What’s the difference?

As suckler beef farmers, the principal bonuses used to distinguish our wares are the Bord Bia Quality Assurance Scheme and the relevant Angus and Hereford schemes. While the relevant marketers behind these breed-based schemes should be lauded for passing value back to thousands of beef producers in Ireland, the reality is that only a small minority of suckler farmers are reaping these rewards. In 2015, 70% of Angus and 79% of Hereford-sired calves born in Ireland were out of dairy cows. Yet, the suckler cow-calf combination model is widely used to sell the message to consumers

For suckler farmers to survive, they need to be distinguished. “Cow-reared beef”, “suckler-bred beef”, “naturally raised beef” – a proportion of today’s purist consumers would undoubtedly select these labels if given the choice. While there is nothing wrong with dairy beef from a welfare point of view, it is disappointing that the cow-reared calf cannot be differentiated in the marketplace given the aesthetics around its rearing

Marketing has the power to change consumer mindset. Twenty years ago, Hereford and Angus breeds were seen as a liability in the beef industry at a time when carcases couldn’t be big enough or lean enough. Look at them now, held up as a success story for our industry.

Any potential marketplace for suckler beef is likely to be somewhere that appreciates the production values that come with specialised suckler beef produced predominantly on a grazed grass diet. Invariably they will be markets with higher disposable income. The UK and western Europe are ideal target markets, especially as suckler-based steer beef is a rarity on the continent.

Achieving extra value requires a marketing campaign that persuades the consumer of the extra value – not unlike what is being done currently with breed-based premiums.

The QPS grid – Is it fit for purpose?

The purpose of the Quality Payment System (QPS), more commonly known as the beef grid, when introduced back at the end of 2009 was to reward higher quality carcases based on the additional meat yield they provided.

At the time, the increments of 6c were based on the increased monetary value that each extra quality (conformation) grade delivered. However, this was at a time when beef price was running at €2.80/kg and increasing from an O to R grade (three increments) was worth 18c/kg to a producer. Nowadays, such a grade jump still commands an 18c increase, even though beef base price is around 36% higher. Based on the science behind the QPS, jumping one complete grade in today’s money should be worth 22.5c to the farmer – on a 400kg carcase that’s €18/head more than is achieved now. At a beef price of €4/kg, this figure rises to 24c – €24 more than is attracted currently.

Processors argue that it is not as simple as this and that demand has shifted toward a smaller product. Indeed, a loin from a 460kg U grading carcase could be worth up to €5/kg less in the wholesale market than a loin from a lesser quality O+ grading carcase weighing 360kg. That alone could mean €100 on a beef carcase.

Furthermore, as the proportion of a carcase falling under the ‘manufacturing beef’ umbrella nears 60%, quality grade becomes less of a concern – the mincer does not discriminate.

Dairy beef exports/weanling exports

With dairy beef posing a significant threat to the suckler cow, one means for securing her future is to get more dairy-bred calves out of the country as young calves in the coming years.

Historically, the live export calf trade has worked in peaks and troughs. The best example of this was the knock-on-effect of calf exports reaching 158,996 in 2010 and the added competition it brought to the domestic trade in 2012. The driver behind this fluctuation was most notably price, with farmers responding to higher domestic prices (live or dead) and pricing exporters out of the market.

In 2016, prices for good-quality Friesian bull calves were underpinned by Irish farmers, leaving exporters struggling to compete and extract a margin in our two main markets, the Netherlands and Spain. Having outpriced the exporters, one wonders if Irish dairy calf to beef farmers have done their sums and if they have what beef price was factored into the equation.

Taking all these factors into account, calf prices will continue to shape live export prospects in 2017. If calf prices provide an opportunity to return a margin, exporters will respond, but if domestic demand continues to price exporters out of the market, as also reflected by Cork Marts’ decision to exit the trade, then it is likely that the volume of calves exported will remain low.

With live exports of weanlings at very low levels in 2016, one wonders what impact this will have on beef prices in 2018 and beyond. The opening up of the Turkish market has added light to a dismal year in terms of live exports. Recent talk of north African markets opening up should underpin prices to a certain extent and take some of the extra dairy cross calves out of the system.

Market access

Producing a top-quality high-value suckler-based beef product requires a market that recognises the value of a specialised beef product. Finding that market is the challenge.

Bord Bia has been promoting Ireland’s environmental credentials under its Origin Green theme, but it is questionable how much the market rewards the superior beef product. For example Ireland’s production standards are on par with the UK yet the UK market places a much higher value on the country of origin than the production and rearing systems for the beef.

There are exceptions. It is thought there is a market opportunity for high-value grass-fed steak meat in the US and Ireland’s growing share of the Dutch market for quality beef demonstrates opportunities can be found. It is remarkable how well Ireland has grown sales to the Netherlands where their farmgate price is consistently below ours.

The ultimate prize that is still to be won in market access is China. This market has potential to be Ireland’s second most important after the UK. Currently New Zealand is considered the premium supplier.

Ireland should be able to make an offering that is comparable with anyone in the world.

Other Asian countries such as Vietnam, Indonesia and South Korea are also exciting possibilities.

Efficiency gains

While we can look to the market for price increases, suckler farmers shouldn’t expect external forces to deliver all gains to the system and the importance of reproductive efficiency and grass utilisation cannot be overestimated.

Teagasc analysis shows that for every 1t extra in grass consumed on a beef farm that this will deliver and extra €105/ha in net margin.

On a typical 40ha farm, that’s the equivalent of €4,200, or €8,400 if it’s increased by 2t/ha. There is still room for improvement in the calving rate on many farms and if this is lifted by 5%, it will return €54/ha.

Calving heifers at 24 months v 36 months has the potential to return €112/ha, which is a massive return, by implementing small changes to the farm system. Finally, if liveweight gain could be increased by 0.1kg/day over the lifetime of the animal, this could generate an extra €78/ha net margin to the farming system. Cow type, genetics, management and nutrition have all a role to play in achieving this target.

Pooled together, the four changes outlined above have the potential to deliver €349/ha net margin to a suckler to beef operation or €14,000 to the average suckler beef farm. These factors should not be ignored.