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Beef Sector Update - Covid-19

The Coronavirus pandemic is impacting significantly on the meat and livestock sectors. Demand for beef has been disrupted here in Ireland and across our major export markets by the closure of restaurants, hotels and bars.

Market channels

Almost 90% of Irish beef production is exported, with the UK and continental Europe accounting for the vast majority of this. In recent years, the Irish beef industry has been successful in gaining listings with more than 80 EU supermarket groups: more than any other country. This has included ongoing business with leading retailers Germany, the Netherlands, Italy, Scandinavia and Belgium.

While the recent improvement in retail sales is positive, the difficulty is that, on average, almost 60% of the total volume of Irish beef exported is normally sold into foodservice (restaurants etc.) and manufacturing channels (e.g. burgers for fast food chains). Foodservice alone usually accounts for more than half of steak sales. Falling prices may lead to much of this product being frozen and sold later in the year. However, freezing the product can devalue it in the eyes of most customers.

 

Producer Prices

Falling cattle prices are a major concern at farm level, particularly following the difficult market situation endured by the beef sector in the past year. The most recent prices – published by the Department of Agriculture, Food and the Marine for the week ending the 28th of March – show that Irish R3 steers averaged €3.65/kg excluding VAT. For the same week, R3 steer prices in the UK were equivalent to €3.74/kg excluding VAT, which also reflected recent weakness in sterling against the euro. Across the EU, where the majority of male cattle are finished as bulls, the average R3 young bull price was €3.52/kg (excl. VAT).

 

Bord Bia’s Beef Market Tracking data indicates that the Irish composite cattle price (i.e the average price paid in Ireland across all categories and grades of animals) was €3.38/kg for week ending 28 March. The Export Benchmark Price (which tracks the equivalent carcase prices in the main EU markets for Irish beef) was equivalent to just €3.29/kg for the same week. This highlights the significant declines being recorded for cattle prices across Europe in recent weeks.

With the foodservice and manufacturing channels greatly restricted, cull cow prices have experienced the most severe downward pressure. In the past fortnight, quotes for O grade cows have fallen by up to €0.40/kg at Irish meat plants. Similarly, there is limited demand for other animals falling outside the preferred retail specifications.

Chinese market

In recent weeks, the situation in China regarding Covid-19 has become more positive: businesses are reopening and close to half of employees have returned to work. The foodservice sector has seen close to 90% of restaurants resume normal service: McDonald’s has reopened 95% of its Chinese outlets.

However, demand remains muted and so some restaurants are offering discounts to attract customers. Local governments are also starting to implement various schemes (coupons/cash) to spur consumption.

China was already experiencing a fundamental deficit of meat as a result of African Swine Fever (ASF). Covid-19 has further amplified this shortage, which highlights the growing importance of continuing to develop the Chinese market for Irish beef exports.

Beef Promotional Activity

Bord Bia has adjusted its promotional activities to reflect the loss of the foodservice sector and the ever increasing pressure on steak cut returns. This has seen promotional activities move largely online in an effort to communicate directly with consumers.

Recognising the significant difficulties being experienced by Irish beef exports in general, and the steak category in particular, in Ireland a TV advertising campaign was launched on the 4th April focusing on two ads – promoting Quality Assured Irish food and a specific steak ad.

It is more important than ever to work closely with key Irish beef customers across retail and foodservice and their suppliers.  In Europe this will involve promotional plans with the main purchasers of Irish beef and their suppliers to hold and grow the position of Irish beef in our main markets. In Italy, a campaign focusing on Irish beef steaks sold through butcher shops has reached over 170,000 consumers and increased sales of beef over the past fortnight.

Market Tracking & Intelligence

Bord Bia is increasing our investment in tracking consumer behaviour to determine the key factors driving their purchasing decisions and to help inform our approach to promoting Irish beef in a post COVID world. Sharing these insights with customers will allow Bord Bia and Irish beef exporters stay closer to customers and help inform their decisions as the market works its way through the impact of COVID.