Beef Market Taskforce participants were given a progress report on the third and final report due as part of Grant Thornton’s analysis of the Irish beef sector.
This report is titled An independent examination of the price composition along the supply chain.
In documents seen by the Irish Farmers Journal, they show that the total value of slaughtered animals excluding VAT averaged €2.17bn in 2018-19. No 2020 data is included in the analysis.
The total value of the domestic and export market was €2.89bn which means that the difference between the buying and selling price averaged €720m for those two years or €389/head on a per-head basis.
Factory costs such as labour, energy and haulage come off this to leave the net margin for factories. Irish farmers were paid an average of €3.49/kg excluding VAT for the 1.85m cattle slaughtered in 2018-19. Table 1 outlines the price paid by animal category.
Market demand by product type
Irish beef sales are summarised in the report and the market is dominated by forequarter beef visual lean demand. Figure 1 outlines the different market demand for different parts of the beef carcase.
Food service markets and retail mince products mean that forequarter beef is in high demand with forequarter beef accounting for 67% of sales in 2018-19.
Figure 1 outlines the market demand by product type.
The UK market is dominated by the retail channel, with retail sales accounting for 44% of Irish beef sales into the UK market.
The wholesale/food service market accounts for 29% of the market while manufacturing makes up the remaining 27% of the market.
TTS meat is made up of roasting joints such as topside, silverside and think flanks or knuckles.
Figure 2 breaks the demand up into the different market channels. The roast market is dominated by retail sales while the steak market is dominated by the food service trade.
Forequarter sales has a pretty even split across retail, food service and manufacturing channels.
UK beef market
Figure 3 outlines some market intelligence on the UK market. Over 50% of the demand in the UK market is accounted for by a single commodity.
“Fresh or chilled boneless meat accounts for 130,709t of the 253,164t of beef exported to the UK market. This is the most lucrative market for Irish factories. This volume is significantly higher than the 35,892t of frozen beef.
Fresh or chilled boneless beef came in at the top price of €5.18/kg.
According to Grant Thornton, the overall average price the UK market returned to Irish beef factories was €4.39/kg excluding VAT over the last two years.
The calculation by Grant Thornton on what factories spend on buying cattle compared with what they sell them for highlights that meat processing is a low-margin business. The main cost for meat factories is buying cattle. It is the first step on a journey to achieving factory transparency, and it is only when that journey is completed that farmer confidence in the fairness of the supply chain can be rebuilt.
The appointment of an ombudsman is being suggested as the solution to the problem of farmer–factory relations. However, unless the ombudsman has the tools and authority to bring full transparency to the chain, there is little point going ahead with an appointment.
On the face of it, a margin of €389 per head for processing cattle in factories seems like a decent amount of money, given that they quickly move through the system. That is why further insight is necessary to what costs factories incur in processing and selling the different parts of the animals that they process.
If transparency can be achieved and farmer confidence in factories built, there is a large agenda of common interests
The margin between what factories pay farmers and realise in sales has to cover all the costs incurred in between – labour, transport, factory maintenance, etc.
It is only when there is full insight to what it costs to bring an animal from the factory gate to retail shelf or restaurant can we fully assess the extent of factory profitability.
If transparency can be achieved and farmer confidence in factories built, there is a large agenda of common interests. Foremost among these is maintaining the values of the EU and British markets for Irish beef in the midst of developing trade deals and there is also the issue of the EU Farm to Fork and CAP negotiation being finalised.