Adam Woods has shone a light on just how great the change has been in how factories source cattle over the past decade.
Adam has covered the details in his excellent analysis in the print edition of this week's Irish Farmers Journal.
In a nutshell, a clear pattern is emerging of factories buying fewer cattle from small farmer finishers and an ever-increasing proportion from large specialist finishers, in some cases very large.
Works for factories
Looked at through factory eyes, it makes perfect sense to have a smaller number of suppliers to deal with that have a bigger number of cattle.
A factory owner will say that there is no other production business on earth that opens the door on Monday mornings with very little certainty on how much raw material they will have to work with that week.
Against this background, they take orders from customers anyway and then set about getting the cattle to fill these orders. When there is plenty of cattle about and farmers want to sell, this isn’t a problem and the factory can buy at a price that suits them.
Factories can be left scrambling around searching for cattle to fill orders
However, whenever cattle supplies are scarce, it is a different story. Factories can be left scrambling around searching for cattle to fill orders and as a result the farmer selling the cattle is in the driving seat when it comes to price.
In this situation, specifications which attract penalties when cattle are plentiful are ignored.
This model suits a dealing mindset - or should that be gambling - farmers taking a punt on reading the market, hoping that they will be able to sell at close to the top of the market.
Beef and sheep markets have changed
As factory beef - and indeed sheepmeat - sales are on an increasingly long-term contractual basis, as opposed to weekly trading in beef markets, continuity of supply and certainty of production costs are necessary to run a successful processing business.
It should not therefore be a surprise to anyone that factories will do what is best for factories when it comes to securing their supply base.
Bearing in mind that factories will protect factories' interests, is there any way that this new feedlot model can be made work to serve farmer interests as well?
It could be argued that farmers selling cattle in the mart over recent months are seeing the benefit of this model, as mart prices for strong near-factory-ready cattle have been better than deadweight prices. This also has been the case in Northern Ireland.
Of course, the counter argument is that factories are investing so much in big finishers that they have to pay for this from somewhere and it is done by paying less to smaller suppliers.
Beef and sheepmeat are the least integrated meat businesses
In any case, the direction of travel seems to be that feedlot cattle are generally commanding a premium price, so if that is the case, farmers have to look at how they can best maximise the value of their stock.
Looking elsewhere to the intensive sectors, pig farming is now in the hands of a small number of huge farmers, the smaller producers long since squeezed out of the market.
Poultry production is even more integrated, with the factory supplying the genetics and feed, the farmer just supplying the facilities and labour. Beef and sheepmeat are the least integrated meat businesses.
Competition
There may be a fear among farmers that if beef finishing is left in the hands of a handful of feedlots, then the competition for cattle at marts may diminish. This is always a possibility, but the reality, from a finisher's perspective, is that factory ownership is already concentrated in even fewer hands.
Also, just as a factory at every crossroads doesn’t guarantee best farmgate price, it is not the number of people that is at a mart that matters, it is the number of buyers and what they are paying that really matters.
The opportunity for buyers to take part in marts online also greatly increases the number of buyers that are chasing cattle in marts across the country.
Feedlots definitely work for factories, that is why they are growing in numbers and increasing their share of the national kill.
They give factories consistency of supply both in number and specification and will also have the advantage of buying inputs at the best price.
Small finishers have always found that dealing with factories was always on the factories' terms. A farmer with five cattle has no negotiating power compared with a farmer offering 500 or even 5,000, as some feedlots can do.
A well-operated mart system incorporating online sales gives farmers the opportunity to present their cattle and, unlike dealing with the factory, there is a return ticket if the price isn’t meeting expectations.
Factories will always want cattle and farmers need to be clever in finding a way to supply them, whether that is directly or indirectly, that gives farmers the best return. How that is achieved is of secondary importance.
Read more
Numbers speak volumes on cattle finishing herds
Factories used mega-finishers to supply 400,000 cattle last year
Commercial beef value hits mart boards
Adam Woods has shone a light on just how great the change has been in how factories source cattle over the past decade.
