Painful years of loss-making cattle prices must be halted
Based on British prices and the substantial devaluation of Sterling since June, there is no denying that cattle prices are far below where they should be.
Farmers are producing at a loss, while price increases from the UK market are both justified and achievable.
Expecting Irish farmers to take loss-making prices to suit UK retailers is completely unsustainable, unfair and doing serious damage to our €2.5bn beef sector.
In a properly functioning market, the normal economic response to the devaluation of Sterling that has occurred since the Brexit vote would be an increase in the UK retail price that would be passed back down the chain to primary producers.
This is exactly what is happening in the case of suppliers such as Unilever and Nestle, but not in the case of Irish beef.
Factories need to wake up to the realisation that the Irish beef sector is being undermined and put at serious risk by this market dysfunction.
Negotiate hard
They must negotiate hard, put pressure on UK retailers, demand significantly higher prices for their product, and pass these increases directly back to struggling farmers.
Let’s look at the facts.
If the 14% Sterling devaluation that has occurred since June applied, the average retail price of beef in the UK would be about £7.80/kg. Instead the current average price is just £6.85/kg.
To compound that obvious market dysfunction, British cattle prices have risen by 13% since May.
In contrast, Irish cattle prices have fallen by up to 12% from a base of €4.10/kg in June to €3.60/kg.
That situation simply makes no sense when the UK is our main market and heavily dependent on our supply of 250,000t per year to meet demand.
What needs to be done?
Clearly, processors are making sufficient margin to sustain lower prices from their UK buyers.
Their farmer suppliers, on the other hand, are making substantial losses. First and foremost, that imbalance has to addressed through a significant rise in prices from the factories.
IFA representatives are meeting with factories at local level across the country to warn them of the rising anger among farmers and set out in bleak terms the damage the unacceptable and unsuitable prices are doing.
At current price levels, the confidence of beef finishers is being eroded, seriously damaging store and weanling prices, and undermining the entire beef sector.
Minister for Agriculture, Minister Creed must take a lead on this and convene an immediate meeting of the Beef Forum.
He must spell out to all players that it is unacceptable to expect Irish beef farmers to carry the can for Brexit and the Sterling devaluation.
The uncertainty of Brexit means it has never been more important for our Government, and the EU Commission, to tackle the excessive power of the retailers.
Politicians talk and promise a lot on retail regulation but have delivered nothing to curb abuses by retailers.
Lack of transparency
There is no transparency on the profits of the major players in the beef industry or the money taken out of the price chain at each stage.
Meanwhile, the beef price paid to the farmer is totally transparent — the lack of margin at farm level is there for everybody to see.
The failure to regulate the retailers and processors in the food chain allows them to drive prices to the current unsustainable levels.
That situation has to be tackled. Our Government has a strong case to make in Brussels for direct CAP support measures for farmers in the livestock and other sectors seriously affected by the sharp decline of Sterling since the UK Brexit vote in June.
The decline of Sterling, arising from the Brexit decision, is clearly a market disturbance outside the control of farmers, one that occurred swiftly and unexpectedly.
Just as the EU acted to support the dairy, pigs and horticulture sectors affected by the Russian trade ban, the Government must now insist that Brussels introduces support measures for exposed producers in sectors where prices have been forced below the cost of production by Brexit.
