EU cow prices continue to recover

In April, it looked as though the cow market across the EU was turning. Prices were recovering after higher year on year slaughterings throughout 2016 had kept them under pressure. By February 2017 the EU price for O3 cows had moved above year earlier and these gains had continued throughout the first quarter. However, Dutch prices remained subdued, as the authorities took action to meet the country’s EU nitrates derogation. Several months on, while the rate of slaughter across Europe has slowed, the number of cows killed in the Netherlands has been higher. In the period January to July, 4.2 million cows were slaughtered in the EU as a whole, a 2% fall year on year. At the same time, Dutch cow slaughterings continued apace and over the same period, were 27% higher than in 2016 at over 336 thousand head. However, over June and July, this pattern appears to have come to an end.

Monthly cow slaughterings in the Netherlands

This sustained raised level of Dutch supply has not weighed on domestic prices this year, which have continued to rally and are now even above the EU average (itself climbing since the beginning of the year). In trade terms, data from the Netherlands, available until June, shows that these higher domestic slaughterings have displaced imports, while the level of exports have actually grown slightly. In the year to June, the Netherlands imported 159 thousand tonnes of fresh/frozen beef, down over 12% year on year, and exported 223 thousand tonnes, up 3% year on year. Typically, net exports would be in the order of 30-40 thousand tonnes.

EU cow O3 prices

The Netherlands is an important destination for UK beef, including cow beef. Total UK exports of fresh/frozen beef to the Netherlands in the year to July are 22% lower (3,250 tonnes) year on year according to data from HMRC. However, the rate of cow culling in the Netherlands has slowed considerably, and in July fell to below the number seen a year earlier and has broadly remained there ever since, possibly explaining the strength in Dutch prices in recent weeks. So, it may be that more normal UK export patterns will return and so continued strength in prices here could be implied. If global beef prices remain strong then this could add even more support, although there are potential threats to this.

Duncan Wyatt