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