Horizon blog: Price vs provenance

The debate in the press about whether UK retailers should pledge British for their sourcing of our agricultural products regularly hits both highs and lows, with beef currently dominating the headlines. Our Economic Strategist Sarah Baker takes a look at why retailers make the decisions on provenance they do and what the long-term implications may be.

With farmers facing price rises in feed, fertilisers and energy costs, the domestic cost of production has risen in recent months. Numbers on the ground of slaughter-ready cattle are a little tighter in the UK, while supplies in Ireland are higher than they were at this time last year. This has led to a wider than usual gap between the price of beef from the republic of Ireland (ROI) and domestically produced beef.

ROI beef is usually less expensive than UK beef and is already widely imported into the UK. Ireland is a net exporter of beef, while the UK is a net importer, and product needs to price accordingly to ensure it flows in the right direction. It fills a demand for the lower value cuts, as well as frozen products, and is also widely used in food processing. Some supermarkets have pledged to only stock British beef but others will keep their options open to allow them to remain price competitive.

This has worked reasonably well for many years – British beef retains the majority of the high-quality, high-value retail market, which largely determines the domestic price and beef sourced from elsewhere fills the gaps.

I think the concern for British farmers is how this will play out longer term. Much of our analysis of new trade agreements, such as the one with Australia and potentially the USA, has assumed that UK consumers will still demand British Beef – at the moment 75 per cent of UK production is consumed domestically – and that UK supermarkets will chase this demand with loyalty to producers at home.

Here at AHDB, we monitor consumer attitudes towards farming and food products. In recent years we have seen an increasing level of consumer interest around the environment. In 2021, four in ten consumers even said they try to buy local produce in order to reduce food miles. However, this is claimed behaviour, and we know shoppers often prioritise practical aspects, such as price and quality, when they are at the fixture. But if supermarkets and consumers can be lured away on price, does this leave producers wide open to increased competition from the wider global market?

Our analysis would suggest not. At least in the short term. Even with new trade deals with global beef producers being signed, our analysis of the Australian FTA, suggests that producers there have access to much higher-value markets than the UK at present. Logically, they are unlikely to divert product away in large quantities when they have such lucrative and rapidly expanding markets closer to home. However, the trade deal with New Zealand is in advanced negotiations and we know that the potential US deal, while very much on the back-burner for now, is not completely off the table.

There is, however, no doubt that in the longer term the domestic industry will need to adapt to compete in a global setting. We’re striving to help by offering bespoke advice to farmers affected by the shift in trade and policy post-Brexit.