- Location
- Bury St Edmunds, Suffolk
Fundamental re-organisation of the beef supply chain, considered by many to be inevitable as soon as retail sales began to be dominated by just a handful of supermarkets, has been given additional urgency by fresh, cross-industry, supply worries triggered by the UK’s imminent exit from the EU.
One expectation is that few prime cattle will be traded more than twice in their lives because slaughter ages will fall even further as more specialist units turn out finished animals at 16 months or less with an anticipated carcase weight of around 360 kilos.
This trend is expected to accelerate as a result of greater enthusiasm for the contract rearing and finishing of dairy beef animals which are owned by processors tied by huge weekly contract demands to the most dominant retailers.
It will then be backed by encouragement for more direct relationships between individual suckled calf breeders and nominated finishers by the same large processors – some of which could be covered by contract too.
Behind this new urgency is retail fear that their beef supply will depend on potentially stretched domestic resources as the logistical chaos that could surround imported deliveries immediately after the UK leaves the EU beds in.
The damage and embarrassment faced by Kentucky Fried Chicken following recent structural disruption to its previously predictable supply system has reinforced this anxiety and anticipation that imports from EU countries will be continue to be inhibited by a weak pound, and eventually perhaps tariffs as well, has done nothing to calm retail nerves either.
Another factor adding to supply chain worries is expectation that domestic consumers, at both retail and catering level, will soon be placing even more emphasis on home produced beef backed by a range of provenance highlights including superior welfare, superior quality selection, watertight breed of origin guarantees, absence of growth hormones, and superior chill room maturation too.
This could soften demand for imported beef and at the same time condemn out-of-spec domestic carcases to restricted placement on ever narrowing sections of the home market or alternatively through exports sales if, or when, they flourish.
Old school finishers, those who take pride in their skill at identifying undervalued, often older, cattle then turning them out at a profit, are expected to once again raise weary eyebrows at these forecasts – as will auction companies which provide the facilities within which this tranche of buyers prefers to operate.
Undying optimism that the systems in which these opportunists thrive will continue to have a place in UK structures may even be encouraged by thoughts that tighter post-Brexit supplies and a weak pound will buoy prime cattle values – as has already happened with both cull cows and manufacturing beef.
This confidence may, or may not, be justified in the short term. After all who knows exactly which way the Brexit dice are going to roll and these old fashioned traders have always relished a gamble.
But there are hefty counter arguments which suggest otherwise. These include increasingly tight carcase specs which, as a result of resolute processor/retail preference for a maximum of just two movements and increasingly younger cattle, already exclude exactly the type of older animals feeder/traders prefer.
Indications of the direction the cross-UK market for prime cattle is expected to take are said to be obvious in the southern half of England where a higher proportion of end prices are already determined by delivery to an agreed rate of above average dlwg, not immediate short term supply/demand fluctuations, and more of these animals are being farmed on contract because the processor is the owner as well.
Many industry advisors and analysts often, but not always, described by old fashioned feeders as “know-alls” are supporting these moves because they are keen to see cost/margin predictability absorbed into beef sector structures and efficient (read non-opportunistic) farmers regularly rewarded for their cost/output skill and effort instead of playing market price Russian Roulette.
One consequence is that tens of thousands processor owned dairy calves, purchased by a range of companies, are already being reared and finished on contract so possible post-Brexit supply worries can be eased and at the same time create a situation in which all industry participants thrive instead of one sub-sector claiming profit at the expense of the others.
Nor should it be a surprise that specialist finishers able to deliver a regular consignment of 40 similarly fed, similarly sized, cattle to a single customer at least once a week are expected to be the most likely participants in this reorganisation – each of them accurately targeting all the stock contained in the delivery at either the manufacturing, middle shelf or top shelf section of the market.
These farms can be excused a wry smile because this new business is being pushed their way after processors tested their own management abilities and found them well short of what was needed to deliver to the retail requirements they demanded of themselves.
Suckler beef systems, which dominate Scotland, sections of Wales and the North of England may be slower to change. However the model willing specialists are most likely to adopt is emerging.
It focusses on an unusually close, more organised, relationship between individual breeders, finishers and processors with predictable end product provenance and delivery once again the target.
Participating breeders are more likely to be BVD free (otherwise efficiency based cost/margin calculations are pointless) and use nominated bulls, some of them on AI studs, which pass on favoured carcase characteristics like long loins, easy calving, high dlwg, light shoulders and a good profit index too.
Some pioneers of this type of suckler system have already turned out 360kg steers carcases at 13 months after the calf was weaned at eight months.
Significantly big name retailers like McDonalds and Tesco are encouraging the adoption of these production strategies.
This being the case it is predicted that advantage gained through advance knowledge of prime cattle prices established on Friday afternoons for the following week, a cornerstone of Beef Industry News which I used to publish, will soon be overtaken by these developments because shifts in market value will become increasingly irrelevant.
Less cattle are expected to be sold to processors against a previously unknown, and therefore potentially risky, base price circulated at the end of each week and more thought likely to be sold at a pre-agreed margin per kilo – as long as the carcases meet the receiving retailer’s target specification.
Essentially this means the prime cattle market could soon be more predictable because it is more organised – although only efficient breeders and feeders who are prepared to work within the new supply system’s restrictions are expected to enjoy regular genuine profit taken from each animal they sell.
# Typical supermarket specification is as follows: Steer or heifer, UK-origin, farm assured, UTM, weight 280-360kg, R3.R4L U3, U4L classification and no more than two farm moves.
(Robert Forster produces Beef Industry Newsletter, which is the best single source of beef industry information available in the UK. It includes an informed, prime cattle price forecast and can be found on the www.rforster.com website. Access is by subscription only. If TFF members email [email protected] they can be sent a complimentary copy of the latest issue.)