Beef prices across the EU took a tumble in the second half of 2018 with exceptionally dry weather across the continent forcing a fast tracking of cattle kills. Alongside this, there was an increase in imports of beef to the EU during 2018 and a drop in exports from the EU. This led to increased supply in a market where consumption is at best static.

However, while cattle kills have been higher in Ireland so far this year, there are signs in the EU and in wider global markets that demand for beef is growing. Where demand increases, prices usually follow. Starting with the EU import/export balance, EU figures for January 2019 showed exports exceeding imports by 16,072t compared with 14,838t in January of last year, reversing the trend of 2018.

EU markets

Starting with the market in Britain, prices for the R3 steer have shown modest improvement over the past three weeks with the equivalent of €3.98/kg paid for the week ending 9 April, 34c/kg more than the equivalent Irish price of €3.64/kg (net of vat). With the UK taking half of all Irish beef exports, any upturn in cattle prices can only have a positive effect on Irish prices.

Across the main export markets in the rest of EU, the R3 young bull price is ahead of the Irish R3 steer price and dramatically ahead of Irish young bull prices which is 29c/kg below steer price on the R3 grade at €3.34/kg (net of vat).

While it is the UK and rest of the EU that accounts for 95% of Irish beef exports, these markets are also influenced by trade in the rest of the world

In France, R3 young bulls are making €3.70/kg, Italy is on €3.89/kg for R3 young bulls and Germany is on €4.18/kg. Even the Netherlands, a country where prices are traditionally well below Ireland, was at €3.78/kg for R3 young bulls on the 9 of April.

While it is the UK and rest of the EU that accounts for 95% of Irish beef exports, these markets are also influenced by trade in the rest of the world. In the USA, prices are 50c/kg equivalent, better than a year ago for a steer similar to an R3 in the EU. The current USA price at the equivalent of €3.94/kg is 30c/kg better than the Irish price.

This is reflected in import prices paid for lean manufacturing beef, which are estimated to be $0.30/kg (€0.35/kg). The USA imports up to 500,000t of this type of product annually from Australia and New Zealand but this year they are diverting more of their exports to China, where the insatiable demand for beef continues to increase. Last year was the latest record year for beef imports, when volume passed the million tonnes mark. Already in 2019, import volumes for the first two months were running 22% ahead of the same period in 2018. This is before the impact of African Swine Fever in the pig heard will be felt, and Rabobank are predicting that this will drive huge import demand for beef and pig meat for the remainder of this year.

China

Irish beef exports to China are in their infancy. Until this week, just six factories were approved, when Liffey meats was cleared to make it seven. The latest CSO export data, also published this week put export volumes at 482t, up from 213t in January. This is small in overall terms but it is increasing and it should be remembered that only frozen beef from cattle under 30 months is accepted by China with offal excluded. Also, these sales were achieved on the basis of only six approved factories, so if the further twelve that have applied for approval can secure clearance, that would make a further meaningful impact on Irish exports to this lucrative market.

Asian opportunities

While the growth of beef demand is most spectacular in China, there is also strong demand growth for beef in other Asian economies. The most interesting of these, from an Irish perspective, is Japan where beef import demand has grown from 495,000t in 2015 to 607,000t last year. A 38.5% tariff on beef had essentially confined this market to offals for Irish exporters, but with the trade deal between the EU and Japan coming into effect in February, this tariff will in time reduce to 9%.

Ireland hasn’t secured approval to export beef to South Korea yet, though it is being worked on by DAFM

That also has to make the Japanese market a realistic target for Irish exporters. South Korea is also a growing market for beef imports, up from 295,000t in 2018 to 415,000t last year. Ireland hasn’t secured approval to export beef to South Korea yet, though it is being worked on by DAFM. When approval is secured and with a free trade deal with the EU also in place, this too has potential for Irish beef exporters.

Comment

Last year was difficult for the beef trade across Europe and Brexit, and uncertainty was particularly felt in Ireland.

However, cattle prices in our main export markets are now well ahead of ours, as is the farm-gate price in the US.

This, along with growing demand in Asia and particularly in China, paints a more positive picture of the beef trade even though supply from South America remain high.