Hotel and restaurant closures add farm-gate price instability

Huge shifts in the retail and foodservice sectors as a result of the coronavirus pandemic are causing significant and unpredictable price instability in the UK red meat sector.

It comes despite retailers warning consumers price hikes are likely with UK food prices reaching their highest rate of inflation in more than five years as Covid-19 takes its toll on supply chains.

A statement by the British Retail Consortium issued earlier this week cited higher seasonal farm labour costs as the main reason. Meanwhile, non-food retail prices are expected to be pushed down by lower demand.

Hybu Cig Cymru – Meat Promotion Wales (HCC) explained that whilst there has been a surge in retail demand for some meat products, hospitality sales have all but ground to a halt.

Over the last few weeks, many butchers have reported unprecedented demand, with consumers increasing purchases on convenient and cheaper cuts like mince. Meanwhile, the multi-billion-pound foodservice sector has almost completely closed.

The dramatic reduction of trade to hotels, restaurants, pubs, educational establishments and workplace cafeterias has produced a destabilising effect on the market prices for lamb and beef.

Hospitality and catering are major recipients of more expensive cuts, such as steaks, which helps processors achieve a better balance for the whole carcase.

Combined with disruption to the export trade, the factors affecting livestock market prices are complex and volatile.

Exceptionally high prices were recorded for both prime lambs and cull ewes at auction markets in Wales during March, with prime lambs peaking at 249.0p/kg for the week ending March 21.

As the lockdown restrictions on eating out came into effect in the UK and across much of Europe, the prime lamb prices fell by 50.0p/kg on the week, whilst cull ewe prices in Wales were down £38.60/head to stand at £62.50/head for the week ending March 28.

Marketing work

With the current imbalance in the supply chain, HCC is working with processors and retailers to ensure that shelves are restocked with the full range of cuts that consumers may want, in parallel with outreach to consumers to encourage different eating habits.

A new and refocused social media campaign from HCC promotes ways of cooking larger cuts in ways that are convenient and affordable for family meals and utilise simple store cupboard ingredients.

Gwyn Howells, chief executive of HCC, said: “The media reporting of increased consumer purchasing, via panic buying, coupled with busy butchers’ stores demonstrates an overly optimistic picture for the meat industry.

“Significant disruption to the out-of-home market is a cause for concern which HCC is tackling head-on.

Getting the message across to consumers that cuts other than mince can be prepared and enjoyed at home is crucial in maximising value for all parties in the red meat sector.

Official data for retail demand for March will become available in early April. HCC will maintain reporting on prices whilst markets remain open and operational.