Wrong price signals to farmers

By James Campbell

Huge cuts in the price for lambs and a reduction in beef cattle price quotes have hit farmers in Northern Ireland this week. This is at the time of year when the farmer needs a rise in price to compensate for higher costs of production and it poses questions again about where the farming business is going. At the same time, compound feed prices are rising as grain and other raw materials become more expensive on the back of demand for corn in the USA to manufacture ethanol. This has led to predictions that the era of 'cheap food' is coming to an end.

But the short-term signals are that beef and sheep prices are not automatically going to rise even if numbers produced in Northern Ireland fall. In fact, the meat processors maintain that supplies of meat have been ahead of demand within the UK since Christmas and this has been the main reason that prices this spring have gone against the normal upward trend. With increasing interest rates, there is less money for consumers to spend. This is not affecting the top end of the market but it is affecting the high volume business.

Retailers continue to try to drive business by increasing total sales. All supermarkets promote sales mainly on the basis of price competitiveness and this is leaving little margin for processors and nothing for producers.

On lambs, there is substantial evidence that the retailers have stocked imported product at levels which leave local supplies surplus to requirements at present until the retailers switch over to home produced lamb (see page 6).

Meanwhile, the store cattle markets have been reporting very strong prices as the annual madness descends on buyers who need cattle to eat grass. There is no accounting for the hope and optimism of the cattle grazer (see page 45).

With payments for milk lagging well behind the hype of rising dairy commodity prices, Farmers For Action (FFA) in Northern Ireland claims that milk processors are taking farmers for a ride as commodity prices soar. Spokesman William Taylor describes the March milk cheque as "a complete insult''.

The Farmers Journal has also received the same message directly from some farmers, regardless of who is their milk buyer. Producers are fed up hearing of huge increases in dairy commodity prices broadcast on radio for all to hear and still no sign of those increases in the prices paid for milk from the farm.

Taylor calculates that the milk price now should be over 22 pence per litre.

That is based on the 10 months approximate average price to January 2007 for average quality milk having been approximately 17.75p/l and adding 25% increase on to that makes a total of 22.19p per litre.

In a direct attack on milk processors, Taylor says that they are long overdue on delivering more money to Northern Ireland's dairy farmers. But company accounts indicate that food processors profits are much lower than they traditionally had been. There are some making big losses.