The response by Meat Industry Ireland (MII) to the market transparency consultation which closed last week was disappointing and a missed opportunity to build farmer confidence in the fairness of the Irish meat processing industry. MII is the trade association that represents Irish meat factories and all of the key players are members.

UTPs

The introduction of market transparency is the final phase of European Commissioner for Agriculture Phil Hogan’s unfair trading practices (UTP) initiative in which he has sought to address the imbalance in the supply chain.

The basic principle is that millions of small farmers across the EU sell into a chain where there are just a handful of major retail and food service buyers who are in the dominant position in negotiations.

Price pressure

The basis for their opposition is that factories being made report prices plays into the hands of their customers and in turn can create negative price pressure and affect primary producers.

They also said that they have an issue with “the definition of representative prices, operators, etc, being left to the member states” and that “the diversity of the meat market and the complexity involved (market channels, animal categories, cut specifications, etc), [means that] there is a real lack of clarity of definitions for reporting concerned".

On one level, these are valid points. However, the reality is that in the trade there are no real secrets regarding wholesale prices and levels of stocks being carried.

It would be entirely reasonable for the industry to insist on a common standard

It is also fair to say that the breaking up of beef carcases into cuts of meat such as steaks, roasts and mince with different specifications is a complex business and it would take effort to establish a level of clarity to ensure all member states were reporting to the same standard.

It would be entirely reasonable for the industry to insist on a common standard and even make their support conditional on that.

If the industry had been supportive in principle then it would be a very different debate in ensuring a price reporting system was developed that that was robust and consistent.

USA model

The argument that compulsory sharing of factory price information is too complicated or would undermine the industry is undermined by a brief look at the model in place in the USA. There, factories are obliged to update prices and stock levels to the USDA on a daily basis and there is open access to the values and stocks of US beef and other meat available at all times. This doesn’t appear to hinder the beef industry in the US, which is consistently among the top three exporters of beef in the world.

Tyson Foods

The largest beef processor in the USA is Tyson Foods, a multi-species company with combined sales in 2018 of $40m (€35m), 37% coming from beef. They kill on average 133,000 cattle per week, which is almost 7m cattle annually – nearly four times Ireland’s total kill.

They are a publicly listed company and provide quarterly updates on trading performance. In their latest publication on 6 May 2019 for the previous three months, sales were $10.4m (€9.1m) and operating income was $635m (€724m) or 6%.

This is a very successful and profitable outcome achieved with the USDA wholesale price and stock level reporting demands and updates on financial performance on a quarterly basis.

Transparency hasn’t hindered Tyson Foods' business and while the US beef price fluctuates at farmgate level, it has for several weeks this year been ahead of the Irish price.

For the week ending 20 June, it was the equivalent of €3.60/kg for an animal equivalent to an R3 steer.

Transparency would aid factories

Irish beef factories would actually benefit from greater transparency on what happens between the farm gate and the retail shelf. At present, there is little confidence among farmers that factories return a fair price.

All the intelligence suggests that meat processing is a high-volume, low-margin business but without transparency this cannot be demonstrated.

Factories have a point in being concerned about consistency on both product and member state reporting so that like is compared with like. They should accept the principle of full openness as in the USA and focus on the logistics of delivering consistency.

In doing so, farmer confidence could be increased and more importantly at a time of great external threat from Brexit and Mercosur, farmers and factories could come to focus on these external mutual threats.