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The Irish beef industry is entering the greatest period of uncertainty in a century, with the prospect of being separated from our main market by a huge tariff barrier a distinct possibility. Not since the 1930s would the Irish beef industry find itself in such an isolated position.
The textbook response to the threat posed by Brexit is that we should diversify our markets. Aside from the difficulty of diversifying from a high-value net beef importer on our doorstep, there is the issue of finding outlets for the volume of beef involved. The IFA has been right to identify this as a problem for not just Ireland but all EU beef producers. The BSE legacy means many markets remain closed despite the efforts of the Irish Government to reopen them. Even where success is achieved, like the US, progress is slow.
There are other realities in the international market that we have to contemplate. Recently, Teagasc produced a report highlighting that while Irish dairy is internationally competitive, beef isn’t. As co-author, Dr Fiona Thorne, puts it: “Argentina and Brazil will be able to produce beef at lower costs of production than we could even dream about.”
It is one thing not being competitive against the lowest-cost beef production areas of the world; it is another when we aren’t competitive against major exporting countries that enjoy a much higher price than Ireland or the EU average. Having traditionally lagged 20-35% behind, the US and Canada are 50c/kg equivalent higher than Ireland, and 70c/kg ahead of the EU average, our next target market after the UK. Australia, which five years ago was the cheapest beef-producing country in the world, has been on par or at times ahead of the Irish R3 equivalent for much of this year.
All of these are major global beef traders. On top of the superior prices being received, they have access to technology that leaves Irish and EU beef producers some distance behind in terms of production efficiencies. Since 1988, EU beef producers have not had access to growth-promoting hormones which drive efficiency in carcase output. There was no scientific basis found for this when the EU was brought to the WTO by the US, with the ruling going against the EU.
The EU will correctly highlight the level of farm support provided by the CAP as a quid pro quo and the fact that in spite of the WTO ruling, they continue to deny access to the EU market for hormone-treated beef. This was a fair point at a time when EU farmers enjoyed farmgate prices that were up to twice the global average.
However, it doesn’t work when many top exporting countries are on par or ahead of EU market values.
It is unrealistic to expect Irish and EU farmers to sell a beef product against a competitor that enjoys access to growth promoters worth 20% or €1/kg on the carcase value. Not only does the market not pay a premium for hormone-free beef, it is perfectly happy to value the meat produced with growth promoters at a much higher level presently.
Irish farmers are committed to the hormone-free, high welfare and high environmental standards of production. Yet there is an expectation that we will be able to go out beyond the EU and develop markets that make our industry competitive. If we have to trade internationally, we will only be able to do so on the same terms as our competitors from the Americas as well as Australia and New Zealand – that is unless international markets are prepared to pay a premium for the standards and controls to which EU beef is produced.
Market conditions
Market conditions would indicate that such premiums are a long way off. As Phelim O’Neill reported recently, the Canadians are wondering if their access to the EU is of any value seeing as they can make as much or more elsewhere for beef produced without the costs of complying with EU standards.
It is timely to consider this when the CAP is under review. The EU can decide to expose itself to international markets but, if this happens, then international rules should apply.
Alternatively, it can continue to insist on current production values whatever the science, but it must be prepared to compensate productive farmers for the additional cost incurred in delivering these standards.
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