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Sector trends

Beef and lamb sectors continue to rally

The market for red meat is seeing healthy support, according to our partner specialists, the Agriculture and Horticulture Development Board (AHDB).

According to AHDB lead red meat analyst Duncan Wyatt and analyst Rebecca Wright, the clarity around the future UK-EU trade deal has contributed to buoyant farm-gate prices. Here are the key takeaways from their analysis of the beef and lamb markets so far in 2021. 

Beef
  • UK beef imports have been hit by Covid-19 and by the increase in trade friction between the UK and the EU. But, as activity in the food-service sector picks up, demand is expected to do likewise. Import volumes, however, will face tighter Irish supply. 

  • Export volumes are likely to be limited by tighter domestic production, with trade friction also having an impact. As the EU food-service sector begins to open up, demand for exports may increase. 

  • Overall, domestic beef demand is forecast to be down year on year but above pre-pandemic levels. 

  • British cattle prices have been elevated so far in 2021. Limited supply is likely to support higher prices, although the reopening of food service may reduce demand for domestically produced beef. 

Lamb
  • Sheep-meat production, including mutton, is forecast to decline 7% on the year, to 274,000 tonnes. 
  • The lower production is due to many farmers having sped up production last year in order to finish lambs before the end of the Brexit transition period in December. The corresponding increase in slaughter meant fewer hoggets in the opening months of 2021. Lambs from the 2021 crop are expected to come forwards in a more typical pattern. 

  • Imports will likely be restricted due to tight production in New Zealand and Australia, and high global shipping costs. Imports are crucial for balancing demand in the UK, both in terms of the cuts preferred by UK consumers and the timing of supply. Longer term, volumes are expected to stabilise.

  • “Historically, export volumes have been closely correlated to domestic production trends,” say Duncan and Rebecca. “Declines in production limit export volumes, and that will be the case this year.” Trade friction is also expected to have an impact on volumes. 

  • Prices were strong in the first half of 2021, and high shipping costs and tight domestic supply may buffer the UK market throughout the rest of the year. “It may not be too optimistic to envisage prices similar to 2020,” say the analysts. The extent to which this is borne out will depend on the domestic supply of lambs and adult sheep for slaughter. 

  • Prices may fall again in 2022, as domestic consumer demand returns to pre-pandemic levels.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the NatWest Group Economics Department, as of this date and are subject to change without notice.

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