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Farmers will have looked with some bemusement at recent positive

By Kimberly Fox,2014-06-18 00:49
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Farmers will have looked with some bemusement at recent positive ...

    IRISH BEEF INDUSTRY A FIASCO FOR FARMERS

Bord Bia’s Aidan Cotter recently referred to potential growth in global meat demand,

    when he said, “meat will have to be produced and we should be the ones to produce

    it”. Except that for Irish farmers, it is hard to avoid the conclusion that our beef industry is a fiasco.

Beef prices are less now than 21 years ago. The 2008 Teagasc National Farm Survey

    shows Family Farm Income declined by 22% in real terms from 1995 to 2008. Yet

    the level of supports has increased from an average of ?5,783 in 1995 to ?17,467 in

    2008. Direct payments accounted for 47% of Family Farm Income in 1995, by 2008

    they account for 103%, and 183% on suckler farms.

Evidently, supermarkets and processors have grabbed the benefit of direct income

    supports for themselves. Increased direct payments to farmers have been used to

    undermine product price, while consumers see no benefit.

Farmers are told to get competitive. We are all familiar with the meat processors

    solution blame farmers for paying too much for stores. This is misleading nonsense.

If this country is serious about beef we need to decide very quickly if there is any

    point to suckling. The future of the cattle sector must be based on profitable weanling

    prices, driven by competition between exporters and Irish finishers. Finishers, in turn,

    must receive a beef price for quality grades that will leave them a worthwhile profit

    too.

Reality is sucklers are not making money, and a ?40 subsidy will not change this.

    While the National Farm Survey gives the overall picture, closer examination of

    Teagasc’s e-Profit analysis (Table 1) shows what is happening on the top 25% of

    committed and efficient farms in the country.

Only the very best can make any profit at all from suckling. The average profit

    monitor farmer (remember these are the top 25% of farmers) lost near enough ?100

    per hectare and the bottom one-third lost a whopping ?300 per hectare, from suckling.

Table 1

    2008 Top 1/3 2008 bottom 2008 average Forecast 2009 Per hectare

    1/3 average analysis

    (ICSA) (Teagasc)

    Price ?/kg LW 1.88 1.71 1.83 1.72 Stocking rate 1.95 1.47 1.71 1.62 Liveweight 637 376 505 480 produced kg/ha

    Gross output 1203 645 926 825 Variable costs 576 514 531 531 Fixed costs 566 435 494 550 Net profit excl ?61 -?303 -?99 -?256 premia/ ha

Even more alarming is the fact that things have got worse in 2009:

    ? Beef prices-down 10%.

    ? Weanlings-down 7%, even though weanling price is increasing in Spain (up

    19.5%) and Italy (Charolais up 8.5%).

    ? Direct payments have been slashed.

    ? Fertiliser and feed prices are well down but the actual volume of inputs will be

    up (due to rain)

    ? Stocking rates are coming down on all but the driest farms.

    ? Bank repayments for FWMS will result in much higher fixed costs. In 2008,

    loan balances on full-time suckler farms increased by 70%. In total farmers

    invested some ?4.5 billion on-farm in 2006-2008.

Taking these points on board, suggests the average profit monitor farmer could lose

    ?256/ ha in 2009 compared to ?99 in 2008 (Fifth column, table 1), and even the best

    will show losses. These figures are from committed farmers who are serious about

    being competitive. Anecdotally, however, many suckler farmers will tell you that it

    costs up to ?500 to keep a cow in the west, on top of fixed costs. The majority of bull weanlings are making just above ?500, heifers less.

The same lack of profitability applies to finishers. Their inability to compete at marts

    means quality weanlings are under-priced. Instead of factories suggesting that beef

    finishers focus on cheaper weanlings/stores, we can only move forward with

    substantially higher prices.

If the processors message is that there is no scope for better prices, isn’t it time we

    got this clarified once and for all so that people could stop wasting their time? We

    could also stop employing public servants whose livelihoods depend on keeping up

    the pretence that our beef industry is viable.

It’s not as if there haven’t been enough committees to look at what’s required. The

    problem is that processors don’t care once they can find sufficient markets based on the lowest common denominator.

The 10 year old Beef Task Force and Agri-Food 2010 reports both emphasised the

    urgency of price differentials between the grades. “It is particularly important that

    (the beef processing industry) should place itself in a realistic position to compete for

    high grade cattle. This further emphasises the importance of strong price differentials.

    It is essential that realistic grade pricing is put in place immediately.” (Agri-Food

    2010) Ten years on- nothing done.

Processors will tell us that low prices are a consequence of market forces. It’s hard to

    swallow this, when you consider how much influence processors have. The three

    main Irish beef processors dominate meat processing in Ireland and Britain, with

    Larry Goodman alone accounting for at least 25% of processing in Ireland and

    England. Goodman plants, with a turnover well in excess of ?1 billion, and contracts

    with major retailers, cannot be regarded as being too small to have no market

    influence.

    Irish processors influence on the UK market is a source of frustration for UK beef farmers. It looks great to see Irish beef dominating Asda shelves but is this progress

    if it can only be achieved by undercutting English suppliers by at least 13%? English

    farmers, who have been getting ?3.25 for R grade steers, believe their figure is being

    kept artificially low by Irish prices.

The implication is that the likes of ABP (Goodman) is the main reason why shops like

    Asda and Sainsburys (both top 4 retailers in the UK) can keep retail beef prices down,

    not just in their own stores but across all retail outlets. The contraction of beef

    production across Europe and the restrictions on Brazilian imports suggests that there

    is no ready alternative now to Irish beef. So why the undercutting?

Irish beef farmers fare even worse compared to Scottish farmers, with our beef prices

    at least 20% less. The quick answer is Scottish beef has been branded successfully

    and the Irish processors have less say there.

By comparison, efforts to brand Irish beef have failed. For years now, the health

    benefits of Irish grass-fed beef have been extolled. We listen ad nauseum to various

    commentators talk up our unique, traceable and naturally produced product.

Sadly, there is still no coherent grasp of what the key essentials of a “clean, green

    food island” strategy are and worse, no real effort to translate such a strategy, if it existed, into premium prices. Some days we want to develop our green image, other

    days we want to import cheap grain to see if we can compete at the bottom of the

    price barrel.

Again, let’s recall what was recommended ten years ago: “We should build upon the

    positive consumer response to the eating quality of our beef product and on the green

    and welfare friendly image of our extensive production systems. The objective

    should be to create a clear premium market in the UK and in targeted continental

    countries, for quality assured Irish beef.” (AgriFood 2010 report, March 2000) We

    got quality assurance alright, but where’s the rest of it?

    Retailers also have to bear considerable responsibility. While they’re keen to demonstrate their fair trade credentials for bananas and coffee, they seem to forget

    that Irish farmers are also surely entitled to fair trade.

    It’s not that difficult for Larry Goodman and Tesco to work out how little farmers are making from cattle. It’s a lot more difficult for farmers to see how much Larry

    Goodman and Tesco are making. If prices don’t improve soon, we won’t care.

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