Analysts compare the impact of Covid-19 on the global beef market

According to the latest market commentary by Quality Meat Scotland (QMS), the Covid-19 outbreak was a global pandemic, but it has very different impacts on the entire global beef market.

In Scotland, beef processors faced increasing absenteeism and needed immediate adaptation to new physical distance rules. At the same time, the loss of overnight orders from the hospitality sector and the changing balance of retail demand quickly built a higher-value steak cut inventory.

“Prime cattle prices fell 3% from late March to early May, but slaughter in Scotland fell 3.4% year-on-year until April,” said a senior economic analyst at QMS. Says Iain Macdonald.

“But in May, aided by marketing campaigns and a warm climate, retail demand surged again due to higher price cuts,” he added.

Furthermore, according to McDonald’s, processors were well adapted, with slaughter numbers exceeding the previous year’s level by 1.9%. Farm gate prices began to rise, reaching a high since 2018 by mid-June.

“As July entered and began to stabilize, the R4L steers were 384p/kg, 12.4% higher than the first week of May,” McDonald’s said.

“On the other hand, at the four-week price-reporting slaughterhouses until July 4, slaughter numbers increased by 4% year-on-year,” he added.

Impact on Europe

Across the EU, the loss of demand from the catering sector in April caused problems with carcass balance, and the EU Commission introduced a private storage aid scheme in May, costing more than €1,000 per ton taken off the market. I paid for the support.

“The price of male prime cows across the EU dropped by an average of 6% between mid-March and end-April and was 4.5% below mid-March levels in early July,” McDonald’s said. Told.

In Italy and Spain, the markets are falling further, prices are about 9% lower than in mid-March. Companies in both countries claimed support for PSA in early July.

“In Ireland, steer prices fell by 8% by mid-April and slaughter dropped in response to weak demand. At the lowest point between mid-April and mid-May, numbers were It is 15% below the previous year’s level.

McDonald’s said, “Since the beginning of June, production has been above the 2019 level, but prices are 2% behind mid-March, and Irish prices tend to be at the highest of the year. is there.

“In addition, the difference from the Scottish price has been around 17% over the last few weeks, compared to the simultaneous 5% discount for 2019.”

USA

One of the biggest influences in the world is the United States. The outbreak of Covid-19 in the meat processing workforce caused the factory to close in April, reducing livestock capacity through April and May, more than a third of its peak.

The high concentration of the slaughter sector drastically reduced cattle competition, putting considerable pressure on farmers’ gate prices. After that, it dropped more than 11% between mid-March and late April. At the same time, however, the combination of strong retail demand and tight beef supply virtually doubled the wholesale price.

“By the end of May, slaughterhouses were once again close to the level they were a year ago, and supply pressures were starting to ease,” he said.

“Beyond mid-March levels, farmers’ prices recovered by 5-6%, but wholesale prices began to fall sharply.

“But the two months of capacity loss caused a significant backlog of cattle awaiting treatment.

In addition, cattle sold in US feedlots are older and heavier than usual, and production is even higher.

“As a result, the downward pressure came back and in July, the price of the farmer’s gate fell slightly from its previous low,” he added.

“Beef supply in the US is tight, and exporters from Australia and Uruguay are closing the gap by increasing shipments, despite a sharp decline in local production.

On the other hand, the sharp contraction of pork production in China in 2018 and 2019 will increase the import of beef by 45% year-on-year in the period from January to May, which will eliminate the national meat shortage. Helped.

Beef is less expensive than it used to be because wholesale prices for pork are twice the level of 2019 and prices for beef are 17% higher, equivalent to 5.40 lbs/kg and 8.10 lbs/kg respectively.

“Exporters from Brazil and Argentina benefit most from China’s demand, helping to improve export competitiveness as global financial market movements triggered by the pandemic reduced the value of the currency. “, McDonald’s said.

“But if China’s meat production were to recover in the next few years, the two countries would seem very at risk,” he added.

According to McDonald’s, it is interesting to compare market prices given the ongoing trade agreement negotiations between Britain and the United States, especially given the debate over production methods and food safety standards.

Due to the recent decline in early July 2020, US steers amounted to 274p/kg, reaching 71.3% of the 384p/kg paid to R4L steers from Scottish abattoirs.

“Since 2015, steers in the United States have averaged about 12% below Scotland’s levels, rising 30% to 10%,” McDonald’s said.

“US seasonality means that US prices tend to be closer to Scotland’s levels in the spring and even further in the fall. The average gap between 2015 and 2019 was 7% in the first half. That was 17% in the second half, half,” he concludes.