NI: Huge beef price rise needed

By James Campbell

A beef price of 325 pence per kg deadweight is needed if suckler cow and beef cattle finishing farms in Northern Ireland are to generate reasonable profits while continuing to operate at current average levels of efficiency.

This is the stark financial reality of beef production in NI without subsidies as set out in the fourth annual 'Yearbook' published by the Livestock and Meat Commission (LMC). The LMC says it is attempting to kick-start a debate on how the subsidy gap can be bridged as a beef price of 325 p/kg is so far away from current prices.

LMC technical manager Dr Mike Tempest says that beef prices of 325 p/kg are the most simplistic, though probably least likely, solution to the conundrum of making a profit from beef cattle in the absence of subsidies.

Tempest reckons a more likely scenario is that the recovery of decoupled subsidies is shared equally between the market and producers improving their efficiency. In this case, the LMC calculates that 245p/kg would be the price for beef but that would only cover current production costs and any profitability for producers will be dependent on becoming more efficient.

This price is very close to the 250p/kg which the National Beef Association (NBA) has been touting as the level to which beef prices need to move in the UK. The NBA chief executive Robert Forster says that he has been in discussions with some of the major supermarkets and he feels that some progress is being made in persuading their beef buyers of the need to raise beef prices. Local beef processors don't appear to be finding the same sentiment among the buyers with whom they are dealing.

"Retailers and caterers must acknowledge that the change from direct to decoupled support payments is more radical then they think and accept that the only way the linked sectors of the beef supply system can thrive is if each is able to meet its costs and earn a sensible profit,'' says Forster.

Subsidising

Forster points out that cattle farmers are currently subsidising consumers, retailers and processors because they are using coupled support payments (livestock premia, slaughter premium and extensification payments) to make up for the fact that market income is significantly lower than their costs of production. This is clearly shown in the figures recorded in the LMC yearbook.

The NBA is also telling beef producers to wake up to the threats and opportunities that will follow the switch to decoupled payments in January, and not to use their Single Farm Payment (SFP) to continue to subsidise shoppers, supermarkets and slaughterers.

"For decades farmers have been falsely accused of growing fat on taxpayers' money,'' Forster argues. This is false because most, and occasionally all, of the subsidy income has been used to underpin the sale price of slaughter cattle and make beef cheaper in shops and catering outlets.

This cannot continue after decoupling is introduced in 2005 because Single Farm Payment support levels will be lower than the combined total of the previous Suckler Cow Premium, Beef Special Premium, Slaughter Premium and Extensification Payment receipts and by 2012 the SFP will be phased out altogether.