Why are beef farmers protesting?
The simple answer is they are unhappy with the price being paid to them by beef processing factories.
Recent analysis by Teagasc shows that farmers need a base price of at least €4.00/kg to be profitable. In the last week of October, farmers were receiving a base price of €3.65/kg for steers and €3.70/kg to €3.75/kg for heifers from beef factories. This means they are producing animals for slaughter below the cost of production.
When did the beef crisis start?
Beef prices began to slip from above €4.00 mark in late 2013. The problem became most acutely obvious in January of this year when factories began to impose penalties on carcases that were out of spec.
How does the Irish situation compare with the UK?
The difference between the beef price paid in the Republic of Ireland and the UK has reached a 10-year high.
Take for example an R4 steer carcase weighing 360kg. Bord Bia analysis shows the UK farmer is being paid €369, or €1.03/kg more than the Irish farmer.
Is it fair to do a black and white comparison with UK?
Meat Industry Ireland (the representative body for beef processing factories) says that focusing on what an R-grade steer receives in Britain is over-simplistic. MII say that any comparison should compare all grades, of all animals (steers, heifers, cows, young bulls, bulls) and should include all of Ireland’s export markets.
However, it’s also worth noting the MII has stated that just 15% of Irish beef exported to the UK is sold through supermarkets. As Irish Farmers Journal editor Justin McCarthy points out here, this raises a number of important questions:
Why are beef farmers selling “out-of-spec” cattle though?
Factories insist their retail clients want beef animals finished at certain carcase weights so that beef cuts fit neatly into the plastic trays that we are familiar with seeing on supermarket shelves. Generally, price penalties can be imposed on carcases that are considered to be too big, i.e. carcases that weigh over 400kg, and therefore not within specification.
The specifications over recent years have not changed. However, whether factories impose price penalties on “out-of-spec” carcases has.
It is clear that once cattle numbers increased, processors used carcase specifications as tools to reduce the prices paid for cattle, simply by adhering more strictly to the specifications and introducing a range of price penalties that were not previously imposed. For example, cattle aged over 30 months were penalised with a lower base price.
In most factories, price penalties of 10c/kg are being imposed, (a lot of price penalties are now being wavered such is the demand - carcase limits of 400kg are now gone to 430kg in some plants while others are not imposing right up to 470kg and even 500kg in places) along with the 12c/kg loss in bonus under Bord Bia’s Quality assurance scheme.
Take for example a 420kg carcase:
If price penalties aren’t imposed by the factory (which has been the case largely during 2013), at current prices, €1,533 would be paid to the farmer. If penalties are imposed for that carcase being overweight, then €1,440 is paid to the farmer - a price cut of €93.
It came as a big surprise to many farmers earlier this year that factories were imposing penalties for out-of-spec carcases.
What happens next?
The IFA have vowed that they will take more action from next week onwards if beef prices do not begin to rise.
Meanwhile, Minister for Agriculture Simon Coveney has convened another “beef forum” meeting involving all stakeholders in the beef sector for November 12. Minister Coveney has said he expects significant progress to be made on the market price and specification issues in advance of this meeting.
With prices rising in the UK by 30c/kg in the last few weeks, it will take a similar price rise here to appease farmers.