The story behind record beef prices

Irish farmers have welcomed the setting of a new record farm gate price for several weeks now, the big question is will it last into 2025.

While Irish factory quotes were up to €6.30/kg this week, the reported price for the R3 steer grade of €6.05/kg (ex vat) at the start of February remains well over €1/kg below the corresponding animal in Britain which was the equivalent of €7.14/kg for the same week.

Almost half of all Irish beef exports are to the UK and half of these are to the supermarket trade where Irish beef sells alongside British beef in Tesco, Sainsbury’s and ASDA.

These three supermarket groups between them account for 50% of all UK retail beef sales according to Kantar data.

Given that the a price gap in excess of €1/kg between Irish and British R3 steer has been in place since the middle of last September, it suggests that there remains further headroom even if Ireland has passed the EU average R3 young bull price.

In Northern Ireland, £5.90/kg (€7/kg) was being offered this week. which closes the gap that has opened between NI and GB prices.

The most basic driver of market prices for any product is supply and demand – if demand is greater than the supply, prices rise whereas if there is more supply than there are buyers, prices fall. Beef supply in the UK and Ireland last year was stable while demand was slightly stronger.

AHDB/Kantar data shows that the volume of beef purchased in the year to 29th December increased by 0.5% compared with the previous year.

Coming off the back of a strong December, the report from the trade is that supermarket demand seems to have strengthened further in the early weeks of 2025, particularly for steak meat.

This coincides with a tightening of cattle supply both sides of the Irish sea. Up to the end of January Bord Bia data shows that cattle numbers through factories were 173,632 head which is 1% down on January 2024. In Britain, it has been a similar trend with over 2,800 fewer cattle through factories in January, a 1.4% decline on the same month last year according to AHDB data.

The strong demand for beef in the run up to Christmas meant stocks carried over into the new year by factories were particularly low, so any dip in kill numbers is significant.

At the recent Bord Bia meat seminar, the estimate for Irish cattle supplies this year suggests that they will be 87,000 lower than the number processed in 2024. That represents the annual kill figure for one of the larger factories and as a result, factories will be chasing cattle, assuming that demand holds with higher prices.

It isn’t just Irish cattle supply that matters, what happens in Britain is most important followed by the supply situation in the EU. Global supplies also matter but to a lesser extent as over 90% of our export business is done with the UK and EU.

In their most recent market outlook, AHDB highlights that 2024 beef production was up 4% on 2023 to 934,000 tonnes. In terms of cattle numbers, 2.12m head of prime cattle went through the factories, up 82,400 head or 4% on the previous year. An increased heifer kill was the main contributor to this increase. Cow slaughter was also up, increasing by 1.8% to 623,000 head in 2024.

AHDB are forecasting that beef output will fall 5% in 2025 to 885,000 tonnes, so the trend established in January will continue with a greater reduction as the year progresses. Converting this to cattle numbers, AHDB is forecasting that the prime cattle kill will fall by 127,000 head or 6% to 1.99m this year while the number of cows going to the factory is forecast to fall by 15,000 head or 2% to 608,000 head.

This is a total reduction of 142,000 head of cattle going through UK factories in 2025.

When this is added to the 87,000 fewer cattle forecast by Bord Bia, it is a combined reduction of 229,000 fewer cattle being processed in UK and Irish factories this year.

From the Bord Bia and AHDB forecasts, it is clear that there will be a lot less beef produced in the UK and Ireland this year.

What this will mean for farmers will ultimately be dictated by how consumers react when making their protein choices over the year. Despite what they refer to as “a level of economic uncertainty” AHDB are predicting that there will be a 1% increase in volume demand in 2025.

In the retail sector, mince is expected to perform well this year though promotions are expected to be lower than in previous years. This will mean smaller peaks at key occasions such as summer BBQs and Christmas according to the AHDB outlook.

Even with higher production in 2024, UK beef imports also increased, up 5% to 333,000 tonnes between January and November. Imports from Ireland increased by 11% with AHDB identifying “the wide price differential between British and Irish cattle prices that opened up during the year was likely a key driver of increased trade.” The outlook also refers to increased imports from Australia and New Zealand though from a low base.

AHDB are forecasting that beef imports will increase even more in 2025, up 12% on 2024 volumes which were already up 11% compared with the previous year.

With a forecasted reduction in Irish slaughter numbers of 87,000 head, it is unlikely Ireland will make up the shortfall unless there is a huge redirection of exports from other EU countries to the UK.

Both these countries secured large tariff free beef quotas for beef exports in post Brexit trade deals that came into effect in 2023.

Last year was the first full year of tariff free access and both countries increased their beef exports to the UK from low bases.

New Zealand beef exports to the UK were 4,417 tonnes in 2024, up 84% on 2023 according to the Meat Industry Association while Australian exports rose by 162% to 6,296 tonnes (Meat and Livestock Australia).

With the US president’s enthusiasm for import tariffs and many US beef producers complaining about the high level of imports in 2024, the UK could be an alternative outlet for some of the almost 395,000 tonnes of beef they exported to the US in 2024.

The ability of Australian exporters to identify and develop an export opportunity was illustrated by the 2024 surge in sheepmeat exports to the UK. With a slump in both UK and Irish sheepmeat production, Australian exports increased by 10,000 tonnes to over 22,000 tonnes up to the 15 November.

The opportunity for Australian sheepmeat exports to the UK was also assisted by a drop in New Zealand production export volumes.

With tighter supply and stronger demand forecast for the UK in 2025, it suggests that there will be a strong demand from factories for cattle coming off farms in both the UK and Ireland.

While consumer demand is strong at present particularly in retail, it can be fickle and if cost of living pressures were to get in the way, beef sales could become vulnerable as they are a discretionary purchase. Also, as Figure 1 shows, only a small part of higher beef prices have made their way through to retail prices and for some categories, price actually fell over 2024.

The other strategic decision facing supermarkets if beef prices continue at current levels is do they continue with their UK only sourcing as is the case for all of the top ten retailers outside the big three.

Tesco, Sainsbury’s and ASDA plus their factory suppliers have access to the cheaper Irish beef supply which gives them something of an edge in the market place.

With the UK and Irish price so far ahead of South American, Australian and New Zealand prices, will some UK retailers offer these as an alternative?

The Hilton Food Group who are major retail packers for many supermarkets in different countries, established a supply agreement with Minerva in July 2022. If there was demand, this would be one option for South American beef to enter the UK retail market.

Another fast track to supplying UK retail is for a major South American processor to acquire a UK/Irish processing group that already supply the retail trade. This has often been speculated on but has never happened with beef, though JBS own Moy Park poultry processors through Pilgrim’s Pride and they acquired the Kerry Group’s meat and meals division in 2022, which is now also part of Pilgrims.

These are strategic decisions for UK supermarkets if beef prices continue at levels much higher than elsewhere in the world.

It would require a major policy change given how loudly they have promoted their allegiance to UK and a lesser extent Irish beef by some. However in business, nothing tests loyalty like money and change is possible, but in the meantime demand for cattle will be strong provided consumers keep buying beef.

In short