18 December 2012

4 minute read

The NFU publication 'Bullish Propects' sets out a vision for the beef industry and discusses consumer demand, beef prices and affordability relative to other meats and how industry groups are working to safeguard the beef sector within these market constraints.

Charles Sercombe
NFU Livestock Board Chairman

"We believe that livestock farmers in the UK produce some of the best beef in the world while delivering a whole host of public goods," write Charles Sercombe NFU Livestock Board Chairman and Andy Foot NFU Beef Group Chairman. "They also manage the landscape of much of the most attractive and environmentally sensitive areas of our countryside and are the economic backbone of many rural communities.

"Prospects for the beef industry are positive. World population is predicted to increase along with demand for red meat, especially from the developing economies in the Far East.

"As a strong grass growing nation, the UK beef industry is ideally placed to respond to these bullish market signals. British farmers have the ability to sustainably increase production to meet the growing global demand. We produce a quality product in a welfare conscious and environmentally responsible manner.

"Despite recent price rises and a better medium term outlook, there are still challenges ahead for the beef industry. Whether in the economics of production, the changing face of regulation, the management of animal health and welfare standards or the continued stewardship of the natural environment."

Andy Foot
NFU Beef Group Chairman

Balancing Value and Affordability

Although robust export markets are an important driver of price, volume is driven by domestic demand and the needs and wants of the UK consumer.

Quality and price are still the two most important factors for UK consumers when it comes to choosing meat. As would be expected, 59 per cent of shoppers in an IGD survey in February 20123 responded that their biggest shopping priority is how much money they spend on their food. However even in a time of economic uncertainty, a third of shoppers still ranked quality above price.

Despite the rise in nominal output prices for beef, the real price, adjusted for inflation has actually fallen compared to historic levels in the early 1990’s, making beef better value over time.

However, when compared to alternative protein sources, beef has become less competitive, encouraging people to switch, especially in the current economic climate.

A strong retail price is not a challenge that can be swiftly tackled at a producer level. Supply will respond to price incentives, especially if these lead to better farm returns but this may take several years to build production capacity. At the moment, increases in the cost of production are eroding any improvement in returns seen from improved prices.

The decline in UK cattle numbers and the tight domestic supply situation has also been driven by the contraction in the dairy herd which supplies over 50 per cent of UK beef production. A further drop in dairy cow numbers would reduce both cow and prime cattle beef supply.

Addressing affordability will require processors to continue to innovate with new cuts of meat to achieve better quality, yield and balance from a carcase, presenting the meat at a more affordable price point. It will require retailers to develop long term strategies to improve sustainable supply, moving away from the traditional short term promotional practices of discounting to market through volume as both domestic and global supply is tight and no-one in the chain can afford to sacrifice margins to drive volume. Finally, it will require both food service companies and retailers to introduce and educate consumers on how to enjoy alternative beef products and recipes.

EBLEX has already done a significant volume of work with the supply chain in this area, developing the Meat Purchasing Guide and Cutting Specification Manual along with a host of speciality cutting guides and working to increase the value of all parts of the carcase.

While beef may be challenged against other protein sources on price per kilo, Kantar data suggests that a purchase of beef directly leads on to a greater spend on associated products e.g. potatoes and other vegetables, Yorkshire puddings or their ingredients etc. than other types of meat and so the net benefit to the retailer is higher. This suggests that there is scope for cross promotions to assure the affordability of beef in shops.

Further Reading You can view the full report by clicking here.

December 2012