Duncan Wyatt, lead analyst of red meat at the Agriculture and Horticulture Development Board (AHDB), looks ahead to see what’s in store for the UK’s cattle and sheep markets.
Last updated: 30 Jul 2020 4 min read
There are two main events that will shape the fortunes of the UK’s cattle and sheep sectors over the coming months and years, the coronavirus outbreak, and the upcoming deadline for Brexit. Broadly speaking, although supply chains have had to adapt, the outbreak has been a demand side issue, and we hope one that is shorter term in nature. Brexit will affect the supply side, and could mean changes to trade and domestic agricultural policy that will last a very long time.
This year, UK beef production is expected to fall slightly, due to tighter cattle supplies. Although imports are not expected to grow, they could be competitively priced, depending on the availability of Irish cattle. However, the fortunes of the beef market in the short term will ultimately depend on how domestic demand evolves, and the path we take out of lockdown. Demand is forecast to be lower year on year, and so the level of exports needed to balance the market will be higher than previously thought. These exported volumes may also need to be keenly priced, into what is likely to be a depressed European market.
Sources: Department for Environment, Food & Rural Affairs, IHS Maritime and Trade – Global Trade Atlas, HMRC, AHDB
With domestic demand looking to remain subdued for the rest of 2020, and backlogged Irish supplies coming through, it is difficult to make a case for support to cattle prices in the next few months. Further forwards, demand is expected to recover in 2021 and, coupled with tighter long-term cattle supplies, this may support farmgate prices.
Also during 2020, UK sheep meat production is forecast to fall, although 2019 production was the highest in recent years. Imports are expected to decline again too, driven by reduced product availability in New Zealand, and the continued higher demand in China for New Zealand product. As with beef, a weaker economy and social-distancing measures across Europe are expected to keep demand under pressure.
Sources: Defra, IHS Maritime and Trade – Global Trade Atlas, HMRC, AHDB
New Zealand and Australia have both now had rain after a prolonged period of drought, which means farmers there are looking to re-stock. In the short term, this will negatively affect production in these countries. Typically, UK exports reflect domestic production trends. As such, exported volumes are expected to decline in 2020, reflecting this lower production. The sheep sector is still vulnerable to any lack of a free trade agreement between the EU and the UK at the end of the year.
Longer term, there are other factors that will influence the UK beef and sheep sectors: chiefly among them, the UK’s new trading relationship with the rest of the world; the removal of direct support, to be replaced by payments for environmental services; ever-changing weather patterns; and a mature market for animal protein at home, set against a background of growing global demand.
The UK is a net importer of beef, and could increasingly become a net exporter of lamb. However, for farms producing all types of livestock, the future is likely to involve greater exposure to world markets, and with that increased uncertainty and price volatility.
Risk management will become even more important, both in terms of the outright price of inputs and outputs, but also market exposure for those outputs. Coronavirus has shown us that things can change dramatically in unexpected ways. It may be that diversification and economies of scale become best achieved through contractual arrangements and co-operation along supply chains, rather than individual businesses going it alone.
For a more detailed look at the prospects for the UK cattle and sheep sectors, visit the AHDB July 2020 Agri Market Outlook .