Volume 10: Economic Impact and International Trade
3. Impact on the private sector
Part 1: The Market
Introduction: the role of agriculture in the economy
Beef production
Production of substitute meat products
Meat consumption and substitution between products
Factors contributing to the decline in beef consumption
The impact of the media on consumption

Introduction: the role of agriculture in the economy

3.5 Dairy and beef farming are important sectors of UK agriculture. Over the past 20 years, the output of finished beef cattle has varied between 15 and 18 per cent of total UK agricultural output, to which it has consistently been the third most important contributor. In 1995 the value of output of finished cattle and calves amounted to £2.6 billion. ¹ The output of dairy cows has varied between 19 and 22 per cent of total UK agricultural output over the past 20 years, ranking behind only field crops as the prime contributor to agricultural output.

3.6 A regional analysis shows that the beef industry is of greater importance to the economies of Scotland and Northern Ireland than to the UK as a whole. In 1995, for both countries, the industry accounted for about 27 per cent of gross agricultural output. ²

Beef production

3.7 Statistics about the production of meat cannot be equated with the consumption of meat in the UK. Production of a particular meat may increase while consumption declines, if the surplus is exported. Likewise production can decline but consumption can increase, with the difference being made up by imports. So, when examining the economic condition of the beef and veal industry, it is necessary to look at both production and consumption, but it is important to keep the two concepts separate.

3.8 Over the period 1986-96 beef came from three main sources:

• calves from the dairy herd;
• cull cows (cows that had been utilised for milk production); and
• specialist beef herds.

3.9 In 1995, for example, 41 per cent of beef was from calves from the dairy herd finished as beef cattle, 22 per cent was from cull cows and 36 per cent from specialist beef herds. Adult bulls and imported cattle made up the remainder. ³

3.10 Over the first half of the 1980s the volume of beef production generally averaged between 1.0 and 1.2 million tonnes per annum. From the mid-1980s volumes began to decline as the introduction of EU milk quotas led to contractions in the dairy herd, which in turn reduced the supply of calves for beef. The growth in live calf exports further exacerbated the decline. It is unclear whether BSE was a further factor.

3.11 As can be seen in Figure 3.1, ⁴ production levels have generally been below 1 million tonnes per annum since 1988 and were as low as 860,000 tonnes in 1993. ⁵

Figure 3.1: UK volume of beef and veal production, 1986-95

3.12 The value of beef (which includes subsidies paid to producers) rose slightly during 1986-95. Figure 3.2 ⁶ illustrates the movements in the value of production over the period. This measure combines the two factors of volume and price. Since the volume of production fell over the same period, it suggests that the price for livestock increased.

Figure 3.2: UK value of beef and veal production, 1986-95, at cash prices

3.13 However, firstly, the majority of the increase in the cash value of production was associated with increased subsidy, such as the suckler calf premium and beef special premium. And secondly, the rise in value holds good only when measured in cash terms. When measured in real terms, value declined. As is examined in more detail in Chapter 4, both the market price for cattle and the retail price of beef lagged behind the Retail Price Index for all items.

Production of substitute meat products

3.14 From 1986 to 1995 there was a significant increase in the volume of poultry meat production. As can be seen in Figure 3.3, ⁷ production increased from 937,000 tonnes in 1986 to 1,389,000 tonnes in 1995. This represented an increase of approximately 50 per cent in production over the entire period. Year-on-year growth averaged 4 per cent.

Figure 3.3: UK production of other meat products, 1986-96

3.15 There were a number of explanations for this increase. One of the main reasons was that there were no quotas or subsidies for poultry production under the Common Agricultural Policy (CAP), and therefore the producers could respond quickly to the increased demand by raising production rather than increasing the price. Furthermore, consumption of white meat rose as it was affected by consumer lifestyle choices and dietary concerns (see paragraph 3.21).

3.16 Pigmeat production over the same period was relatively constant, hovering around 1 million tonnes a year. Sheepmeat production did, however, experience steady growth before flattening out. As can be seen in Figure 3.3 above, production increased by 30 per cent from 301,000 tonnes in 1986 to 400,000 tonnes in 1995, with a peak of 418,000 tonnes in 1991. As with poultry, the production of sheepmeat was not regulated by the CAP, at least up until 1992, and as demand for the product grew, production increased accordingly.

