UK beef production is forecast to fall 3.7% on 2010 levels to 875,000 tonnes, driven largely by a decline in the number of male dairy calves available for slaughter.
The supply situation is likely to be exacerbated by a surge in export volumes of UK beef and veal, with the Agriculture and Horticulture Development Board (AHDB) predicting these will grow 7.4% to 146,000 tonnes in 2012 as more UK product is bought in continental Europe.
"The fundamentals point towards the fact that, if you've got a tightening supply of cattle and demand is still there for beef, prices will firm," said Mark Topliff, senior analyst at AHDB Market Intelligence.
He would not be drawn on how much prices were likely to rise. However, they have already moved upwards at wholesale level this year. Last month, the deadweight price of average GB carcase-grade beef, known as R4L, smashed through the 300p/kg barrier for the first time (w/e 9 April), and prices are expected to strengthen further over the next 18 months as a result of tightening supplies, according to AHDB's latest outlook for the UK cattle sector. Retail prices, however, have stayed largely stable, with fresh beef costing £6.16/kg compared with £6.17/kg last year [Kantar World-panel 52w/e 20 March 2011].
The prospect of higher beef prices comes after agri-food consultancy EFFP last month picked out meat as one of the sectors that was yet to see significant price inflation over the coming months, even though overall inflation levels would come down (The Grocer, 'Food price hikes in check but meat price could yet go up', 16 April, p33).
Topliffe added that although beef supplies were expected to tighten in the short term, future price rises could be mitigated if farmers started feeling more confident about the prospects of their industry again, and increased herd sizes as a result.