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No backstop for Irish beef prices
Irish prime beef prices are now below the EU average, writes Phelim O'Neill.

Irish factory prices are now well behind those in the markets where we sell our beef.

In recent years, Irish factory prices have peaked in the month of June from which they have fallen to hit the low point in October. However, in 2018, while they peaked in the month of June, they have kept falling since.

Main markets

Relative to the main markets in which Irish factories sell the beef, farmgate prices were the best in the eurozone, and even the gap with Britain was closed to 16c/kg equivalent on steers and just 4c/kg on heifers.

For O3 cows in June, Ireland was ahead of the rest of the EU with the exception of Sweden and Irish cows were 15c/kg ahead of cows in Britain for the O3 grade and a huge 24c/kg ahead of France, the strongest cow beef market in the EU for O3 grading cows.

The main difference this year is that the trade hasn’t picked up in late October or early November as had been the case in 2016 and 2017. That means Irish prices on steers and heifers are now lagging behind farmgate prices in all our main export markets, even where these are primarily young bull markets.

Steers/young bulls

At the week ending 24 November, Irish R3 steers were at €3.65/kg excluding vat. This compares very unfavourably with Britain, where R3 steers were making the equivalent of €4.12/kg, and Sweden, where R3 young bulls were making the equivalent of €4.12/kg.

In our main eurozone markets, Irish prices for R3 steers are a massive 59c/kg behind Italian R3 young bulls. German young bulls were making €3.93/kg in the last week of November and in France where prices lagged behind Ireland for much of this year, they were 7c/kg ahead on €3.72/kg for R3 young bulls.

Heifers and cows

Comparing heifers, Irish R3 prices were at €3.78/kg for week ending 24 November, which is behind all of the main export markets for Irish beef with the exception of Germany, where €3.72/kg was the price of R3 heifers.

Even on cows, where Ireland had been so dominant, prices are well back, with Irish O3 cows making €2.78/kg at 24 November, whereas in France the same cows were worth 24c/kg more at €3.02/kg. Irish prices remain ahead of Britain, where the equivalent price for O3 cows was €2.63/kg.

* All prices net of vat and supplied by Bord Bia.

Dairy growth forecast to continue until 2030
EU outlook positive for dairy between now and 2030

Difficult production caused by weather is expected to limit growth in EU dairy production in 2018 to 0.6% to 167m tonnes. And the weather effects of 2018 will possibly impact on production in quarter one of 2019, with growth in production forecast to be 0.7% next year.

The EU dairy industry is forecast to grow by 0.8% annually until 2030, when total production is predicted to be 182m tonnes from the expected 21.9m dairy cows. Yields are predicted to grow from 7,050kg per cow in 2017 to 8,240kg per cow in 2030, an increase of 17%.

Price

On price, the EU raw milk price in 2018 is predicted to be €34/100kg, which is 2% below the last five-year trimmed average.

The recovery and stability in milk prices is explained by falling stocks of skimmed milk powder and good demand for dairy products. Intervention stocks have been reduced to 170,000t, which could be cleared completely in 2019.

Lower milk production in some EU countries and lower fat content has meant lower supply of butter, which has driven butter price to an average of €5,100t, which is 50% above the five-year average.

While cheese prices have been below 2017 levels they have remained consistently around €3,300t over this year.

Global trends

By 2030, world milk production is expected to be above 1bn tonnes, increasing annually by over 15m tonnes, with 40% of the increase in India, primarily for the domestic market.

Increasing demand in Africa and Asia is forecast to be ahead of their ability to increase production and therefore will be a growing market for exporting countries.

While milk powders will be the core business, demand is also predicted to increase for dairy products, according to the EU’s forecast.

Cheese is a big performer for EU dairy industry.

Cheese is EU ace

Cheese is broken into two categories – domestic consumption, which is personal use, and industrial, which is driven by the convenience food sector where cheese is a key ingredient.

