Irish beef finishers can only look on with envy this week as their counterparts in Northern Ireland and Britain receive a significantly higher beef price for their cattle. Over the last month, a significant price differential has opened up between Irish and UK beef prices for prime cattle when compared on a like-for-like basis.

As of this week, beef prices in Northern Ireland and Britain are now 30c/kg to 45c/kg ahead of Irish prices, which is a shortfall of €110 to €145 on a typical 360kg carcase. This week, the base quote for an R3 steer in Ireland stood at €3.59/kg (excluding VAT), while base quotes for an R3 heifer were about 5c higher at €3.63/kg (excluding VAT).

However, based on the euro-sterling exchange rate (€1=£0.9066) this week, beef prices in the UK are in a far healthier place compared to Ireland. In Northern Ireland, R3 steers and heifers are fetching almost €4/kg excluding VAT this week, according to data from Livestock & Meat Commission NI.

Meanwhile, in Britain, AHDB reports this week that steer and heifer prices are now trading at€4.06/kg excluding VAT. On a regional basis, the price disparity is even more pronounced with prices for prime Scottish cattle trading at highs of €4.20/kg excluding VAT – over 50c/kg higher than Irish prices.

Why the price disparity?

The beef industry has often used the weakness of sterling for the comparatively weaker performance of Irish beef prices in recent years.

But looking at the euro-sterling exchange rate over the last month there have been no major swings in the value of the pound to suggest any reason for the gap that’s opened up between prices in both jurisdictions. And it’s not down to the numbers of cattle being slaughtered either.

Over recent weeks, the Irish cattle kill has risen with more than 36,000 head processed this week and last week.

The drought conditions and the resulting tight supply of fresh grass saw a spike in the numbers of cattle being presented to Irish factories. But the same happened in the UK. Figures from AHDB show the weekly cattle kill in Britain jumped sharply since the end of May, with more than 47,000 head of cattle processed last week by factories.

In Northern Ireland, the weekly kill rose above 9,000 head last week, with a significant uplift in the volume of prime cattle being slaughtered since the end of May.

With currency relatively steady and cattle supplies higher in both Ireland and the UK, we must look to see what’s happening in the market to determine why such a differential has opened up in Irish and UK beef prices.

COVID-19 impact

As can be seen in Figures 1 and 2, beef prices in Ireland and the UK fell in tandem as the COVID-19 lockdown took hold in March.

The closure of the important food service market, which is valued at £90bn (€105bn) in the UK, created a demand shock for Ireland’s beef industry as well-known customers such as McDonald’s and Burger King, along with thousands of other restaurants, closed their doors.

Irish and UK beef prices fell sharply throughout April as a result of the loss of food service. While demand from supermarkets did spike during the lockdown it was for lower-value products like mince and burgers. Demand for higher-value steak and roast cuts shrunk with restaurants, cafés and hotels all closed.

However, as governments across Europe have slowly begun lifting COVID-19 restrictions, demand is returning from food service customers preparing to reopen. Fast food giants such as McDonald’s and Burger King have already reopened many of their outlets across Europe, while the hospitality industry (pubs, restaurants and hotels) in both Ireland and the UK will reopen from July.

As a result of the easing restrictions, beef prices in both Ireland and the UK have recovered from the lows they hit in late April and early May.

However, while Irish prices have recovered to a level around €3.65/kg and plateaued, UK beef prices have continued to rise and rise week after week and are now in quite a healthy place.

Brexit bounce

One of the major reasons for the continued rise in UK beef prices has been the wave of nationalism following the UK’s exit from the EU at the start of this year.

Taking advantage of the national mood as the UK finally exited the EU, coupled with pressure from the NFU to support British farmers, supermarkets have been heavily promoting British food and drink all this year.

Given that the UK is not self-sufficient in beef, this strong promotion of British beef has driven up prices to a new level that’s significantly above Irish prices.

In recent weeks, UK supermarkets such as Morrison’s and ASDA have been heavily promoting higher-value steak cuts labelled 100% British beef in order to drive footfall.

Unquestionably, this sort of promotional activity is driving demand and higher farmgate prices for UK beef. At the same time, the rising beef price in Northern Ireland has also created opportunities for Northern buyers looking to purchase cattle south of the border, which has resulted in a spike in Irish cattle being moved to Northern Ireland for direct slaughter.

Northern Ireland

Northern Ireland-based agents are now actively buying Irish cattle to be slaughtered in Northern Ireland in order to service the wholesale and food service market. Since late May, the number of Irish cattle moving north of the border for slaughter has spiked (Figure 3) to as many as 1,000 head per week, which is the highest level of cross-border cattle trade since 2013/14.

The one benefit of this activity is that it has helped put a floor on cow prices and inserted plenty of life into the mart trade in Ireland for slaughter-fit cattle, particularly heifers.

Ireland’s beef industry has lagged behind in price in recent weeks but if the current demand for UK beef continues, it simply has to trickle down to Irish prices given the lack of self-sufficiency in the UK.

While the current price differential is disappointing for Irish beef farmers, it should act as an indicator of the direction of travel for prices in the short-term as demand for beef returns.