Study analyses value loss in prime cattle market

The value of the prime cattle market in Great Britain fell by £15 million in the year to February 2016, primarily due to a fall in the base price paid for cattle meeting target specification, according to a new report.

The analysis, which is part of an ongoing project aiming to improve the transparency and understanding of prime cattle pricing, shows that 84% of the loss of value (£12.6 million) was a result of the fall in the base price. This decline amounted to just under 30p/kg for steers and heifers, with a slightly smaller fall for young bulls.

A decrease in the number of cattle being slaughtered, particularly heifers, was the second most significant factor, however this was partially offset by an increase in average carcase weights and a small improvement in carcase quality.

After these major drivers and changes in the mix and weight of cattle are taken into account, there is still a loss of around £1 million due to changes in prices between different parts of the conformation/fat class grid relative to the base price. The average price for R4L steers declined by 28.9p/kg between February 2015 and February 2016, while prices for many other classifications fell more significantly. This largely reflects changes to the bonuses and penalties paid by some processors, either based on carcase classification or on other factors, such as carcase weight.

“The analysis emphasises the importance of producers understanding and responding to processor requirements. This is particularly pertinent in a falling market, where delivering the right kind of animals will minimise any loss of value,” said Stephen Howarth, market specialist manager for AHDB Market Intelligence.

“As specifications have tightened and penalties for missing target ranges increased, it appears that some producers have not responded to these market signals, contributing to the reduction in the value of the GB prime cattle market over the period.

“These findings reinforce the importance of producers keeping in close touch with market developments in order to understand and anticipate changing requirements. This in turn will enable them to maximise their returns.”

The full report can be found on the AHDB Beef & Lamb website.

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