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Beef & Lamb Market Update, May 2020

Covid-19 continues to significantly impact on meat markets

The COVID-19 pandemic continues to negatively affect the market for Irish beef. Retailers in many markets across Europe are focusing strongly on supporting the domestic beef sector. This provides a particular challenge for Irish beef exports, due to our high dependence on exports.

The sheep sector, while erratic over recent weeks, has avoided the same fall-off in demand as Easter followed by the start of Ramadan coincided with seasonal low supplies of hoggets in both Ireland and the UK

Planning for Post COVID-19

As the European market evolves following the significant disruption of recent months, Bord Bia is focused on working closely with key customers of Irish beef and lamb.

Promotional plans are being developed with the main purchasers and their suppliers, incorporating a combination of in-store activation, online focus and endorsement by high-profile chefs to defend and grow Ireland’s position in our major markets.

Market Situation

Describing the market situation requiring the introduction of Private Storage Aid (PSA) for the beef sector, the EU Commission outlined that the foodservice channel is responsible for approximately 70% of Europe’s demand for the principal steak cuts. The Irish beef sector needs to export almost 90% of its production, so the fall off in market opportunities presents an even greater challenge.

Settled, sunny weather and the start of barbecue season, in mid to late April saw some recovery in steak cuts. However, sales of fillets, which are typically highly dependent on foodservice, are still trading at prices which are 30-40% below normal levels.

Overall, the foodservice sector across the EU is expected to see sales decline by one-third in 2020, according to a recent report by market research agency GIRA.

GIRA has predicted an economic drag leading to a widespread downturn in consumer spending over the next two years, and a decline in beef consumption across the EU of between 7% and 8%.

 

Current difficulties look set to continue in relation to carcase balance, as demand focuses on lower value cuts such as mince. GIRA also pointed to some constraints on the previous strong forecasts for Asian beef import demand.

 

Beef Trade

Although the foodservice market has been effectively suspended since mid-March, there has been a significant increase in beef sales through supermarkets and butcher shops.

The latest data from Kantar shows that in the four-weeks to April 19th, there was a 15% uplift in the volume of beef sold at retail in Ireland. Most significantly, there was a 26% surge in the volume of mince sold, while steaks also rose by 15%.

Similarly, for the British market, data published by AHDB show that for the 12-week period to April 19th, the total volume of beef sold through retail increased by 16%. Sales of mince grew by 27% while steak volumes increased by almost 11%.

In Europe, the rise in retail sales of beef is reported to have been less dramatic. For example, recent data for the French market estimates the increase at approximately 9%.

This growth in retail demand has of course been hugely welcome. However, it should be emphasised that it has not been sufficient to fully compensate for the loss of the catering and hospitality trade.

The foodservice channel normally accounts for almost one-third of Irish beef exports, while the manufacturing category - dominated by burger production for quick-service restaurant chains - occupies more than a further quarter of our total volume. The suspension of many of these outlets over recent months have resulted significant difficulty over recent months in achieving a carcase-balance.

Early signs of market recovery

A critical concern for the sector is that Irish producer prices are running 30c/kg behind last year’s levels. Significant declines have also been recorded in prime cattle prices across Europe over recent months.

The past fortnight has seen some welcome recovery in cattle prices at Irish meat plants. Availability of finished animals is likely to tighten over the coming weeks, before more animals reach their target condition off-grass. Across most markets, steak cuts have been on price promotion over recent weeks in order to minimise the build-up of stocks. This activity, combined with the partial reopening of quickservice restaurants, has also stimulated some uplift in demand.

Sheepmeat

Lamb producer prices have stabilised in the past week. Availability of hoggets has tightened significantly, and supplies of spring lambs have been slow to materialise as yet. The recent decline in throughput has helped to maintain prices at a time when demand remains fragile as a result of the Covid-19 pandemic. Favourable grass growth and lamb thrive, the transition to new season lamb looks set to gain momentum over the coming weeks.

Ramadan continues until 23th May, however, with restrictions in place for mass gatherings, the traditional celebrations around the ending of the Muslim fast have been curtailed. Lower oil prices will also have an inevitable impact on global sheep meat demand and live exports particularly from the oil rich states in the Middle East.

On a positive note, some restrictions are being gradually eased on the continent, however it will take some time for this to translate into increased demand for sheepmeat from the foodservice sector, as consumer confidence and disposable incomes remain impacted.