Articles

Scottish Mart Meetings State Tight Global Beef Supplies Will Keep Prices High

Friday, March 16th, 2012

Sandy Hay of Bank of Scotland, David Leggat of UA, Robert Gilchrist of Keenan and Stuart Ashworth of QMS.

Beef prices look likely to remain firm on the back of a tight supply of cows and calves in the chain, according to Stuart Ashworth of Quality Meat Scotland (QMS), who spoke at a series of beef meetings held at four of Scotland’s Marts, including Stirling Agricultural Centre.

At the events organised by Bank of Scotland, Keenan and QMS at Thainstone, Lanark, Dingwall and Stirling auction marts, local farmers heard that the Scottish beef herd is very challenged following high culling rates. “There is little prospect of significantly more cattle appearing over the next couple of years so the tight supply will remain,” he said.

Mr Ashworth suggested that the supply and price dynamics are also likely to be affected going forward by low animal numbers in many parts of the world, for example numbers in the USA, one of the world’s biggest beef trader, are significantly down on stock as a result of the drought in 2011.

This worldwide shortfall will limit where domestic and international buyers could seek alternative supplies. “There is a tight supply everywhere, so prices will remain firm; there will be no cheap beef for the EU market. However, with consumer confidence remaining fragile, farmgate prices may be constrained by consumers’ willingness to pay higher retail prices.”

The audience consensus was that the supply and price equation certainly points to opportunity for those with cattle to fatten and finish, as well as those selling stores. However the high price of feed is still a big concern as is the outcome of the CAP reform, which is making many reticent to invest in upping cow numbers.

The Bank of Scotland and Keenan focused their discussions on the need for improved efficiency in production to give the confidence that good margins can still be made independent of the single farm payment.

“The rise in beef price since August 2009 has been 17%; over the same period feed wheat prices have increased by 76%, so what can farmers do to capture the value that we’re seeing in rising sale prices, whilst insulating yourselves from these increases in input costs?” Sandy Hay from the Bank of Scotland asked.

Mr Hay said production efficiency equates directly to business efficiency, which gives the bank’s enhanced confidence in lending to farmers looking to capitalise on the undoubted domestic and export opportunities. “The QMS average for feed plus forage cost is 50%, a 10% reduction in costs would give a net margin improvement per finisher of £22.31 whilst a 10% reduction in feeding days from the QMS average of 221 days to 199 days would yield an improvement of £20.65 per head.”

In addition to feed costs and feeding days, Mr Hay suggested that it was imperative that producers should also focus their attention on feed conversion efficiency (FCE) – “an improvement in FCE from the average of 182kg gain/tonne of feed up to 200kg gain/tonne of feed would yield another £16.72/head. The combination of a 10% improvement in all three areas would be £59.68/head.”

Keenan’s Robert Gilchrist said that feeding the Keenan Mech-Fiber System way is all about driving efficiency improvements.  “The average improvement for beef finishing units using the System is £47/head based on feeding a similar ration but presenting it in a more physically effective manner. This improves rumen function and, in turn, animal performance.”

He explained that FCE is one of the most important measures for any livestock farmer; it is widely used by pig and poultry farmers but should also be the focus of beef farmers. “The measure of feed conversion efficiency is kilos of liveweight gain per tonne of dry matter fed. This means that if feed is costing £150/tonne of dry matter and you were to improve your FCE by 10% from 100 to 110, the cost per kilo would fall by 14 pence.”

“Achieving marked improvements in FCE is our goal and it boils down to the physically effective mix that you get from the Keenan,” he explained. “The Mech-Fiber as we call it encourages the animal to chew the cud for longer, slowing the passage of feed through the rumen and improving the level of digestion.” He added that the other real gain for first time Keenan users is that for many it gives them very accurate feed intake and cost information for the first time. “If you can’t measure it, how do you know how you’re doing?”

Stuart Ashworth concluded that there is certainly opportunity for beef producers going forward, but the one thing that would give them the confidence they need to invest for the future is improving their production efficiency.

David Leggat, Executive Chairman of United Auctions, who chaired the largest seminar, held at Stirling Agricultural Centre, said: “Numbers of store cattle forward at our weekly sales are well ahead of last year due to prevailing buoyant prices and also a shortage of bedding and feed stuffs in some areas. This is likely to mean a reduction of numbers in April, the traditional time for buying store cattle for the grass. “

-ENDS-

For more information, please contact:

Jane Craigie, Jane Craigie Marketing on 01466 780078 / 07795 278767

jane@janecraigie.com

Or

On behalf of United Auctions:

Jenny Kumar, JK Consultancy on 07989 557198 / jenny@jkconsultancy.com

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