AHDB beef and sheep outlook 2018

The annual Agriculture and Horticulture Development Board (AHDB) Outlook conference webinar took place on Thursday last, detailing the outlook for 2018 for UK farmers.

Beef

Reflecting on 2017 performance, Lead Analyst Duncan Wyatt presented figures to show beef production totalling 896,000t, which is in line with 2016 figures. This was made up of 1.975m prime animals, an increase of 1.2% year-on-year, while cow numbers were down slightly to 650,000 heads.

Year-on-year carcase weights were down for male cattle with the average steer carcase at 367kg (-5kg), and young bulls at 326kg (-0.5kg), while heifers and cows were slightly up on 2016 levels at 330kg and 307kg.

Total UK beef imports rose by 3.6% in 2017 to over 270,000t. The majority of this came from Ireland, increasing by 5.25% or 10,000t to just over 190,000t. This was driven by a 6.5% increase in finished cattle supplies in Ireland in 2017, the majority of this coming from the expansion of the dairy herd, which also explains the decrease in overall carcase weight in the same period.

Lower Irish dairy calf exports in 2016 have contributed to larger number of animals in the 12-24-month-old bracket as of January 2018. These animals will be coming forward for slaughter throughout the year, increasing Irish slaughter numbers to over 1.8m head in 2018. This is expected to lead to an increase in exports to the UK. However, while the UK represents 51% of total Irish beef exports, Ireland has managed to diversify its markets over the past number of years.

Imports of Polish beef to the UK increased by 33% year-on-year, albeit from a low base, to 19,500t. This was largely into the food service sector driven by export-focused investment in Poland over the past few years.

On the exports side, while volume was down 1.2%, to 109,000t, the value of exports increased compared to 2016 levels, with an increase in exports to Hong Kong showing potential for the UK exporting to countries outside the EU.

Prices

Farmgate prices were significantly higher throughout 2017 compared to the very poor prices experienced throughout 2016. From mid-May onwards prices were well above the five-year average. Prices for 2018 began strong although they have started to decline in line with the seasonal trend as slaughter numbers increase.

2018 forecast

Animals in the 12-30-month age bracket in Great Britain (NI figures not included) were 23,000 head higher in January compared to 2017 figures. Therefore, AHDB forecasts prime UK slaughter numbers to be in excess of 1m head this year, an increase of 2.3% year on year.

Looking at calf registrations, total numbers are similar to 2016 levels. However, the make-up of these numbers has changed. There is an 8% decrease in dairy male registrations while beef males and females have increased by 2.5% each. Dairy female registrations dropped by 3.5% or 17,000 head year-on-year. This is due to contraction in the dairy herd as well as a greater use of beef semen in the dairy herd. There has also been an increase in the number of native crosses at the expense of continental crosses. The majority of these are believed to be coming from the dairy herd.

Carcase weights

Carcase weights are forecast to decrease by 1kg/year over the coming years due to two factors:

However, if the number of male cattle slaughtered as young bulls continues to fall in the UK as it has from 25% in 2010, to 16% in 2017, this could have an impact on carcase weights as steers are taken to older ages and potentially greater carcase weights.

Breeding herd

The forecast for 2018-2020 for the beef herd is relatively stable as farmers are adapting what is described as a ‘wait-and-see’ approach to Brexit. This is in contrast to the dairy herd which is forecast to decline by about 1% per year over the same period.

Brexit

As expected, the forecast comes with a Brexit warning, depending on how trade agreements post-Brexit will affect supply. However, given the nature of the supply chain, supply figures won’t shift greatly over a short period of time.

Sheep

Rebecca Oborne, red meat analyst, outlined the sheepmeat review of 2017 and forecast for 2018.

Price

Farmgate prices for the first quarter of 2017 were below the five-year average due to the large carryover of lambs from 2016. This was due to difficult conditions in spring, delaying grass growth and having a knock-on effect on lamb performance, delaying the normal drafting pattern through the second half of the year.

New-season lamb came through early in 2017. However, as weather conditions deteriorated through the summer, throughput of lambs was reduced, causing a price hike in late May and June. Prices came back in line with seasonal changes later in the summer yet finished the year above 2016 levels. This year, prices have started quite strong, currently 30p/kg ahead of last year.

Looking the price differential between New Zealand and UK lamb prices, 2017 saw a reduced price differential compared to the previous two years. This has led to a reduction in the competitiveness of New Zealand lamb on UK shelves. The contributing factors to this are a high New Zealand lamb price compared to historical levels coupled with both the weakening of Sterling and a strong New Zealand dollar.

Production

Total lamb production in 2017 was 298,000t, an increase of 4% on the previous year. This was due to both the increased carry over of the 2016 lamb crop as well as a bumper lamb crop achieved in 2017.

This higher level of domestic production led to a decrease of 9% in imports last year totalling 75,000t for January to November, the lowest level recorded since 2000. Another contributing factor to this is the weaker pound, making UK imports less competitive. Also, with rising demand in China and throughout Asia, both New Zealand and Australia have started to concentrate their efforts on these emerging markets closer to home.

The weaker pound led to an increase in exports, up 11% year on year to 90,000t. Germany has emerged as a major market for UK lamb while, despite a difficult first half of 2017, exports to France finished 1% up on 2016 levels.

Consumption dropping

Kantar Worldpanel retail data showed that the number of households to have purchased lamb on at least one occasion in the previous 12 months was down by 5%, while retail prices were up 5% and volume sold was down 9% year on year. It should be noted that these figures are for retail only and do not include the food service sector. They are also on a product weight rather than carcase weight equivalent. Based on carcase weight equivalent, consumption is calculated to be down 4% year on year.

Forecast

Similar to the beef herd, breeding ewe numbers are forecast to remain quite static over the period 2018-2020, with just a 1% increase expected on 2017 levels as farmers wait to see what effect the outcome of Brexit negotiations will have on their business. The breeding flock has been on the increase over the past nine years following a period of sharp decline in the mid-2000s.

The lamb crop for 2018 is set to be slightly lower than that of 2017. This is due to the larger than usual lamb crop in 2017 coupled with the poorer weather conditions experienced throughout the breeding season last year leading to reduced litter sizes expected this spring.

Production figures for 2018 are set to increase to 317,000t, up 6.3% on 2017 levels. This will come from carryover of 2017 lambs as well as increased cull ewe numbers. While the percentage of the 2017 lamb flock carried over is lower than the previous year, due to the increased lamb crop in 2017, the carryover in terms of heads is greater.

Lamb carcase weight remains in line with the long-term average and is expected to remain stable over the coming years.

An increase in production is expected from cull ewe numbers. A three-to-four year culling cycle has been recorded in the UK since the foot and mouth disease outbreak in 2001. Given that 2017 cull numbers were relatively low, a year-on-year increase is expected in both 2018 and 2019. To offset this increase in domestic production and reduced domestic consumption, exports are expected to rise throughout 2018.