In the EU, the market is divided 50:50 and the EU forecasts that per-capita cheese consumption will grow by 1.3kg to reach 20kg per person by 2030.

Geographical indicators are key branding in the personal consumption cheese markets and generate a premium in internationally traded cheese beyond the EU.

Exports of EU cheese increased by around 40% in the decade between 2007 and 2017 and this growth is forecast to continue through until 2030. By then, the report predicts the EU will be exporting 1.2m tonnes of cheese, which would be 40% of the global cheese trade, up from 34% in 2018.

Butter is back in fashion.

Butter in fashion

EU consumption of butter is forecast to reach close to 4.6kg per capita in 2030 in the EU outlook report, 0.3kg above the 2018 level. Global demand is forecast to lead to an increase of EU exports to approximately 260,000t.

Butter prices have been extremely volatile over the past couple of years, peaking this year at almost €6,400/t though this is expected to drop to around €4,500/t by the end of the year. The EU outlook is forecasting a butter price of €4,000/t in 2030.

Milk powders

Whole milk powder (WMP)is facing increasing competition from South America and the EU share of global trade is forecast to fall to 12% in 2030 from the present 14%.

Demand will remain strong within the EU, however, with WMP production forecast to grow by 4m tonnes per year up to 2030, due to higher domestic demand forecast to increase by 4.2m tonne annually, with chocolate the main source of this increased demand.

On skimmed milk powder (SMP) the EU is a huge global player accounting for the supply of 50% of the total product traded.

Volumes

Volumes traded doubled in the decade 2008 to 2018, with the EU accounting for half the increase. Over the decade, the EU had been increasing its exports annually by 16%, reaching a record total volume of 780,000t in 2017.

The EU outlook report is forecasting that volumes traded will grow by 240,000t milk equivalent per year up to 2030, with the EU taking a 30% share of global exports.

This growth in demand is predicted to lead SMP production reaching 1.8m tonnes by 2030, 18% above the 2018 levels and creating a demand for an additional 2.2m tonnes milk equivalent being used for SMP processing.

No good news in beef outlook
Despite forecasting less beef being produced in the EU, price pressure is predicted to continue

The EU beef outlook to 2030 is forecasting meat consumption in the EU will decline, going from 69.3kg per capita in 2018 to 68.7 kg in 2030.

The cause is predicted lower availability, even with higher imports, and a preference for lower meat intake and meat substitutes.

Consumption

Within meat consumption, the forecast is for reduced beef and pigmeat intake and increased consumption of poultry and sheep meat.

Per-capita beef consumption in the EU is 11kg in 2018, but this is predicted to fall to 10.2kg per person in 2030.

On pigmeat, consumption is forecast to fall from 32.5kg per person at present to 31.7kg in 2030.

On the other hand, sheep meat consumption is expected to grow from 1.7kg per person at present to 1.9kg per person by 2030 and poultry is forecast to grow from 24.1kg in 2018 to 24.8kg per person in 2030.

Herd

The suckler cow herd across the EU is forecast to continue the decline that has been happening since 2000.

Numbers are expected to fall a further 900,000 between now and 2030 from 11.3m to 10.4m head.

Beef production is also forecast to fall to 7.7m tonnes by 2030 compared with 8.2m tonnes at present, which is a 6 % decline over the next 12 years.

Despite a prediction of less beef, not only is there no increase in prospect for beef prices, but they are expected to decline in the coming years, stabilising in the late 2020s.

Imports and exports

On global trade, the outlook report predicts a decline in EU beef exports and a corresponding increase in beef imports.

Exports of beef are predicted to fall by 8% in 2018 and continue falling in the coming years to be at 227,000t in 2030, 10% lower than at present.

This is because Brazil, Argentina and Australia are forecast to be particularly competitive in export markets.

On the other hand, imports from outside the EU are forecast to increase by 6% this year, mainly from Brazil and Argentina, and this is expected to continue increasing until 2030, when they are forecast to reach 350 000t, a 15 % increase on present levels.