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Dawn Meats' takeover of Dunbia’s Irish operations this week did not come as great surprise to anyone in the industry or farming circles.
Negotiations have been ongoing for some time.
Nevertheless, the farm organisations have made known their disapproval of the move in what they see as a further blow to competition for finished cattle.
Dawn's growth
This latest move puts Dawn on to five factories, one behind ABP on six plus a 50% stake in Slaney, and one ahead of Kepak, with Liffey owning three.
This means that three-quarters of the Irish cattle kill is handled by these four groups with half the kill handled by ABP and Dawn alone.
Read more: big three becomes big two
Farmer concerns are driven by what they see as a handful of people able to dictate cattle price and in the process exploit beef finishers.
There is very little confidence among farmers that meat factories give their farmer suppliers a fair deal.
Butcher shops
A large part of the reason for the lack of farmer confidence in Irish meat factories is driven by an absence of transparency of what happens in the industry after the farm gate.
The reality is that the major meat processing groups in Ireland publish little or no financial information about company performance or financing. It may be OK for a small butcher shop, family owned, to keep its financial affairs to itself but it is not satisfactory for multi-million, multinational companies as our big beef processors now are.
The concerns about factory ownership are twofold.
The obvious concern is that factories are excessively profitable at farmers’ expense but an equally valid concern is what if factories, buying millions of euro worth of cattle, are not financially strong?
Meat processing is usually a low-margin business, but in the absence of robust financial information there is always a risk, however remote, of companies being exposed to high-risk investments either in Ireland or less stable parts of the world. If these were in place and went wrong, then it could jeopardise the core business and put the farmer suppliers at risk.
Thankfully, farmers not getting paid are now a rare occurrence in Ireland but that doesn’t mean it could not happen.
Hence the need for more information on our companies.
An industry that lacks transparency
The lack of industry transparency was recognised last year in an industry taskforce set up by EU Agriculture Commissioner, Phil Hogan.
This is now being taken forward in the Commission's work programme but is not a matter for DG Agri alone, it is the competition commissioner that ultimately has to drive it.
The USA and Canada have models that are well worth considering as the basis of any action to get an understanding of the stocks of beef and its market value with the Chicago Mercantile exchange providing a futures market for livestock.
Ultimately less buyers for cattle could mean less competition. On the other hand, stronger companies should be better able to negotiate with major multinational supermarket and food service industry buyers.
The real issue for farmers is getting a fair deal and not feeling exploited.
This is where information and knowledge of what happens after when the farmer drops his cattle off at the factory has a role.
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