The Irish Farmers Journal this week publishes performance tables for Irish beef factories based on the prices they have paid on a selection of grades on steers, heifers, young bulls and cows during the first half of this year.

Scroll down to view the tables below.

The prices used in this exercise are supplied by the Department of Agriculture, Fisheries and the Marine and include VAT. All factories processing over 20,000 cattle annually are required to report prices under EU legislation.

Influencing factors

The Irish Farmers Journal publishes a sample of the reported prices paid by factories on a weekly basis. A full report on all grades is available on the Department’s website.

As always with statistics, there are a number of things that should be kept in mind. In the first instance, these tables are compiled on a sample of grades. They are broadly representative of the Irish cattle kill, but if every single grade was included there could be slight variation.

We also have to remember that these are average figures and there are many factors and individual payments that are combined to create the average.

Speciality breeds

The most obvious example is the impact of speciality or niche groups of cattle such as Angus, Hereford or organic, which isn’t very common.

It is the exception for factories not to pay a premium on these niche breeds but some are more active in the marketplace than others and the larger groups often designate one or two factories based on geography to handle these.

It is not possible to separate these reported prices out from the overall factory kill, so we need to keep in mind that a factory killing a good number of these will be reporting higher overall prices, particularly in the R=3=/R=4= and O=3=/O=4= grades for steers and heifers.

How factories buy cattle

A further feature that affects overall prices is how close individual factories stick to the grid. For example, where a factory prefers flat-rate buying, its price and place in the table will look poor for the U and R grades, but the O grades will look particularly good.

In these circumstances, such a factory will attract big supplies of O-grading cattle and probably very few U and R grades. This would not be reflected in the tables as they don’t take account of number of cattle killed in each grade. A factory not seeking to be active in a category such as cows still has to report the price of any that it kills, no matter how few. In this situation, we might find that a factory with just a few cattle in a category finds itself well down the table.

Difference in priorities

Finally, and importantly, there is the customer profile of each factory. The larger groups tend to have best access to the UK supermarket and burger chain businesses, which is currently the beef market with the best return in Europe. That is driven by the cost of UK Red Tractor cattle, with Irish suppliers being used to top up the deficit in domestic UK supply and in the process reduce the overall average cost of the beef.

Other factories whose business is more continental or wholesale-based are currently in a weaker market position.

This is due to the weakness of our previously elite beef markets in France, Italy and Germany, who buy a quarter of Irish production between them and currently have farmgate prices 30c/kg lower than in Ireland.

The exception to this is in the plants that have carved out a niche market for a percentage of their produce, which is often Angus- or Hereford-based. It is inevitable that Irish factories whose markets are based in these countries are in a weaker position in the Irish market when buying cattle.

Up until a decade ago these were the elite beef markets in Europe and factories whose business was based on supplying them would have been as strong and at times stronger buyers of cattle than those who concentrated on the UK market.

Quality Assurance is an absolute must when supplying the UK retail and foodservice burger markets. While it is also a requirement for some European supermarkets, there are more market alternatives on the continent for non-quality assured beef.

Purpose of the tables

Farmers dealing in or selling cattle regularly to factories quickly learn which factories are particularly interested in different types of cattle. The main purpose of these tables in the Irish Farmers Journal is to inform farmers where it is best to target their particular type of cattle. We find the factories with UK supermarket and burger chain business have a strong focus on steers, heifers and young bulls. The factories that concentrate on Europe and wholesale markets are strong on cows.

There are also differences between the cow-focused plants on the type of cows they are looking for. There will be more detailed analysis of what sells best where next week.

Another thing tables do is reflect the spread of prices paid by the different factories on the same grade. This has to be seen in the context of the explanations for variances referred to above.

* More details in Results at a Glance opposite.

In the past when this exercise was carried out, it was traditional to give out star performer and wooden spoon awards. On one occasion, both awards were withheld as one year prices overall were so bad it was decided there was no star performer and on another year that had a strong improvement in farmgate prices, it was felt no factory deserved the wooden spoon.

The situation this year at midterm report stage is that despite a spread of prices between factories, none are deserving of the wooden spoon. Looking back to 2011 (Figure 1), the year we last published a beef factory performance review, it was a very different European meat market for Ireland. Italy started that year off as the kingpin in Europe with the highest prices, though the UK closed the gap before the year was out.

Interestingly, that year Ireland was actually ahead of the UK for a short period in May. The interesting feature of that time was that the euro traded at 88p compared with €1 to 71p for most of this year. If we were to apply that exchange rate to last week’s Irish R3 steer price, it would bring us up to €4.61/kg, which is still 30c/kg behind the UK, but much closer.

Farmgate prices compared

The fact that Ireland for all of this year to date has traded several cents per kilo ahead of France and Italy represents real achievement for the Irish beef industry (Figure 2). These were the traditional powerhouses of Europe and we have now traded ahead of them for a prolonged period. That is progress that should be welcomed.

It is said you can never beat the market, but you can always aim to be the best in the market. So does that mean we have to award a collective gold star to our industry? Not quite – we have to stop at a commendation.

Despite the currency swing, the gap with the UK has widened dramatically in the last couple of years. The impact of Red Tractor branding has no doubt driven value for UK farmers, but because so many companies in the Irish beef industry are also key players in the UK, we might have expected that this gap would be closer.

The supermarket and burger chains have the same quality assurance specifications for Irish beef and sell both side by side. It would be reasonable to expect that Irish prices, while maybe not exactly the same as British, don’t deserve to be as far behind.

There remains another question mark over the Irish beef industry and that is how well it will handle extra cattle coming into the system on the back of dairy industry expansion.

Last year, oversupply of 150,000 cattle seriously depressed the farmgate price in what was a widespread depressed market. In recent weeks, we have seen scarcity of numbers driving price. How factories succeed in keeping Irish prices at the top of the market when there are strong supplies of cattle coming through will be the real test.

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