The publication by the Office of National Statistics (ONS) of August retail price movements, and the latest financial updates from major retailers, highlight some of the current challenges in the red meat supply chain.
According to ONS the retail price of beef, lamb and pork rose between July and August which, from a producer's point of view, is pleasing.
"However, the reality is that, compared with a year ago, the retail price of beef, lamb and pork, as well as chicken are all lower," observed Stuart Ashworth, Head of Economic Services with Quality Meat Scotland (QMS).
"Pork and chicken fell by 5 per cent, with beef and lamb showing a lower decline of around 2.5 per cent. Perhaps these retail price movements should not come as a surprise with the information relating to the UK's major multiple retailers that continues to emerge."
The growth of Aldi and Lidl based on a low-price business model is well documented and the major retailers have responded to this competition by cutting prices.
At the end of July Morrisons indicated it would reduce the price of 1000 products by an average of 18 per cent. Among the cuts mentioned is a reduction of more than 20 per cent in the price of beef mince, an even bigger cut in some poultry products, and reductions in some processed meat products like ham and cooked meats.
Shortly after this, ASDA was reported to be taking similar steps to cut meat and own-brand product prices 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.
"With the farm-gate prices for prime cattle, sheep and pigs all higher than they were 12 months ago, the squeeze in supply chain margins beyond the farm-gate quickly becomes apparent, and an abattoir's ability to pay year-on-year price increases to producers becomes compromised."
The high street, though, is not the only outlet processors have for their products, observes Mr Ashworth. "They can of course sell to food processors, who use meat as an ingredient in ready meals and other products, or export meat.
"Here too there are challenges. Food processors, like primary processors, have many high street retail customers and so face the same challenges in maintaining margins on sales to supermarkets. However, with sterling weakness lifting the price of imported manufacturing meat, abattoirs will find less pressure from low-priced imported raw materials among food processors."
In the export markets, and despite the weakness of sterling making Scotch product competitively priced even after rises in farm-gate prices, competition is intense. Sterling weakness does, though, make imported product more expensive.
"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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