3.17 Despite the increased production of sheepmeat and poultry meat during the period, the UK was, and remained, a net importer of both. In beef and pigmeat, during this period, the UK vacillated between being a net importer to a net exporter from year to year. ⁸

Meat consumption and substitution between products

3.18 In 1988 consumption of all meat products peaked at 3.834 million tonnes. As can be seen in Table 3.1, ⁹ consumption was steady over the period 1986-95, though with significant variations among the various meats consumed. In 1995 about 97 per cent of UK consumers ate meat in an increasing variety of forms. ¹⁰

Table 3.1: UK consumption of meat products, 1986-95

3.19 Over the period 1986-95, the share of beef and veal within total meat consumption declined from approximately 31 per cent in 1986 to 24 per cent in 1995, being mostly replaced by poultry which increased its share from 27 to 34 per cent. Per capita beef consumption also declined by about 35 per cent, or 6.7 kg per person per year. ¹¹

3.20 The decline in beef consumption in the UK market was mirrored, but to a lesser degree, by a decline in the EU markets. Beef consumption in the 12 Member States of the EU ¹² fell by 2.2 kg per person during the same period. ¹³ Consumption also declined in the United States, and by 1995 had fallen by approximately 25 per cent from the peak levels of 1976-77. As with the UK, the main loss in market share was to poultry and, to a limited extent, pigmeat. ¹⁴

Factors contributing to the decline in beef consumption

3.21 Many factors other than BSE may have contributed to the decline in beef consumption and to its substitution with other products during the period 1986-96, not least the gradual erosion of beef's position in a competitive market by the relatively cheaper prices for pork and poultry. There were also substantial changes in the socio-economic environment which had an impact, including: ¹⁵

• reductions in the average size of the family unit and the growth of single-person households, leading to fewer traditional family meals based on large amounts of meat;
• growth in the trend towards shopping in large supermarkets that offer the consumer a vast array of attractive products and meal solutions (which tend to incorporate relatively cheaper meats, particularly poultry, in the product);
• growing awareness and interest among consumers in healthy eating and concerns about food safety, the environment and the welfare of animals. The image of beef, perceived as a more fatty and less healthy meat by consumers, has suffered;
• changing work patterns that have resulted in the growth of full-time employment among women. With less time for meal preparation, some of the more traditional cuts of beef, such as the roast, have suffered; and
• shifting leisure patterns with less time being spent on formal meals. ¹⁶

3.22 It is not possible to quantify the extent to which BSE may have had an impact on beef consumption during this period. The basic factors that contributed to the long-term decline in UK beef consumption also apply to other EU countries and the United States. ¹⁷ The EU had its own health scares, linked particularly to the use of hormone growth-promoters in beef and veal, which may have had some impact on the consumption of beef as well. ¹⁸

The impact of the media on consumption

3.23 The coverage of BSE in the media, and developing consumer awareness, may have affected consumer demand on several occasions. In May 1990 a spongiform encephalopathy was discovered in a cat. This discovery was the subject of intense media interest and seems to have had an impact on the market. ¹⁹

3.24 Mr Stephen Wentworth of MAFF's Meat and Livestock Group, minuted the Parliamentary Secretary, Mr David Curry, on 22 May 1990 briefing him on the state of the beef market and the need for market support measures. He wrote:

The adverse publicity concerning beef and BSE has affected demand both at retail level and at livestock markets. At retail level the impact is varied. The greatest effects seem to be in the South East and Midlands with some retailers reporting reductions in sales by one third to one quarter. However, circumstances clearly vary considerably from retailer to retailer and shop to shop. There are some who report business much as usual. The situation is also complicated by the number of public holidays at this time of year, the warm weather and the impact of high interest rates all of which tend to reduce demand. ²⁰

3.25 Figure 3.4 shows the weekly price of clean cattle (ie, cattle that have not been used for breeding) from May to July 1990. As can be seen, there was a small decline in the price in May, although this might not have been as a result of the feline encephalopathy case, since cattle prices tend to fluctuate for a number of reasons.

Figure 3.4: UK prices of clean cattle

3.26 In November and December 1995 there were a number of television programmes which exposed gaps in the integrity of the control of the bans on specified bovine material entering the animal feed chain. This resulted in heightened consumer concern and may have depressed consumption of beef before Christmas 1995 and in early 1996. ²¹

3.27 Studies by Michael Burton and Trevor Young, at the University of Manchester, suggested that publicity surrounding BSE was responsible for a 4.8 per cent decline in the demand for beef over the period 1990-93. ²² As with any macroeconomic study, they were not able to hold constant other factors that may also have affected demand, such as increased concern about cholesterol or the use of growth hormones in cattle, which also generated adverse publicity about beef. While the conclusions reached in their studies may well be correct, we view the results only as evidence supporting the general proposition that BSE had an adverse impact on the demand for beef, rather than as a precise quantification of that impact.