While the price farmers are being paid for their cattle is the real problem, the farmers’ share of the supermarket or butcher shop price has been a major point of dispute in recent weeks. It has been claimed by the Beef Plan movement in their protest that it is as low as 20%, while Meat Industry Ireland (MII) says it is in fact 63%.

Both organisations cannot be right, so with the assistance of Bord Bia, the Irish Farmers Journal is examining the share of the total value of the chain including offal, not just the share of retail price.

Offal contribution

To make a precise calculation, it would be necessary to have a precise value for the offal, which, as the main diagram illustrates, is split into many component parts sold across the world.

Irish factories do not publish offal values but it is a legal requirement in the USA and as offal is a globally traded product with negligible tariffs no matter what market it is sold in (unlike beef cuts), we can use this to make an estimate of the value of offal to an Irish beef factory per animal.

In any attempt to calculate the real farmer share of the animal’s value, what the factory realises for the sale of offal has to be included. Retail beef price does not reflect the contribution offal makes.

Retail v farmgate value

Bord Bia presented retail values for the main beef cuts to the recent discussions between the farm organisations and MII in the aftermath of the factory protests.

The Kantar data on beef purchases showed that shoppers bought 22% of their beef as steakmeat, the average price of which was €14.16/kg

They showed an average Irish retail beef price of €8.97/kg based on a survey of consumer grocery purchases by Kantar Worldpanel, which conducts detailed surveys of consumer shopping patterns across all food products.

It is important to note that this average price is calculated on the basis of the beef that was in the shopper’s trolley, not the amount of each cut on the beef carcase.

The Kantar data on beef purchases showed that shoppers bought 22% of their beef as steakmeat, the average price of which was €14.16/kg. Thirty-nine per cent of their beef purchases were mince at €6.50/kg, 13% were burgers at €7.48/kg, 14% were roasting joints at €8.44/kg, 11% were stewing beef at €8.55/kg and 2% was value-added beef at€9.33/kg. When the value of these purchases is combined, it gives an average Irish retail value of beef of €8.97/kg.

Yield

However, it has to be remembered that these are the amounts of beef purchased by Irish shoppers, not the amount of the particular cut of beef that is available on the beef carcase. The Irish Farmers Journal along with Bord Bia deboned a U-3+ beef heifer carcase weighing 324.6kg and this top-quality beef carcase was made up of 11.8% of steak meat, 16.4% of roasts and 46% of mince, burgers, stewing meat, etc. The remainder, 25.8%, was fat and bones.

Comparing the yield of meat cuts with consumer purchases shows that Irish shoppers are big buyers of steak meat, the highest-value retail cut.

Therefore, when calculating the retail average value of beef cuts and relating it to the animal delivered by farmers to the factory, it is more accurate to reflect the amount of the different cuts available when working out the retail value of the carcase.

Also in this calculation, the value of the offal should be included even though offal sales through supermarkets and butchers are so small as not to be recorded in the Kantar data.

The missing element from this calculation is the value of offal, of which virtually none is sold in retail but is still worth substantial money to beef factories

If we apply the Kantar retail values for the different cuts to our deboned carcase and collected the yields, assuming everything was sold as retail over the counter, the average retail price we arrive at is €6.50/kg based on steak, roasting joints and mince/burgers/stewing/added value product combined. See Table 1.

The missing element from this calculation is the value of offal, of which virtually none is sold in retail but is still worth substantial money to beef factories.

Retail plus offal value

As offal is sold across the world and values aren’t published by Irish factories, it is impossible to put an accurate price on the value of offal to the factories. However in the US, the USDA publishes detailed analysis of values for beef cuts and offal on a daily basis, and on Friday 16 August, the hide and offal value was put at $9.30 (€8.37) per hundred weight (454kg) live for a typical beef animal weighing 1,400lb (635kg equivalent).

If the same value for the hide and offal was achieved by Irish factories, the offal would be worth an estimated €118 per animal.

If we add that extra value to the animal we are using in this example, €118 on a 326kg carcase is worth an additional 36c/kg on top of the average retail value of beef cuts, which was €6.50/kg, making the total value an estimated €6.86/kg.

When this value is applied to the average R3 steer price for week ending 18 August of €3.62/kg, it leaves the farmer getting 53% of the retail and offal value.

Comment

It is somewhat academic working out the share of value of the animal realised by the factory that makes its way back to the farmer when farmgate prices are so poor.

What is essential is that farmers are economically viable when sending beef to the factory – the market alone doesn’t deliver enough to make the business viable.

Historically, beef production has relied on direct support when access to growth-promoting hormones was banned in the EU.

Yes the market needs to do more but it is meaningful direct support that is required to make the beef industry viable.