Pork and chicken suffer most in retail price decline

Pork and chicken have taken the biggest retail price hit over the past year, according to an analysis of recent price movements by Quality Meat Scotland (QMS).

Looking at the August report from the Office of National Statistics, alongside recent financial updates from major retailers, QMS economist, Stuart Ashworth, pointed out that while retail prices for beef, lamb and pork all rose between July and August, they still remain substantially lower than in 2015, with chicken also selling at a significantly reduced value.

“Pork and chicken prices, in fact, fell by more than 5% (on the year), with beef and lamb showing a lower decline of around 2.5%,” he said, adding that such retail price movements should, perhaps, not come as too much of a surprise, given the information emerging from the UK’s major multiple retailers.

The growth of Aldi and Lidl, based on a low-price business model, was well documented, he continued, while both Morrison’s and ASDA had also reported price reduction moves in order to remain competitive.

“While cutting retail prices does not necessarily mean that the multiple retailers will pay less to their suppliers, it is difficult to see how they could pay more,” said Mr Ashworth (pictured above).

“With farmgate prices for prime cattle, sheep and pigs all being currently higher than they were 12 months ago, however, the squeeze in supply chain margins beyond the farmgate quickly becomes apparent with an abattoir’s ability to pay year-on-year price increases to producers becoming compromised.”

The weakening of sterling, meanwhile, is helping the industry, for the moment at least, by lifting the price of imported manufacturing meat, a factor which is reducing the flow of low priced imported raw material into the UK’s food processing market.

On the export front, however, competition remains intense, despite the weakness of sterling making Scotch product more competitively priced than in the past.

“Sheepmeat exports are still struggling to match the levels of 12 months ago, while beef exports are showing only marginal increases,” said Mr Ashworth. “In contrast, pigmeat exports have been much stronger in the first half of 2016.

“Imports of sheepmeat and beef so far this year have been lower than last year, however, while pigmeat imports are up marginally. As a result, the net effect of trade and domestic production has left the home market slightly more tightly supplied than last year, in the past couple of months.

“So, despite the supermarket price wars, processors, in order to meet their supply contracts, have faced competition in the market for slaughter livestock. This has supported higher prices for producers leading to lower margins among processors.”

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