Beef Farmers Face Win-Win Market Situation
03/02/09

Beef farm incomes are being protected from the recession by the enthusiasm domestic consumers are continuing to show for British beef - despite a startlingly high year on year lift in retail prices.

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The National Beef Association anticipates that even if a domestic cattle supply surplus is created by an unforeseen reaction among consumers to the even steeper retail price rises that are expected in months to come, such surplus should be sold easily, and profitably, onto the surging export market that has developed following the 21 per cent drop in the value of sterling against the euro recorded since October 2008.

“Beef producers are weathering the recession because consumers have stayed remarkably loyal to beef despite a 15 per cent, year on year, lift in average retail prices and even bigger percentage leaps in the value of mince, sirloin and other popular cuts” explained NBA director, Kim Haywood.

“There is no sign that the almost constant demand for a more expensive product will falter and farmers should not worry because, if it ever does, their unsold beef will be re-directed onto the equally buoyant export market instead.”

“This is a win-win scenario. If domestic demand ever falters the slack in the market will be taken up by short supplied overseas customers who will be happy to buy British beef for the same price in euros that they paid last autumn even though it will earn the producers over 20 per cent more in sterling terms.”

According to the NBA financial market traders are not expecting sterling-euro exchange rates, which are driven by the pressure on the UK economy, to ease until the economic storm has begun to blow itself out.

“The current consensus is that this will take at least two years so beef farmers across the UK should be able to feel confident about their market income until the beginning of 2011 at least,” said Ms Haywood.

“It is also significant that exporters in the Republic of Ireland who sell beef into the UK are being hit so hard by the rise in the value of the euro against sterling that they have called on their government to set up a sterling stablisation fund, with an exchange rate fixed at 80 euros to the pound instead of around 94p, so that some of their sales can be protected.”

“This underlines just how much the UK’s beef sector can expect to benefit from the rise in the value of the euro and exposes the warnings issued recently that if cattle prices are pushed too high farmers will soon find it more difficult to sell their cattle.”

“UK cattle prices are, at present, mainly underpinned by strong retail demand against weaker overall supplies and a strong euro that inhibits imports – so they should rise further.”

“But a lift in export activity is always an option if less beef is needed domestically and - as long as the pound is struggling against the euro - it remains the win-win alternative that should protect domestic cattle prices no matter what some processors might say,” Ms Haywood added.

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