Adam has covered the details in his excellent analysis in the print edition of this week's Irish Farmers Journal.
In a nutshell, a clear pattern is emerging of factories buying fewer cattle from small farmer finishers and an ever-increasing proportion from large specialist finishers, in some cases very large.
Works for factories
Looked at through factory eyes, it makes perfect sense to have a smaller number of suppliers to deal with that have a bigger number of cattle.
A factory owner will say that there is no other production business on earth that opens the door on Monday mornings with very little certainty on how much raw material they will have to work with that week.
Against this background, they take orders from customers anyway and then set about getting the cattle to fill these orders. When there is plenty of cattle about and farmers want to sell, this isn’t a problem and the factory can buy at a price that suits them.
Factories can be left scrambling around searching for cattle to fill orders
However, whenever cattle supplies are scarce, it is a different story. Factories can be left scrambling around searching for cattle to fill orders and as a result the farmer selling the cattle is in the driving seat when it comes to price.
In this situation, specifications which attract penalties when cattle are plentiful are ignored.
This model suits a dealing mindset - or should that be gambling - farmers taking a punt on reading the market, hoping that they will be able to sell at close to the top of the market.
Beef and sheep markets have changed
As factory beef - and indeed sheepmeat - sales are on an increasingly long-term contractual basis, as opposed to weekly trading in beef markets, continuity of supply and certainty of production costs are necessary to run a successful processing business.
It should not therefore be a surprise to anyone that factories will do what is best for factories when it comes to securing their supply base.
Bearing in mind that factories will protect factories' interests, is there any way that this new feedlot model can be made work to serve farmer interests as well?
It could be argued that farmers selling cattle in the mart over recent months are seeing the benefit of this model, as mart prices for strong near-factory-ready cattle have been better than deadweight prices. This also has been the case in Northern Ireland.
Of course, the counter argument is that factories are investing so much in big finishers that they have to pay for this from somewhere and it is done by paying less to smaller suppliers.
Beef and sheepmeat are the least integrated meat businesses
In any case, the direction of travel seems to be that feedlot cattle are generally commanding a premium price, so if that is the case, farmers have to look at how they can best maximise the value of their stock.
Looking elsewhere to the intensive sectors, pig farming is now in the hands of a small number of huge farmers, the smaller producers long since squeezed out of the market.
Poultry production is even more integrated, with the factory supplying the genetics and feed, the farmer just supplying the facilities and labour. Beef and sheepmeat are the least integrated meat businesses.
Competition
There may be a fear among farmers that if beef finishing is left in the hands of a handful of feedlots, then the competition for cattle at marts may diminish. This is always a possibility, but the reality, from a finisher's perspective, is that factory ownership is already concentrated in even fewer hands.
Also, just as a factory at every crossroads doesn’t guarantee best farmgate price, it is not the number of people that is at a mart that matters, it is the number of buyers and what they are paying that really matters.
The opportunity for buyers to take part in marts online also greatly increases the number of buyers that are chasing cattle in marts across the country.
Feedlots definitely work for factories, that is why they are growing in numbers and increasing their share of the national kill.
They give factories consistency of supply both in number and specification and will also have the advantage of buying inputs at the best price.
Small finishers have always found that dealing with factories was always on the factories' terms. A farmer with five cattle has no negotiating power compared with a farmer offering 500 or even 5,000, as some feedlots can do.
A well-operated mart system incorporating online sales gives farmers the opportunity to present their cattle and, unlike dealing with the factory, there is a return ticket if the price isn’t meeting expectations.
Factories will always want cattle and farmers need to be clever in finding a way to supply them, whether that is directly or indirectly, that gives farmers the best return. How that is achieved is of secondary importance.
Read more
Numbers speak volumes on cattle finishing herds
Factories used mega-finishers to supply 400,000 cattle last year
Commercial beef value hits mart boards
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