Dawn Meats group development manager Paul Nolan gave a cattle price outlook to farmers in attendance at an Irish Farmers’ Association (IFA) beef meeting in Portlaoise, Co. Laois, on Tuesday (November 22).
Not many people would envy Nolan’s job on the night; despite receiving several tough questions and plenty of criticism on pricing issues from the farmers in attendance, he was commended for attending the event.
It seems that predicting beef price is a bit like giving a long-range weather forecast. It can be estimated what might happen, but it can’t be said with certainty what will happen and Nolan admitted that he has often been proven wrong in his beef trade forecasts.
While prices have now started to recover, the big question in the room on the night was why Irish beef prices had fallen so far behind EU prices during the peak kill weeks of late-September and October.
Answering this question, Nolan said: “There are mitigating factors and it’s not always as simple as it looks.
“First of all, we are a little distant from the market. Our transport costs have increased but more importantly, demand has tightened and when demand tightens, the first thing that happens in any of our major markets is that localisation kicks in and local product gets precedence.
“The third point is that the steak cuts are put in at values, and that’s great if you can keep the volumes from those animals that you have moving and moving at those prices. With the downturn we have seen, this can be challenging.”
Turned a corner
Nolan added that he believes this trend may have turned a corner.
“There’s been a bit of an improvement and that [50c/kg] gap will have closed in the last week or two and it looks like this may continue,” he said.
“The holy grail at the end of the day is about factories having empty chills with the product gone at the best prices they can get. That’s the aim.”
Nolan referred back to a previous farmer event that he spoke at earlier in the year when the steer base price was at €5.15/kg.
“I said to farmers back then that we can take no credit [for the strong prices at the time] as an industry. It is the market that dictates the price and what we are seeing now is a readjustment.
“Earlier this year saw the perfect alignment where there was enough margin to go around for everyone – which is a rarity in this game,” he said.
“We had a good run that took us to where we were very recently and what has happened is European consumers have been taking into consideration the extreme pressures that have been coming from the factors we all know about [inflation].
“What we’ve seen in our business is a little bit of reluctance to buy the higher-end cuts of beef,” he added.
Nolan also referred to the rising costs associated with processing beef and getting beef to the destination markets.
Steer base price has recovered by 15-20c/kg over the past two weeks with a base price of €4.65-€4.70/kg available at many outlets this week. This is up from the €4.50/kg on the grid to what was being paid for steers as recently as two weeks ago.
Commenting on this trend, Nolan said: “What you’re seeing in the last couple of days is an improvement in price but critically, it’s based on a supply-demand relationship rather than a market force demanding the product.”
Positives
Giving his analysis of the supply forecast into 2023, Nolan said: “Early in the new year, I don’t see sufficient finished cattle being around. I think the supply-demand ratio will keep things positive.”
While Teagasc’s Aidan Murray said on the night that winter beef finishers will need €5.80/kg to breakeven on Hereford steers and €5.40/kg to breakeven on finishing Friesian steers, Nolan had a different set of figures.
The Dawn Meats group development manager said: “We have been told by farmers putting cattle in now for finishing in February/March, that a price somewhere in the region of €5.20/kg to €5.40 is necessary.”
Nolan said that the necessary price will depend on when cattle were bought and how well the cattle were forward bought.
The Dawn Meats group development manager told the farmers in attendance: “I’d be optimistic with the supply-demand situation – and hopefully the market requirement situation – that we will get close to those prices.
“I heard someone coming in the door mention €6/kg to breakeven. Honestly, I don’t know, but to me, all the factors do not say we will hit €6/kg, but I’ll be happy enough if it does because if the market pays it then we’re all in a position to take advantage of it.”