Volatility is buzzword in markets

From a traditional position where their cattle prices were typically the equivalent of €1/kg lower than Irish price, they surged to the equivalent of €5.40/kg in May 2015. After that, they entered a falling cycle losing the equivalent of €2/kg by October, then rebounding before falling again.

However, since Christmas a modest but sustained recovery has taken place to leave them trading at the equivalent of €4.29/kg at present, a figure that would be very attractive to Irish farmers.

The reason behind the US price surge was drought which resulted in a massive cattle cull bringing the national herd to its lowest level since the middle of the last century. The rebuilding process left fewer cattle for slaughter and as a result the US became even more dependent on imported beef, particularly high quality manufacturing beef used in burgers.

This market was filled by predominantly Australia and New Zealand who between them sent almost 700,000t of manufacturing beef to the US in 2015. Australian cattle numbers are expected to fall dramatically this year from a record high kill last year in excess of 9m cattle to a twenty five year low this year of around 7m.

In theory that presents a golden opportunity for Ireland to crack the manufacturing side of the US beef market following the relative success in exporting the higher value cuts in 2015. However, little is simple in the beef trade and we need to be cautious about the US opportunity for Irish manufacturing beef in the US.

Brazil, the world’s beef superpower has targeted the US as a key market in 2016 having been cleared to resume trade last year. So far their focus has been China but such is their capacity for production the US is a complimentary target.

That presents two difficulties for Ireland. They will use the same 64,000t quota that Ireland exports to the US under and while it was not filled last year, when Brazil gets going it will be quickly used. In addition to this Brazilian beef prices are hovering just above €2/kg which makes them extremely competitive in price sensitive markets, particularly for manufacturing beef.

Aside from that, we have the certification and testing issues to resolve at an operational level whenever the officials finally agree the formalities. Put simply, Europe and the US has differing approaches on beef production with use of hormones and anti-biotics perfectly acceptable there but not in Europe.

Similarly their approach to E-coli is to wash carcases with lactic acid and again use it at the cutting stage whereas this is not accepted in Europe though not strictly illegal.

The EU way of dealing with any E-coli threat is to ensure any exposed meat surface is thoroughly cooked whereas the US because of the acid wash are more relaxed and tend to leave their burgers rare. This becomes an issue if ground beef that is not washed in lactic acid is used because it is the cooking process that takes care of any risk. It is difficult to envisage how these apparently conflicting systems can be reconciled and unless they can then it will be difficult for Irish companies to supply manufacturing beef to the US.

This time last year, Irish prices were in the middle of a welcome recovery. The recent surge in the value of the euro against sterling makes Britain a more difficult market though it will help Northern Ireland farmers in European export markets. Getting the value into Irish beef that is needed will be as challenging as ever in the coming year.