Factors Affecting U.K. Meat Prices

Press, Volume C, Issue 29518, 20 May 1961, Page 7

Factors Affecting U.K. Meat Prices

STUDY of mutton and lamb prices in the United Kingdom' over the last 40 years has shown that about 75 per cent, of the variation in prices from year to year can be accounted for by the annual supply per head of the population and the level of annual disposable income per head of the population. This information was given to the Lincoln College farmers’ conference this week by Professor B. P. Philpott, professor of agricultural economics at the college. It has been found that for • 1 —t. ’

every 1 per cent, increase in the supply of lamb and mutton there is a 1.5 per cent, fall in price and vice versa. As annual changes in stocks of lamb and mutton are small in relation to supplies so that supplies can be taken as a very close approximation of consumption, it can be said | that for every 10 per cent, i tall there is in price, con- ; sumption rises by 7 per cent. , By comparison with many j other commodities, particularly non-agricultural, this • reponse of consumers is quite ; tow. Lower Return i This led Professor Philpott on to say that for every 11 per cent, increase in supplies of imported lamb and I mutton the total sales 1 revenue rises by only about 10.2 per cent. Thus if the price was £2OO a ton extra ■ revenue earned per ton was ' only £4O. • j Discussing other factors which have some bearing on I price. Professor Philpott said , that supplies of poultry per ;head of U.K. population had j a much smaller influence ■ than most people would bei lieve. Every 1 per cent, in- ; crease in poultry meat per i head reduced lamb prices by only 0.05 per cent. Supplies of beef and pork appeared : to have no influence on lamb I prices w hatsoever. Next Professor Philpott j turned to the factors influencing month by month fluctuations in the Smithfield price within the year. The I indications of studies for , 1958 —and Professor Philpott says that it seems likely that the same relationships operated in 1959 and 1960 are that about 90 per cent, of variations can be accounted for by supplies of .lamb and mutton put on the

market and stocks at the middle of the month. •

Every extra 10,000 tons of meat put up for sale within a month reduces the prices by about a Id a lb and every increase of 10.000 tons in the stocks of imported lamb reduces prices by slightly more than Id.

Assuming that this is indeed the case. Professor Philpott says that it can be of assistance in discussing the question of stabilisation of Smithfield prices over the course of the year. The natural question was why not sell less in periods of low prices and raise prices and sell more in periods of high prices and perhaps lower prices thereby getting more even prices throughout the year. Stabilisation of prices by adjustment of the rate of sales in the United Kingdom does, however, appear to be very difficult.

“It does not appear as though much upward effect can be exerted on prices by a policy of reduced sales and increased storage in periods of low prices since on the basis of what has already been said prices will fall on account of increased stocks by just as much as they will rise on account of reduced sales. This is simply because, in setting its prices in the wholesale market, the meat trade appears to be influenced not so much by the rate at which lamb is being released for sale on the wholesale market but on the rate at which it is arriving in the United Kingdomt sales plus change in stocks.!. Stabilisation “But stabilisation of prices is not an end in itself and indeed in some circumstances can be a positive disadvantage. Maximisation of sales revenue, even if it does not stabilise prices, is surely the main goal of marketing policy and this could stift be secured by better disposition of sales throughout the year by selling less in periods of low prices and more in periods of high prices. The difficulty here, of course, is that of forecasting the high and low price periods of the year. "The alternative to adjusting the rate of sale of supplies within the United Kingdom is to control the rate at which those supplies actually reach that country 4

—in other words by holding greater stocks in New Zealand and adjusting the shipment of lamb to the United Kingdom in order to maximise returns.

“And since it is basically the rate of arrival of lamb in’ the United Kingdom which influences prices and we have control over that rate, then we have through our control, some ability to forecast prices over the year. “In considering this idea I think that we would want to be assured that the changes in stocks of lambs held in

New Zealand did not have the same effect on prices as those in the United King - dom. We should also remember and allow for the fact that an increasing proportion of our lambs is by-passing the wholesale market and flowing direct to retail consumers at prices which we know very little about, and above all. of course there are the great difficulties of administering this sort of marketing control within the framework of our existing marketing set-up.”