Farming: Global market in meat still volatile despite rise in returns

The latest market commentary from Quality Meat Scotland (QMS) issued a sharp reminder to producers not to assume they will be better off at current market prices. Commenting on the trend in the cost of farm inputs, Iain Macdonald, senior economics analyst at QMS said: "While the price of straight feeds has now fallen back from the highs seen after the war in Ukraine began, prices remain elevated above pre-war levels and sharply higher than last year, suggesting that the cost of compound feeds, which moves at a lag, will continue to rebalance higher, squeezing finishing margins in the coming weeks and months.” He said that globally the sector had faced major volatility in recent years, with Covid restrictions and their eventual easing seeing a major rebalancing swing away from eating out and towards retail sales for home cooking – and then back again. “Meanwhile, beef processors have had to cope with reduced staffing levels through illness and general labour shortages in many parts of the world,” he added. In the EU prices had also bounced back from Covid lows – but the market had softened in recent weeks, as the rise in cost of living began to dampen consumer demand. On top of this, the effects of a changing climate had had implications for some major beef producing nations. “For example, in Australia, beef production has been affected by severe drought, which initially led to herd liquidation, followed by unprecedented levels of rain, which have resulted in a drive to re-stock. "As a result, you had a surge in slaughter, followed by a severe supply tightening over the past couple of years,” said Macdonald. In 2021, Australia’s beef production had fallen by nearly a quarter compared to 2019 and while a rebound was expected this year, the USDA was still expecting it to fall around 15 per cent short of the 2019 high, having recently lowered their 2022 forecast by 3 per cent. “This reduction in supply has pushed Australian cattle prices up significantly. While off the highs seen earlier this year, processor cattle in the Eastern States still averaged 516p/kg in the week to July 18, placing them 13 per cent above the latest Scottish R4L steer price.” Severe drought conditions in Canada and the US over the past year had also led to herd consolidation, with the cow kill holding well above historic averages in the second quarter. In South America, high rates of inflation over a prolonged period led the government of Argentina to introduce export controls in the middle of 2021, supporting domestic food security while squeezing the ability of the country’s beef processors to build on recent successes in the Chinese market. And although BSE in Brazil had led to difficulties with export to some countries, it was currently rebuilding supplies to both China and the US.