Time for hard questions on plummeting beef prices

ICMSA president John Comer

Farmers are being shamelessly taken advantage of by players further along the chain

Anyone involved in the beef market will know only too well that prices have taken a nose dive in the last 12 months.

In the last number of weeks, two pieces of analysis have been carried out within the ICMSA to determine what has been lost to the beef producer.

Firstly, an analysis of the Irish beef sector showed that beef farmers not only lost profits in the last year to falling beef prices from the processors but also the percentage return of the final retail price has fallen close to 18% in the last year .

Using the ELBEX style methodology formulated for the UK beef sector, the analysis was carried out for each month from January 2012 to March 2014.

Dividing the categories into steers and heifers, the analysis shows that the final percentage return to beef farmers of the retail price ranged from 57% to 47% for heifers and 54% to 46% for steers.

Surprisingly, the lowest percentages are being returned to farmers in the last months when prices have been at their lowest to farmers for close to four years. The only rational explanation for this ‘double-dip’ lower percentage to the farmer from a lower price is unscrupulous actions from both the retailers and the processors at a time when all observers agree that beef farmers are struggling to stay afloat.

The idea that this ‘double-dip’ is any kind of normal interaction between supply and demand is comprehensibly blown out of the water when we note that these cuts to farmers’ margins have occurred at a time when average retail prices have risen for consumers.

The second piece of analysis showed beef farmers suffered a €106m loss in the first five months compared to the first five months of 2013 due to this reduction of beef prices. The analysis looked at the prices paid to beef farmers for steers, heifers, bulls and cows and it showed a huge loss of income in the first five months.

When comparing prices in the four categories using the average price paid in both periods and subsequently calculating the loss of income from the lower price in 2014, the data shows a €106m loss.

The big question is where this money has gone — as beef prices at retail level have not fallen.

The quantifying of this loss in income should act as a wake-up to all involved in the industry and efforts must be re-doubled by those charged with the sector’s overall health to ‘step up to the plate’ and start asking the kind of hard questions of those whose margins and profits seem mysteriously sacrosanct whether prices go up or down.

Farmers are being shamelessly taken advantage of by players further along the chain — the multiple retailer and, to a lesser extent, the processors — and sooner or later, both nationally and at EU level, some degree of regulation of margins in the production of food will have to be introduced or we will arrive at the situation where a few corporations will have power and control exceeding many of the states in which they operate.

One day historians will look back on a situation that has the man or woman milking cows subject to dozens of inspecting governmental agencies while the gigantic multinational corporation selling the milk to the consumer seems unbothered by anything other than the most cursory glance and they will most assuredly scratch their heads. Some of us are scratching our heads now.


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