ten months, with the Irish share of UK imports slipping seven percentage points to 71%.

In part, this is likely to reflect a firm EU beef market, where R3 male prime cattle prices were 19% higher than a year earlier at the end of November, and 43% higher than two years before, despite the overall volume of supply added to the market this year expected to increase by 0.6% from 2021. 

Reflecting the strength of EU demand, Eurostat data highlights that imports from non-EU countries rose by more than a third from 2021 in the first eight months. In the UK trade data, sales to the Netherlands, France, Germany, Italy and Spain have all shown considerable growth in 2022, with the combined volume shipped to these countries doubling to 51,000t in the January to October period. 

Meanwhile, Eurostat figures also show that the internal volume of beef trade in the EU increased, with exports between member states rising by more than 5% on the year.  Helping support the increase in internal trade, the volume shipped to non-EU markets fell by nearly 1%. Supported by its increased beef production and barrier-free access to the EU market, Ireland sold 13% more beef to other EU countries in the first eight months of 2022.

Looking to next year, the EU Commission is forecasting a fifth consecutive annual decline in overall EU beef production. Ireland is set to be a significant contributor to this fall with Bord Bia projecting a 2% decline in the Irish cattle kill, while carcase weights are likely to continue falling. To meet the gap in supply, EU import demand from non-EU countries is set to grow further, with the EU Commission forecasting a 4% increase in 2023. 

Iain maintains that “the UK is well-placed to help meet some of this additional demand, with increased calf registrations in 2021 and higher on farm prime cattle supply as of October 2022 signalling the potential for increased beef production in 2023.

“Though it should be noted that, as the year progresses, UK production growth is expected to slow, with a slightly reduced spring 2022 calf crop in GB to begin reaching slaughter condition in the final quarter”.

While a significant increase in cull cow slaughter in the autumn of 2022 is set to reduce production in the future, this will not take effect immediately.  A smaller suckler herd will begin to have more of an impact on calf registrations in spring 2023 and therefore take until the second half of 2024 to begin pressuring prime cattle slaughter, with a more significant impact likely in early 2025.

Looking further afield, UK beef exports to non-EU countries have had a challenging year in 2022, falling back by 36% year-on-year in the first ten months, mostly driven by a sharp reduction in trade with the largest markets of Hong Kong and the Philippines. However, other markets have shown strong growth, with the volume exported to Canada and Japan doubling.

In 2023, the reopening of Hong Kong to overseas tourists and the partial relaxation of covid restrictions should help support imports for the local foodservice sector. Meanwhile, an ongoing meat deficit in the Philippines could help support a recovery in UK exports of frozen boneless cuts. For both Canada and Japan, the USDA is projecting lower domestic production but higher consumption next year, signalling potential for further expansion of UK beef exports.