When factories are paying for cattle they buy from farmers, the value is calculated on the carcase weight multiplied by a rate per kg. However, in getting to the point where the carcase reaches the factory scale for weighing, a significant amount – between 40% and 50% – of the animal that the farmer dropped off in the lairage has been removed. This includes the hide, head, feet and all the internal organs.
What is of particular interest to farmers is that this product is harvested by the factory before the animal is weighed and therefore does not appear to cost the factory anything to purchase, despite the fact that is has a commercial value. In industry jargon this is referred to as the “fifth quarter” because when the animal moves through the slaughter hall, it is split into two sides. Each side is, in turn, split across the middle when it enters the boning room. That means that the original animal is now divided into four quarters while the left over parts removed during the process are described as the “fifth quarter”.
How it works
Offal is an important source of revenue for meat factories but it is oversimplification to suggest that this figure is an automatic profit. There is a cost to harvesting, storing and selling offal just as there is with prime beef cuts.
Hides can be another substantial revenue for meat factories which can be worth up to €80 for prime cattle and €50 for cows when the market is at its peak
Also, in practice, meat factories reflect the value of offal in what they decide to pay for beef carcases, which is what remains of the animal once the hide and internal organs have been removed. Hides can be another substantial revenue for meat factories which can be worth up to €80 for prime cattle and €50 for cows when the market is at its peak.
The beef carcase is what is left after the hide, head, feet and internal organs have been removed and is what the factory pays for.
However, for much of the past year, the hide trade has been very weak with prime cattle hides have been trading around €30 and cow hides worth just €10-€15.
Meat processing is the reverse of the normal assembly line process, with the animal that arrives at the factory broken up into over 100 component parts between prime cuts of beef and offal. In deciding the value of a beef animal, the factory will know the yield or weight of each of these component parts and the price they expect to get for each in the market place.
Offal is harvested in the slaughter hall and packed or transported to a separate site for further processing
Costings are typically produced on each batch of carcases going through the cutting plant in which the weight and yield of the batch across the cuts are captured. At the end of each batch, the expected value of the prime cuts, plus a value for the fat and bones are added up.
Offal is harvested in the slaughter hall and packed or transported to a separate site for further processing. Hides are removed early in the process and taken immediately out of the slaughter hall as there is a high risk of contamination of the beef carcase. They are taken outside into a non-food production area for either onward dispatch to a hide merchant or, in many cases, companies prepare their own for selling into the leather tanning industry.
When all of these separate operations are complete in the meat factory, they will be able to calculate the amount and market value of each product they have. It is usual practice that this is carried out on a weekly basis by way of management accounts and, in this, the expected value of the beef from the carcase that was weighed is added to the offal, hides and other by-products to establish the overall value of the animal to the factory.
This will then dictate what the factory intends to pay for its next intake of cattle, so the value of offal becomes part of the price paid by the factory per kg for the carcase.
Of course all of this process is carried out by factory owners out of sight of farmers. The EU has a fantastic price reporting system that publishes accurate weekly values paid for beef carcases across each member state.
Currently, the EU Commission is exploring how to bring greater transparency to what happens in the factory and wholesale sectors of the industry
Unfortunately, that is where the information ends until whenever the meat reaches either the butcher’s counter, supermarket shelf or restaurant when the price the product is offered to the consumer becomes known. The bit in the middle is the great unknown but it need not be.
Currently, the EU Commission is exploring how to bring greater transparency to what happens in the factory and wholesale sectors of the industry. An off-the-shelf solution is available by copying what happens in the USA. There, the USDA publishes daily information of stocks and values of all component parts of the animal, including offal. Irish farmers should have the same knowledge and information on what happens the parts of their livestock after they drop them off at the factory lairage.
Greater transparency on what happens to the products from the beef animal after it leaves the farmers trailer would actually benefit factories as well as farmers. It would enable factories to explain clearly and on a factual basis why the market is performing in the way it is at any given time.
It may be a small consolation but it would enable farmers then to understand why factory prices were poor
Information is collected by the Irish Farmers Journal on an ad hoc intelligence-based way and this gives us a basic insight but not the full picture. We have information that there was more imports into the EU in 2018, less exports from the EU and slightly increased production alongside (at best) a stable market. This suggests there will be over supply of beef but it would be so much better if we could actually see the total stocks in factories and what price they were getting on the wholesale market.
It may be a small consolation but it would enable farmers then to understand why factory prices were poor and of course in a rising trade with low stocks and rising wholesale values, farmers would be in a position to drive a harder bargain when selling.