The COVID-19 pandemic continues to negatively affect the market for Irish beef.
Retailers in many markets across Europe are focusing strongly on supporting the domestic beef sector, which makes trade difficult for Irish exporters.
Maintaining presence in export markets is vital given that 90% of the beef produced has to be sold outside the country.
The sheep sector, while erratic over recent weeks, has avoided the same fall-off in demand as Easter followed by the start of Ramadan coincided with seasonal low supplies of hoggets in both Ireland and the UK.
Describing the market situation requiring the introduction of Private Storage Aid (PSA) for the beef sector, the European Commission outlined that the food service channel is responsible for approximately 70% of Europe’s demand for the principal steak cuts. The Irish beef sector needs to export almost 90% of its production, so the fall-off in market opportunities presents an even greater challenge.
Overall, the food service sector across the EU is expected to see sales decline by one-third in 2020
Settled, sunny weather and the early start of barbecue season in mid to late April plus supermarket promotions have seen some recovery in steak cuts.
However, sales of fillets, which are typically highly dependent on foodservice, are still trading at prices which are 30% to 40% below normal levels.
Overall, the food service sector across the EU is expected to see sales decline by one-third in 2020, according to a recent report by market research agency GIRA.
Current difficulties look set to continue in relation to carcase balance
Commenting on the overall beef market impact of COVID-19, GIRA predicted an economic drag leading to a widespread downturn in consumer spending over the next two years, and a decline in beef consumption across the EU of between 7% and 8%.
Current difficulties look set to continue in relation to carcase balance, as demand focuses on lower-value cuts such as mince. GIRA also pointed to some constraints on the previous strong forecasts for Asian beef import demand.
Live cattle exports continue to run well below the equivalent period in 2019. For the year up to 3 May, overall exports have declined by 20%, or 36,000 head, to 140,000 head.
The primary reason for this decline has been fewer calves being sent to other EU markets, which have collectively fallen by 26%, or 38,000 head, to 108,500 head.
There are indications that Spain and Italy will represent useful outlets for stronger reared calves over the summer months
The calf trade to the Netherlands has fallen by 33%, or 24,000 head. The Dutch veal sector is highly reliant on sales into the food service markets of Italy, France and Germany, which have been seriously affected by COVID-19.
There are indications that Spain and Italy will represent useful outlets for stronger reared calves over the summer months.
For the year to-date, shipments to non-EU markets have increased by 52%, to almost 12,000 head
However, it is realistically anticipated that calf exports are likely to slow down further in comparison with last year. While calf exports reached 200,000 head in 2019, exporters in the trade expect this figure to contract by between 50,000 and 60,000.
Meanwhile, there has been some recovery in exports of live cattle to international markets.
For the year to-date, shipments to non-EU markets have increased by 52%, to almost 12,000 head. This trade has focused mainly on the Libyan market, followed by Turkey and Algeria.
Since mid-March, the majority of consumers across Europe have been confined to their homes in accordance with COVID-19 restrictions. Although the food service market was effectively suspended, there has been a significant increase in beef sales through supermarkets and butcher shops.
For example, the latest data from Kantar for the Irish market shows that in the four-weeks to 19 April, there was a 15% uplift in the volume of beef sold at retail. Most significantly, there was a 26% surge in the volume of mince sold, while steaks also rose by 15%. Similarly, for the British market, AHDB data shows that for the 12-week period to 19 April, the total volume of beef sold through retail increased by 16%.
Again, the key highlight related to strong sales of mince, which grew by 27%, while steak volumes increased by almost 11%.
Elsewhere around Europe, the rise in retail sales of beef is reported to have been less dramatic, for example recent French data estimates increases of approximately 9%.
The food service channel normally accounts for almost one-third of Irish beef exports
This growth in retail demand has of course been hugely welcome. However, it should be emphasised that it has not been sufficient to fully compensate for the loss of the catering and hospitality trade.
The food service channel normally accounts for almost one-third of Irish beef exports, while the manufacturing category – dominated by burger production for quick-service restaurant chains – occupies more than a further quarter of our total volume.
The suspension of many of these outlets over recent months has resulted in significant difficulty in achieving a carcase balance.
As referred to earlier, the European Commission has introduced a Private Storage Aid (PSA) scheme for the higher-value hindquarter cuts.
However, initial reactions suggests that commercial interest may be limited, as processors deem that the rates involved insufficient to compensate for the devaluation associated with freezing of steak cuts.
