Last week’s reflection on the performance of beef in the context of Food Harvest 2020 made grim reading. Bord Bia, in their letter to the editor, correctly points out that prices were 24% higher in 2020 for R3 steers than the 2007-2009 average. However, that is little consolation to farmers, when we look at a fall of almost 10% between 2015 and 2020 from €3.98/kg to €3.63/kg. This is not a viable price for steer beef produced from the suckler herd within the constraints that farmers in the EU have to work under.
Decade ahead - EU
Unfortunately, at this point, the signals mainly appear negative. EU production will be shaped by the Farm to Fork strategy, at a cost to farm incomes of 16%, according to the USDA. Alongside this, we have the EU policy of international trade deals, which makes the EU market more accessible to the lowest-cost beef producing regions of the world. The Mercosur deal alone will hit the value of Irish beef between €50 to €60m, according to the EU’s own impact assessment. In an EU beef market where per capita consumption is forecast by the EU to fall by 1.6% by 2030, trade agreements will potentially bring in additional supplies from South America, Australia and New Zealand.
Britain hasn’t delivered yet, but may have potential
The average R3 steer price reported in Britain last week was the equivalent of €4.38/kg, a level at which Irish beef production would be sustainable. However, despite having Irish beef “as much as possible within the ‘British and Irish’ segment of the market and several key buyers continue to regard Irish beef as equivalent”, as Bord Bia point out, the Irish R3 steer price reported last week was €3.83/kg.
The challenge now is to have this reflected in farm gate prices
The present value of the British beef market does show potential, and Bord Bia is getting Irish beef placed in the same space.
The challenge now is to have this reflected in farm gate prices. Farmers will hope that a grass-fed PGI can do a similar job to the Red Tractor logo for British beef, and when we reflect back in 2030, we can identify this as a turning point.
On the negative side, Brexit means the return of costly red tape for doing business in Britain for Irish exporters.
There is also the question of what future UK trade deals will do to the value of the British market for both British and Irish beef producers.
Global trading platform
It is very difficult to foresee what will happen to change the relative price position of Irish beef in the years ahead.
Beef is increasingly moving to a global trading platform, where Irish beef will be pitched against North American hormone-assisted, grain-fed beef at the premium end of the market, and South American grass-fed beef at the lower value end.
Farmers correctly judge the success of strategies on what they do for farm gate prices
Growth will be in Asian markets, which are already well serviced by the US, Canada, Australia, New Zealand and South American countries.
Ireland has the marketing infrastructure in place with Bord Bia offices, and many Irish embassies now have agricultural attachés appointed. Farmers correctly judge the success of strategies on what they do for farm gate prices. By this measure, it hasn’t been a success by 2020, and the road ahead also looks difficult.
But if we regain access to China early this year, do more with the US while Australian production is curtailed, develop in Japan and in time South Korea and Vietnam, there may be dividends by way of better prices for farmers.
Farm gate price is the measure of success that matters
The Irish farm gate beef price in recent years has not been consistently at a level that makes beef production viable from the suckler herd. As of now, measures taken to strengthen the place of Irish beef in the market are not seen at the farm gate.
Current market signals by way of beef price are the reason for a bleak analysis
A price surge like what occured at the start of the last decade can change this, but the obstacles of Brexit, EU production and trade policy will present huge barriers in the years ahead. There will be opportunities in Asia, but this will be a well contested space, and perhaps we can add more value – if not volume – in the UK market.
Current market signals by way of beef price are the reason for a bleak analysis and current beef prices aren’t sustainable for Irish farmers that deliver beef from the suckler herd.
Competing in an increasingly globalised market against lower cost producers makes it difficult to see where sustained substantial increase in Irish beef values will come from. Solving this puzzle will earn and deserve the plaudits.