The rising cost of transport to EU markets following Brexit and the current energy crisis are two of the factors that are holding Irish beef price back compared with other EU countries.

This was part of the explanation on why Irish factory prices lag behind their EU counterparts offered by Joe Burke, senior meat manager in Bord Bia, in an interview with the Irish Farmers Journal this week.

He explained that Germany is a particularly strong market for manufacturing beef at present and that is reflected in high German farm gate prices, reported to the European Commission and published in the Irish Farmers Journal each week.

The strength of the German market is also giving a bounce to Polish beef prices who are their closest supplier for imports. However, with Irish transport costs increasing by 120% as well as direct shipping avoiding Britain, it makes the cost of doing business in Germany much lower for Polish suppliers than their Irish counterparts.

Even with the higher farm gate prices, Irish steak meat was securing more in German markets than its German counterpart, according to Joe Burke. This is because Ireland has been developing the German steak meat market alongside the UK market for forequarter manufacturing beef, sold to the supermarkets and burger chains.

The difficulty with this is that while for eight years out of 10, Irish R3 steers have been ahead of the EU R3 young bull average, it means that we don’t have the flexibility to switch markets instantly.

It is, however, an option that is open to at least some factories outside the main groups who don’t have long-term supply commitments in the retail or fast-food chains.

These businesses have the flexibility to secure the best spot market prices as opposed to being restricted by longer established trading relationships.

Rising tide lifts all boats

On the issue of factories appearing to be taking a very relaxed approach to specifications at present, Burke described the present trading environment as being one where a “rising tide was lifting all boats, including so-called out-of-spec cattle”.

He pointed out that the growing number of breed bonus schemes often favoured plainer cattle that were born to dairy cows and often making no more than an O grade.

Breed bonuses had the effect of pulling these prices up, as does flat buying, rather than adding more to higher-quality stock.

Burke also commented that there was often more flexibility on specifications with customers on the continent than in the UK and a gradual repositioning of business may also be contributing to this.

One area where he was particularly forceful was in relation to the QA bonus paid by factories as part of the in spec bonus.

“Bord Bia have no role in the price paid for QA cattle over non-QA cattle. We operate the scheme and that is as far as it goes,” he said.

Young bulls

The Irish Farmers Journal put it to him that it was possibly a time for a rethink on young bulls seeing that as market in Europe was valuing these at more than Irish steer beef at present.

His response was that there can be a place for 150,000 to 200,000 young bulls but the internationally developed image for Irish beef is a grass-fed steer product.

He also pointed out that rapidly rising feed costs will be most felt in young bull production but that there can be a place for at least some of them. He said it is a very specialised business and should only be entered into where farmers have a clear commitment from a factory to buy them.

Comment

Irish beef farmers are caught between two stools when it comes to placing their product in the marketplace.

They have a grass-based steer product that isn’t keeping pace with young bull prices across much of Europe and it is part of a long-established supply chain built on UK retail, burger chain and food service business that wants a product produced to a tight specification at a lower price than its UK counterpart.

There is no obvious route to breaking out of that cycle other than by the large Irish and UK factory groups pushing for the same value for each rather than using Irish beef to blend with the UK to give an overall lower price to the customer.

Alternatively, if continental markets remain dominant, we may see factories outside the main groups without supermarket or burger chain relationships come to the top as they have been in the past.