Also, with the economic climate uncertain, there is little indication of whether steak cuts would face a better market coming out of storage later in the year than at present.
Early signs of market recovery
The past fortnight has seen some welcome recovery in cattle prices at Irish meat plants. Availability of finished animals is likely to tighten over the coming weeks, before more animals reach their target condition off-grass.
Across most markets, steak cuts have been on price promotion over recent weeks in order to minimise the build-up of stocks. This activity, combined with the partial reopening of quick-service restaurants, has also stimulated some uplift in demand.
This situation reflects the latest value of the prime Irish composite price
However, a critical concern for the sector is that producer prices are running 30c/kg behind last year’s levels.
This situation reflects the latest value of the prime Irish composite price, or average price paid in Ireland across all categories and grades of animals for the week ending 2 May, which stood at €3.36/kg (excluding VAT).
By comparison, the prime export benchmark price (which tracks the equivalent carcase prices prevailing across the main EU markets for Irish beef) was equivalent to €3.37/kg for the same week, which highlights the significant declines which have also been recorded in prime cattle prices across Europe over recent months.
More calves reared
For the year to-date (to week ending 8 May), calf registrations to the dairy herd are running over 52,000 head or 4% ahead of 2019 levels, at 1.26m head. However, many of the extra calves from dairy cows and heifers are crosses with beef sires such as AA and HE, which are also approximately 30,000 higher. Interestingly, calf registrations to the suckler herd for the year to-date have also increased by more than 18,000, which represents a 4% recovery following the reductions we had seen in recent years.
120,000 extra cattle to be available
The estimated net effect, between additional calf births (total +70,000) and potentially 50-60,000 fewer calves exported, would indicate an increase of over 120,000 calves to be reared in Ireland in 2020, the majority of which would be carried forward for beef production.
There are of course some alternative outlets available to sell these animals for live export, at different stages. For example, Spanish feedlots often purchase well-reared calves later in the year, including Angus-crosses. The Libyan market has also been a valuable one for dairy-bred bulls (both Friesians and beef-crosses) and Turkey and Algeria represent possible markets for some of the better-quality beef-cross young bulls coming from the dairy herd.
Lamb producer prices have stabilised in the past week (Figure 2). Availability of hoggets has tightened significantly, and supplies of spring lambs have been slow to materialise as yet. The recent decline in throughput has helped to maintain prices at a time when demand remains fragile as a result of the COVID-19 pandemic. Lamb performance has been relatively good but drafting rates could be slowed if soil moisture deficits worsen and curtails grass growth.
Lower oil prices will also have an inevitable impact on global sheepmeat demand and live exports
Ramadan continues until 23 May. However, with restrictions in place for mass gatherings, the traditional celebrations around the ending of the Muslim fast have been curtailed. Lower oil prices will also have an inevitable impact on global sheepmeat demand and live exports, particularly from the oil rich states in the Middle East.
On a positive note, some restrictions are being gradually eased on the continent. However, it will take some time for this to translate into increased demand for sheepmeat from the food service sector, as consumer confidence and disposable incomes remain affected.
We are also coming to the end of the New Zealand lamb season and with China returning to normal following its COVID-19 experience, we can expect that it will increase its share of New Zealand sheepmeat in the coming months just as it did in 2019.
As well as building contacts and maintaining relationships with key buyers around the world, Bord Bia has a number of specific campaigns running at present to drive sales including:TV campaign in home market encouraging consumers to purchase Quality Assured Irish produce.Eight-part cookery series on RTÉ One, Cook-in, to encourage viewers to make the most out of the food they have at home. In Italy, Bord Bia is running print and a social media campaign with the tagline “Cooking at home – Irish beef a natural and healthy choice”. In Germany, Bord Bia is running a PR campaign focused on cooking Irish beef in the home (“IrishBeef.de #enjoyathome”). In China, Bord Bia’s promotional focus is on educating food service customers on the potential of Irish beef and lamb in the preparation of traditional Chinese dishes. The 2020 Master Series will commence in June, through WeChat and Weibo (influential Chinese social media platforms).
Looking aheadAs the European market evolves following the significant disruption of recent months, Bord Bia is focused on working closely with key customers of Irish beef and lamb. Promotional plans are being developed with the main purchasers and their suppliers, incorporating a combination of in-store activation, online focus and endorsement by high-profile chefs to defend and grow Ireland’s position in our major markets.