Tesco UK under fire for preferring Irish beef
The UK's National Beef Association (NBA) has criticised Tesco for preferring Irish to British beef over the Christmas period.

The NBA quizzed Tesco over the lack of British beef available on its shelves over the festive period.

The farming organisation said Tesco’s response was that the retailer is “constantly reviewing product quality on the beef that is purchased and we have found at this moment we are finding the beef from Ireland to be of a better quality”.

‘Shameful’

Chris Mallon, chief executive of the NBA, slammed Tesco’s comments by saying: “It is shameful for Tesco to blame the quality of British product for its absence on Tesco shelves. The real reason is their buying policy which prioritises ‘cheapest first’. It shows a complete disregard for Tesco’s UK suppliers to put out statements falsely informing consumers that British product is inferior, instead of admitting that they source on price.”

As highlighted by the NBA, Irish beef was cheaper in mid-November, when supermarkets were sourcing meat for the festive season. The British average price was 378.9p/kg whilst the Republic’s price converted to 333.7p/kg.

Bord Bia’s beef sector manager Mark Zieg told the recent meat marketing seminar that the growing British acceptance for Irish beef was helping exports and “this is something we want to build upon”. Zieg showed a picture of a large billboard in a UK supermarket advertising British and Irish beef as one to illustrate his point.

Watch an interview with Mark Zieg in our video below:

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Collapse in Turkish lira threatens exports
The Turkish market has provided a lifeline for live exports of weanlings and store cattle and therefore a weakening in the value of lira is of real concern.

Turkey is in the midst of a currency crisis with the lira suffering a 30% devaluation in recent days. This follows a significant devaluation earlier this year with the value of lira to euro shifting massively over the last year and reducing from a position of three to four lira to the euro in mid-2017 to seven to eight lira in recent days.

The lira experienced a slight recovery on Wednesday afternoon but remains volatile amid trade tensions between Turkey and the US. It spells bad news for Irish exporters and weanling producers ahead of the busy autumn sales period. Over 10,000 cattle have been exported live to Turkey in 2018 but there were hopes of a significant increase with 20,000 head exported in the second half of 2017 and the market opening up to private buyers in mid-2018.

Cattle boat for Libya

Curzon Livestock will send a boat of heavy bulls to Libya in late September. Managing director James Horgan said the consignment would be divided between Friesian and continental bulls.

He has just returned from Turkey where he had discussions with Turkish livestock buyers about supplying weanlings.

“The Turkish lira is volatile at the moment and as a result they can’t make buying decisions. But when the currency settles back into a trading range, then they will be able to do so.

‘‘I’ll be very disappointed if we don’t do business there this autumn.”

Kepak buys 2 Sisters UK red meat business
As reported by the Irish Farmers Journal last week, Kepak has bought the red meat division of 2 Sisters Food Group in the UK.

Irish meat processor, Kepak has confirmed it has reached agreement to buy the red meat business of UK based 2 Sisters for an undisclosed sum. Under the terms of the deal, Kepak has said it will take control of the business with immediate effect.

The red meat business of 2 Sisters comprises four main production sites across the UK, including McIntosh Donald facility in Portlethen, Scotland; and three St Merryn sites at Merthyr, Wales, and Bodmin and Victoria in Cornwall, England.

Kepak said the deal will significantly increase the group’s value and scale as well as strengthening its partnership with a number of key customers, most notably supermarket giant Tesco. The Clonee headquartered group added that the deal would provide it with a new source of raw material but also act as both a Brexit and a currency (€/£) hedge for the existing and the new Irish-UK businesses.

Kepak say the acquisition will see it processing about 250,000 cattle and more than 1million lambs annually in the UK, supplied by more than 13,000 farmers spread from Scotland to Cornwall.

John Horgan, managing director of Kepak, said the 2 Sisters red meat business was a perfect fit for the group’s strategy to continue to grow in its key markets in the UK and Ireland.

“The acquisition of this red meat business, with its very solid UK retail, foodservice and manufacturing relationships, marks a very significant next step in delivering on our strategy. It is a great fit for Kepak. The addition of these facilities to Kepak Group significantly increases the value and scale of our business,” added Horgan.

Analysis: What the Kepak-2 Sisters deal means for farmers?
Phelim O’Neill analyses what this latest deal in the meat processing sector means for Irish farmers.

At first glance, it may look that this deal between Kepak and 2 Sisters is of little direct interest to Irish farmers as it is taking place outside the island of Ireland. However, this deal could be transformative for Kepak and propels them alongside ABP and Dawn Meats in terms of reach and scale.

Between them, ABP, Dawn Meats and Kepak now control 60% of the entire combined cattle kill in the UK and Ireland. This would see the three Irish companies processing around 2.7m cattle in total per year.

Recent consolidation

A deal between Kepak and 2 Sisters would be the latest in a recent wave of consolidation that has swept the meat-processing sector in the UK and Ireland. This consolidation has been driven by the Irish meat companies and started when ABP made its move for Bert Allen’s 50% share of Slaney Meats. ABP built on this by acquiring 50% of Northern Ireland processor Linden Foods from Fane Valley.

ABP, along with its interests in Slaney and Linden, now accounts for 30% of the Irish cattle kill, 39% of the cattle kill in Northern Ireland and around 20% of the British cattle kill.

Dawn Meats then acquired Northern Ireland company Dunbia in 2017, giving Dawn a 24% share of the Irish cattle kill, 17% of the cattle kill in Northern Ireland and around 20% share of the British cattle kill.

Up to now, Kepak’s processing interests were exclusively focused in Ireland with operations in beef, sheep and pigs. The group has a 16% share of the Irish cattle kill today. The deal for 2 Sisters red meat division marks a return to processing in the UK for Kepak and will give the group an 11% share of the British cattle kill.

Kepak had previously built a significant presence in Britain at a facility in Preston. Kepak exited processing in the UK in 2007 after exchanging its Preston factory to Dunbia for its processing facility in Kilbeggan, Co Westmeath.

As well as consolidation of meat processors, there has also been an ongoing rationalisation of the supply chains by supermarkets and the major food service buyers.

2 Sisters was subject to an investigation by the Food Standards Agency (FSA) following revelations by a Guardian/ITV investigation late last year on practices in one of their poultry processing factories. The investigation revealed a number of issues around operational process and labelling but recognised that corrective measures had been put in place. Ranjit Singh resigned as chief executive soon after.

Effect of consolidation

When we look at the performance of farmgate prices in Britain compared with Ireland and consider how the foodservice retail and processing chains operate, farmers may be right to question the performance of the meat industry.

The top three supermarkets in the UK (Tesco, Sainsbury’s and Asda) have a combined 58% share of the £185bn UK grocery market and present their beef offering as “British and Irish”.

In their most recent survey in June 2018, AHDB found that Sainsbury had 96% UK beef offering, Asda 55% and Tesco 72%. The same applies with McDonald’s, which has 1,250 stores in the UK and present its beef product offering as British and Irish, while Burger King operates more than 500 stores in the UK.

However, there is currently a 34c/kg differential between the Irish and British beef price (R3 steer), despite the fact that Irish beef retails in the UK at the same price as British beef.

Complexity of beef processing

Factories would point out that they don’t sell every part of the animal to the UK supermarkets or food service sector. The complexity of the business lies in the disassembly of the carcase into a multitude of component parts. The factories then sell each of these in the market where it is valued most, which could be anywhere between the home market for steak meat to the Philippines for lower-value cuts or Africa for byproducts.