This year (2018) has been a challenging year for a multitude of reasons.

Coping with variable weather conditions is part and parcel of farming but 2018 threw some unusual extremes at our industry.

We also saw continued consumer challenges associated with health and environmental assertions about livestock production, in particular.

Similarly, while discussions over the future of agricultural and rural polices are hardy annuals for farming businesses, this year has been dominated by the uncertainty that is Brexit.

It seems unlikely that any of these themes will diminish in importance through 2019 although we can hope for more benign weather conditions and clarity over Brexit.

The challenges of the spring weather, namely “Beast from the East”, were most apparent in the sheep sector with the June census indicating a decline of 8% in the Scottish lamb crop and 4% decline across the UK, as a whole.

British Cattle Movement Service (BCMS) data showed an increase in on-farm mortality among cattle under twelve months old of more than 2,500 head over the first half of 2018 and a decline in Scottish calf registrations of 1.5% in the same period.

The same data set also shows an even larger decline in calf registrations in the third quarter of the year. There may still prove to be a legacy of the “Beast from the East” in spring 2019 calving performance.

After the “Beast from the East” came the “big dry” adversely affecting grass and crop growth which in turn impacted livestock growth rates. This manifested itself most notably in the rate at which prime lambs reached the market.

Across the UK, as a whole, the decline in the weekly lamb kill was greater than the decline in the estimated size of the lamb crop in May and June before the kill gained momentum through July and into August when supplies where higher than a year ago.

With the Muslim festival of Ramadan occurring in early June, this slow delivery of prime lambs to the market contributed to significantly higher producer prices than a year earlier in May and June.

Growing availability then led to falling prices through July and early August before getting a lift from the increased demand for the second Muslim Festival of Eid al Adha.

During September supplies once again tightened considerably and supported prices. After climbing again during October, weekly slaughter numbers once again fell well below year earlier levels during November to offer some support to prices as the year drew to a close.

Overall, UK lamb slaughterings between June and the end of November show a decline of 5% year-on-year.

When set against a decline in the 2018 UK lamb crop of 4%, this suggests a higher proportion of the 2018 lamb crop being carried into the new year. Nevertheless, because of the smaller lamb crop the actual number of lambs carried into 2019 will be lower than last year.

While the number of lambs slaughtered has reduced, there has been some growth in carcase weights which in the second half of 2018 have typically been 0.2kg heavier than last year. This increase in carcase weights is reflected in auction market throughputs where the proportion of over 45kg lambs has increased as has the per kg discount paid on these lambs.

Assessing the market outlook for prime hoggs in the first quarter of 2019 is overshadowed by the uncertainty over Brexit.

The proportion of sheepmeat exported climbs to its highest levels in the first quarter of the year so, with uncertainty over European market access, the outlook becomes very confused.

Equally, though, with Easter falling beyond the potential Brexit date and with Ramadan occurring in May 2019, there may be strength in the market in late April and May.

Early indications in respect of the 2019 lamb crop are that the breeding flock will be smaller than last year. June census data reported the number of “ewes intended for first time breeding” to be 4.5% lower than the previous year.

Meanwhile, UK slaughter estimates show a 3% increase in the ewe kill over the June to November period. Nevertheless, with ewes in good condition at tupping and hopefully a more benign climate during lambing the lamb crop may be little different from 2018.

The lasting memory for the beef market in 2018 was the very disappointing market returns at the end of the year with the seasonal prices lower than last year’s levels.

The disappointing end to producer price levels is equally notable because of the firmness in prices over the first half of the year, although they did dip below last year’s levels in late summer before firming and being ahead of year earlier levels in October and early November.

This firmness in producer prices in the first half of the year came despite a slightly better supplied market as both production and imports increased slightly although there was also some growth in exports.

Growth in net new supplies continued through the third quarter, particularly because of higher imports of frozen beef while exports came under pressure and producer prices began to fall.

Growth in domestic production came from both a change in cattle numbers and cattle weights.

This year has been characterised by significantly higher numbers of cull cows reaching abattoirs; the January to November UK cow kill has been more than 5.5% higher than the same period in 2017.

Cull cow slaughter weights were also higher in the first half of the year although since then, and particularly through the third quarter, they fell below year earlier levels.

The prime stock kill, in contrast, grew by 0.7%, entirely due to growth in heifer slaughterings which offset small declines in prime male cattle slaughterings.

Steer carcase weights, after having fallen below last year’s levels for most of 2017 and early 2018, increased in the final third of 2018.

Apart from June and July prime heifer carcase weights have also been higher than last year as have young bull carcase weights.

Meanwhile, consumer purchases of beef cooled over the first three quarters of the year. Drivers for this decline are many and varied and many will continue into next year.

Repeated messages alleging the risk to health and the environment from consuming red meat repeatedly appear in the media. Although still only a very small part of the population, at just 5%, veganism and vegetarianism continue to grow particularly among the under 30-year olds.

Also playing a part, despite food being a basic life need, is the lack of consumer confidence which can lead to lower out of home demand and more selective buying for home use. Marginal increase in supplies and marginal declines in demand quickly destabilise the market.

Also playing on the market in the second half of the year has been a global decline in demand for leather. This has led to considerably reduced demand for, and prices of, cattle hides globally.

Cattle hide prices in Australia, for example, have fallen 15-25% over the past month and more than halved in the year. US prices are similarly off by 30-40% on the year, while unsold stocks are reported to be climbing; and the UK is no different, seeing prices fall more than 10% in recent weeks.

A £10 fall in the price of a hide from a 380kg carcase equates to 3p/kg dwt reduction in the revenue a processor gets for that carcase. Consequently, the recent global fall in hide prices pressurises global cattle prices.

Looking forward to 2019, the number of Scottish cattle in the supply chain, the basic building block of future beef supplies, continues to be lower than this this time last year.

However, basic numbers hide a decline in dairy-sired heifers being partially offset by a growth in beef sired heifers. In the first half of the year these extra beef heifers will support total slaughter numbers, although male numbers will tighten, and may mean that overall Scottish slaughter supplies are little changed.

However, as the year progresses prime cattle stock numbers will tighten as both beef heifer numbers and male numbers reduce.

Carcase weight movements will also be key to the supply of beef on the market.

A continuation of the recent trend of small increases in carcase weight will quickly offset a lower number of cattle in the system but may also lead to more cattle falling outside processors preferred carcase weight ranges, therefore, facing the associated price penalties.

This year was notable for the high level of cull cow slaughtering, and the level of culling in 2019 will also play on the volume of domestic beef on the market.

Reduced levels of culling will help to tighten domestic beef production and the smaller breeding herd recorded in the June census would suggest a lower number of cull cattle in 2019, unless herd reduction is going to continue.

Retail demand is likely to remain challenging as the drivers of the past year, identified earlier, continue to influence consumer behaviour.

Although exports are not as important for the beef sector as they are for the sheep sector, they do play an important part in maximising carcase value. Equally, imports are an important part of the UK beef market which is only around 80% self-sufficient in beef.

European Tariff regimes currently offer some protection from imports from non-EU countries, but Irish and EU beef is free to enter unhindered.

Brexit then also casts a shadow over the beef market in 2019 particularly over how beef imports will be managed.

Tariff free imports of Irish beef would mean business as usual but if this led to more relaxed tariffs on non-EU imports then imports could grow. An application of a tariff on imports from any nation, EU or otherwise, would have the potential to increase retail and farmgate prices of meat.

However, would that be an acceptable consequence of Brexit? or would politians not use this option in the interest of managing consumer prices?

2019 is therefore going to be another challenging year for all in the beef and lamb supply chain.