Beef markets in recent years have on average followed a trend of higher farmgate prices when supplies are tight and more downward pressure on the trade when supplies are higher. It is therefore no surprise that beef finishers are apprehensive about the forecast increase in cattle supplies over the next six to 18 months.

This year’s higher than forecast kill of 1.58m head is likely to have a knock-on effect of delaying the increase in throughput for the first half of 2016. Supplies thereafter are forecast to grow with Bord Bia predicting a kill of 1.61m to 1.64m head in 2016.

This looks set to rise in 2017 on the back of a 120,000-head increase in calf births in 2015, a similar if not higher birth rate again in 2016 and a reduction in live exports in 2015 (fell 58,946 head to 177,431). Taking this into account, it is understandable there is a spotlight on live exports as a means of reducing supplies in the marketplace.

It is early in the year to gauge how live exports will perform this year. 2015 was a difficult year for weanling and store exports in particular. Joe Burke of Bord Bia reports exports in these two categories combined falling to their lowest level in 15 years due to higher Irish cattle prices and a depressed trade in many market destinations.

As detailed in Table 1, live exports of calves performed relatively well in 2015 considering exports to Belgium ceased due to the country introducing new IBR legislation and Irish calf prices running about €20 to €30 higher than the previous year.

Dutch market prospects

The Netherlands continues to be our most important market for calves. Joe says there is currently a good level of optimism in the Dutch white veal (slaughtered at less than eight months of age) and rosé veal (less than 11 months) sectors.

“The year finished positively for Dutch producers. White veal prices increased from €4.80/kg a few weeks earlier to €5.00/kg, which is mainly attributable to strong Christmas demand. Reports in the Netherlands show the veal price had not reached €5.00/kg since May 2014. This is generating greater optimism, with the trade forecast to remain strong into the new year.”

Adding to renewed confidence is continued lower input prices. “Dutch veal production systems are intensive. A high percentage of calves are purchased in spring with a target of slaughtering at eight to 11 months of age for the Christmas market. Milk powder is trading at about €150/100kg which is back from €162 the previous year, while whey powder has fallen from €74/100kg at the end of 2014 to €50/100kg at the end of 2015. When you consider the high volumes used and lower cost in 2015, this has given the veal sector a significant boost”.

While beef producer prices are favourable and input costs are currently lower, the potential for live exports of Irish calves will boil down to price.

“Demand for calves finished the year strongly. Estimates for the end of 2015 show calf imports reducing 4% on 2014 levels, boosting demand. Only Germany, its main source, and Ireland recorded growth. Latest prices quoted are averaging around the €100 to €105 mark, about €30 to €35 over levels seen 12 months earlier.

“Many Dutch producers like Irish calves as they do not have the extreme Holstein breeding that some other EU countries have. While this may be the case, price still has a huge impact on the competitiveness of Irish calves.”

Response

Joe explains that prices generally rise in the first quarter of the year in response to higher demand. Market forecasts predict prices for good-quality calves rising to €120 to €130 per head which means calves for the Dutch market will need to be purchased in the region of €80 to €90 per head to cover transport costs and compete in the market.

Export logistics

The number of Irish calves exported to the market could be potentially higher were it not for our tightening spring calving pattern. The majority of calves are exported from the end of January to the middle of April which creates logistical challenges for exporters in the number of calves they can physically handle with their businesses operating at peak activity for a shorter period.

The number of calves exported in 2015 reached 43,418 compared to 34,228 head exported directly in 2014. On the face of it, this looks like a significant increase. However, it fails to show exports to the market of 6,800 calves in 2014 through the avenue of trading through Belgium.

In the past, in the region of 20,000 calves were exported live to Belgium. This overcame the fact that calves exported to the Netherlands can only have one drop-off point, with specialised distributors in Belgium servicing smaller producers with deliveries of lower sized loads of calves.

The loss of the market is very significant and should act as a warning signal to Ireland as to the risks of IBR legislation being introduced across other EU destinations which could limit direct exports or transit of animals through the country.

Spanish beef difficulties

Spain, like Italy, continues to be a market under pressure with low beef prices, falling consumer consumption and weak internal demand all combining to depress the trade. The unseasonal high temperatures, similar across much of the EU, have had a part to play in low demand.

Beef prices have remained unchanged for the last quarter of 2015, with a very slight increase in December. Live exports out of Spain continue to provide a lifeline to the trade and Joe explained that this has been a significant contributor in helping to provide some stability to the trade.

“Spanish exports grew further in 2015, and close to doubled, rising by 87% from January to September or rising 56,500 to reach 121,306 head. This outlet has provided a market alternative for light bulls with 108,000 head weighing over 300kg exported live to Lebanon (51,455), Libya (28,287) and Italy (12,404).”

Spain’s beef trade difficulties have also impacted on their level of imports although not to the extent that might be expected. Imports for the first nine months of the year fell 24,000 head or 6%. The source of their imports is detailed in Table 3. Imports of cattle from Ireland fell very significantly in 2015, reducing 15,000 or 34% to 29,301. Calves contributed 10,742 towards this reduction and Joe says higher calf (and weanling) prices reduced the competitiveness of Irish cattle exports into Spain. Higher prices for Angus and Hereford calves in recent years have also limited trade in this area.

“Even with beef price pressure, Spanish feedlots have been active and keen to maintain similar levels of throughput. A reduction in cereal prices has been significant and many producers have focused on reducing cost and maximising efficiency to try and return a margin. It is early to predict what the market price of calves in Spain will be this spring. It looks that if Irish prices for good-quality calves weighing 55kg with good shape are in line with Spanish calf purchase prices of €140 to €155 delivered (Irish calves purchased at €100 to €120), there should be potential for exports”.

Growing French demand

France has developed as an important outlet in the last three years. Exports reached a high of 8,313 in 2015 with a small number of buyers gradually increasing throughput of Irish calves for specialist veal systems. The market is for a good-quality calf in between that exported to Netherlands and Spain.

Angus and Hereford exports

As mentioned previously, the market for exporting Angus and Hereford calves to Spain in particular, but also to Netherlands and Belgium, has diminished in the last two to three years with Irish farmers driving the trade and pricing exporters out of the market. This is despite over 80,000 extra Angus and Hereford calves born in 2015. While some suggest the market might ease in 2016, it is early to predict if it will be sufficient to reopen this trade avenue.

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