Weak demand and oversupply have been blamed for poor Irish beef prices over the past year. According to Bord Bia, finished cattle supplies here have risen by 12.5% or 125,000 head so far this year. All categories of cattle have seen numbers rise, with steers up 19%, heifers up 16% and young bulls up 10%.

Meanwhile, the opposite is happening in the major world beef-producing regions, with tight supplies and strong prices. Rabobank’s latest report on global beef markets says the supply of beef for the rest of 2014 and into next year will remain tight.

Beef production

The latest figures from the US show that beef production from January to August is down 5.6%. Steer and heifer slaughter is down 4.6%, dairy cow slaughter is down 12% and beef cow slaughter is down 17%. The main reason behind the tightening US supply is there are 536,000 fewer cattle in finishing feedlots this year. There is also an element of herd rebuilding going on after last year’s drought.

The tight supply of cattle in the US has given rise to record prices, which reached the equivalent of €4.37/kg last month. For the past four months, US prices have been greater than Irish prices on a weekly basis. Despite these unprecedented price levels, demand for US beef on the domestic and export markets remains strong.

To meet demand, the US increased its imports significantly, mainly from Australia, New Zealand and Canada.

Australia, the world’s third-largest beef exporter, sent 67% more beef to the US this year. Australia’s supplies are also expected to tighten after two straight years of record slaughter levels. This is expected to reduce the Australian herd by 10% to about 26 million. A predicted drought is tightening supply further as farmers reduce cattle numbers.

Even though the drop in grain prices has allowed Brazilian farmers to finish a record number of cattle, strong exports have kept prices high. As the top exporting country in the world, exports are 11% ahead of last year, mainly due to the favourable trade situation with Russia.

Weak demand

European beef demand continues to be weak due to the economic environment in several key markets.

For example, beef sales this year in France and Germany are back 4% and 3.1% respectively. Demand for beef in Italy and Spain is also lacklustre as high retail prices have not come back in line with declining cattle prices.

Looking ahead to 2015, Bord Bia believes that supplies of prime cattle will tighten considerably, principally due to the 4.3% decrease in calf births in 2013.

As the economies of key European markets recover and Irish supplies tighten, the laws of supply and demand should mean that beef prices will recover.