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Stackyard News Jan 06

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Finishers should resist abattoir moves to use end of OTMS to pull down prime cattle prices

Abattoirs across the UK are using the ending of the OTMS at close of business this Friday (January 20 th ) as an excuse to pull down prime cattle prices - even though supplies of finished stock on farm are tight and chill room beef stocks are low.

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So says the National Beef Association which describes the long predicted move as “inevitable” and recommends it should be dismissed by finishers as a trading ploy rather than a genuine reaction to market forces.

“Many slaughterers are looking for a chance to knock back prices and one of their habitual ploys is to create the impression of a falling market because this can persuade finishers to rush cattle forward before they are hit with further income losses,” explained NBA chairman, Duff Burrell .

“However finishers should demonstrate their refusal not to be panicked into selling cattle at the wrong time by keeping as much stock as they can off the market until the processors' bluff is called.”

“It may take a week or two for this message to sink in but we know slaughterers are looking for prime cattle and if they meet enough supply resistance they will have to offer more money to bring them out.”

According to the NBA many slaughterers will protest that the appearance of more cows, especially dairy cows, on the commercial market from January 23 rd will put pressure on prime cattle forequarter values.

However it believes the EU beef market to be short supplied and has also noted that prime cattle prices in the Republic of Ireland (ROI), which is the source of most forequarter supply competition on the domestic market, are remarkably close to the English average at 191-192p per dwkg .

“Farmers there, and in Northern Ireland where averages are unusually high at 191p, are digging in and refusing to take price drops without a fight and if this determination not to accept reductions can be repeated in England, Scotland and Wales then the abattoir campaign, which began last week with a 5p-6p drop in live auction averages can be quickly snuffed out,” said Mr Burrell.

“Decoupling has made realistic market returns imperative for the beef sector and the only reason to bring cattle forward is to generate sales income now that slaughter premium, and all other direct subsidies, have been consigned to history.”

“Huge losses are still being made at current prices so a further drop in price threatens long term production and supply sustainability - and abattoir owners should be aware of this.”

“It should also be noted that cull cow prices continue to be strong. O4 cows are averaging between 109p and 135p on a cross-UK basis and in the ROI they are levelling at 158p - which is more than high enough to give our own cow beef a healthy discount against imported without any further drop in prices.”

“On top of that there are more than sufficient UK abattoirs approved to handle OTM animals and rather than force price drops on the better cows, and prime cattle, the appearance of dairy cows next Monday will give them the very welcome slaughter volumes that so far has been missing,” Mr Burrell added.

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National Beef Association