1. Supply.
UK Beef herd (Suckled calf production) numbers have remained constant during 2016, there is little evidence to support an increase in the beef herd during 2017.  It is currently estimated at 1.6m head.
Significant culling of the UK dairy herd during 2016 will have a significant impact on the future market by reducing cattle available for slaughter during late 2017 – 2018 because of;

• Reduced beef calves will be born and registered
• The number of dairy culls is likely to reduce after the ‘mass cull’ of 2016
• Unexpected continued culling in dairy sector due to Milk Reduction Scheme and businesses exiting the industry on an improving market.

More dairy semen is expected to be used in 2017 due to improving dairy prices, less dairy cattle coming in from Ireland and limited numbers of youngstock/replacements available.
Slow finishing off grass during summer and autumn 2016 has led to reduced numbers of prime cattle being slaughtered; these are likely to be put forward throughout the winter or more likely in spring 2017 due to increasing feed prices.
Short-term (2017 & 2018) supply of prime beef appears to be fine; however it is difficult to forecast beyond this.  Reducing BPS payments will probably provide a challenge for the UK suckler herd in the coming years, and may result in a cull similar to what the dairy industry has experienced recently.

2. Carcass Grading changes and Weight Restrictions.
Carcass weights have been increasing in the UK over the last 10 years.  However with penalties now being applied on the dead-weight market on animals falling outside specification the killing weights of prime cattle is set to significantly fall during 2017.  Specifications keep changing and have hefty financial implications.
Example – ABP November 2015 Maximum Weight (pre-penalty application) 440 Kgs.  This is reportedly being reduced to 380 Kgs from Feb 2017.  This is reducing prime cattle finished price (potentially by up to £220/hd at current market price) but also having a significant impact on the store cattle/weaned calves market.
Tightening of weight bracket has been happening in the lamb market for the last 4-5 years on the dead-weight market, and is mainly driven by the supermarket’s demands for cuts of meat that can fit into specifically sized trays, and for the growing market for the ‘ready meal’ product.  These products require meat portions of specific, uniform size and weight in order that the cooking instructions remain correct.  Cutting the meat thinner or thicker in order to obtain the correct portion size in the pack will have an effect on cooking time (apparently).  A lame excuse in my opinion, but farmers have to take the hit.
Changes to the grid system, is also causing headaches and has practically killed off the profit in Friesian Bull Beef production.  The old EUROP system (in use since 1970’s and arguably in need of change as cattle conformation/quality has improved drastically during this period) is being phased out and replaced by a huge grid full of potential pitfalls.

Very simple – Green is base price; a bonus applies to everything above this.

What a shambles.  White is base price, bonus applies to green and red.  EVERYTHING IN YELLOW gets a penalty.  Almost impossible to grade a live animal!

3. Threats.
Imports – main threat is Ireland.  The beef herd has been increasing during last 3-4 years and dairy herd is set to increase further from 2017.  The market may prove to be a little more challenging in 2017 due to currency exchange rate.
Input price volatility – grain and soya prices currently rising.
Political uncertainty – BREXIT.  Lots of opinions on how it may affect the market but it’s a big unknown as yet.  It’s unlikely to have a positive impact.

4. Exports.
UK Beef export is quite simple, about 80% of all beef exported is minced, i.e. cheaper cuts.  ADHB and HCC aim to increase the export of the better cuts during 2017 and make the most of the current exchange rate (likely to remain low for now???)  The continent and America are the main targets.
HCC have been trying to get Welsh Beef and Lamb into America for the last 5 years and a trade agreement was 99% done in June 2016 until the BREXIT vote put a halt to proceedings.  Donald Trump’s election win is also likely to slow down progress, it is rumoured that his intention is to limit imports in order to prioritise the American agricultural sector.

Useful reading;
http://beefandlamb.ahdb.org.uk/wp/wp-content/uploads/2016/07/Beef-outlook-July-290716.pdf
https://icsaireland.ie/news/icsainthemedia/factory-price-grid-no-longer-fit-for-purpose/

Contact Huw at huwthomas@fcgagric.com to discuss any of the above points.