Beef price slump no surprise
“Any animals approaching slaughter weight will be bundled out the door to qualify for the last of the slaughter premium towards the end of the year, even though sellers may lose out, if the factories respond with a price cut in the face of over-supply”.
That’s from our pages in the first week of January, 2004, when we reported Liam Dunne of Teagasc’s predictions.
The slump still came as a shock for the Irish Cattle and Sheepfarmers Association, which asked new Minister, Mary Coughlan, to convene an immediate beef crisis meeting, and called for a Beef Strategy Board.
It seems to have been less of a surprise for the IFA, but deputy president Ruaidhrí Deasy still said the price cuts wiped out any possibility of cattle farming profits this autumn, and seriously damaged relations between factories and farmers.
Anyone could have told them that the autumn price slump would be worse than ever this year, because of the ending of the slaughter premium.
Earlier in the year was when farmer organisations should have been talking and planning and advising how to get around an expected cattle supply bottleneck this autumn and winter.
Cattle farmers have walked right into this bottleneck, selling fewer cattle before September, and then sending enormous numbers of unfinished cattle to the factories in October.
As a result, the market for the final quarter is being flooded with about 30,000 more cattle for slaughter than last year.
Only very innocent farmer organisations would be surprised to see prices falling in that scenario.
ICOS is the only farmers group coming out with constructive advice to farmers on how to adjust their cattle sales, telling them there is no profit in aiming to collect a slaughter premium by sending unfinished cattle to the factory, when a combination of low factory prices and deductions and levies, will cost more than the value of that premium.
Meanwhile, there’s a scarcity of unfinished stock in their marts to satisfy very strong demand for forward stores for finishing with one premium left, and also for punched out cattle.
The co-op marts advise farmers to check their stocking densities carefully and sell on any animals with one premium left which they themselves may not be able to claim, to mart buyers with premium capacity left, who are prepared to bid strongly for them.
This would bring some kind of order to the way farmers sell cattle, and would serve them much better in the long run, than having to camp outside factory gates whenever prices fall.
Ultimately, all farmers can control is the cattle supply.
It’s no use for farmers to simply bluster that factories are abusing dominant positions by driving down prices without justification. Factories shout back that low priced South American beef has helped to drive down returns from the beef marketplace 13% since July.
What farmers should be listening to is market advice from experts like Liam Dunne.
He also pointed out more than nine months ago that culled suckler cows would hit the autumn 2004 market in increasing numbers, before their price falls when the Suckler Cow Premium disappears in the New Year.
Suckler farmers have to be ready for that, and may have to consider delaying the sale of such cows until the New Year (although the slaughter premium is worth five cent per kg more for cows than for steers).
They must also beware of autumn live export market turbulence, which Liam Dunne predicted, due to the different decoupling options chosen by the member states which buy live cattle from Ireland. For some member states, decoupling will make imported Irish cattle unattractive from New Year, 2005, and these final months of 2004 offer the last high-priced opportunity to export weanlings.
