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Independent.ie

Tuesday 6 December 2016

Rocketing South American beef prices seem too good to be true, but it's great for us while it lasts

John Shirley

Published 25/01/2011 | 05:00

Last Thursday, while the Dail was turned into a ministerial bouncy castle, Ireland's co-op marts were in the real world at their annual conference in Laois.

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On beef and cattle prices, the news was very positive. Bord Bia's Joe Burke outlined a remarkable scenario of South American beef prices rocketing to EU levels and beef-deficit areas, such as the Middle East, seeing prices jump well above EU levels.

While the Department of Agriculture is slow to license walk-on-walk-off cattle boats to North Africa and the Middle East, cattle are being shipped there from France, Germany and Spain, thus creating room for more Irish product on mainland Europe.

The marts got a different message on cattle numbers. On the back of fewer births and recent higher shipments of calves and weanlings, the under-30-month cattle population had collapsed by a massive 271,000hd on October 1 last.

Looking at the prospective EU beef kills for this year, Mr Burke predicted that Ireland will have the greatest shrinkage and will be down almost 8pc. That's equal to the annual kill of three sizeable factories.

The lift in cattle prices is already under way. Since the New Year, mart managers reported that prices have lept by €50-100/hd. This is happening despite higher than usual cattle showings for this month.

But it's the developments in the beef powerhouses of Brazil and Argentina that have gripped everybody's attention and transformed the world beef scene.

At the end of last year, cattle prices in both countries were on a par with Irish prices. However, Brazil's cattle prices were at about 60pc of Irish levels as recently as early last year.

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"Can this last?" asked the co-op mart delegates. What seems too good to be true often is too good to be true. Prices can fall and rise.

The fact that the South American prices are primarily driven by domestic demand and reduced output suggests that the higher prices can last a while. Only time will tell.

The impact of the higher Brazilian prices is greatest in the beef-deficit markets of Russia, North Africa and the Middle East. Mr Burke said that the opening of the Turkish market lifted the price of R3 bulls in Germany from €3.30 to €3.69/kg. And this market is now open to Irish meat plants.

In an ever-changing scene, Egypt is now paying €2.45/kg liveweight for males delivered. This outlet traditionally took plainer cattle, so €2.45/kg for a plain 600kg Friesian bullock equates to €1,470/hd.

In the halcyon days of the boatloads of Irish cattle going to North Africa, the trade depended on export refunds that were as high as 70pc of the price. Today, if boats could be approved, cattle could be profitably shipped without refund and still return a competitive price to the Irish farmer.

From the marts' viewpoint, the North African live shipping created activity around the rings and could potentially do so again, but the Irish Farm Minister and his Department may not want even more raw material taken from the Irish factories.

Marts, too, must be concerned at the decline in the Irish cattle herd.

Historically, marts were often placed in the centre of towns. When the Celtic Tiger (CT) came, they were suddenly sitting on valuable sites. It's of interest to look at the different owner responses to the CT.

In the east of Ireland, which was dominated by private marts, we have seen widespread closures and redevelopment. The big centres at Naas, Maynooth, Ashbourne, Mullingar, Edgeworthstown and Drogheda are all gone. Carnaross remained open, and, with a huge catchment area, and as a result is now the biggest mart in the country.

In the south, Cork Co-op Marts has effected major rationalisation, closing marts in Mitchelstown, Mallow, Fermoy and Midleton while they opened the new Corrin Centre outside Fermoy. They continue in Bandon, Dungarvan, Macroom and Skibbereen.

In the west, Connacht Gold also halved its operating marts to Ballymote, Balla, Ballinrobe and Mohill. Golden Vale Marts, although no longer a member of ICOS Co-op Marts, has rationalised internally in the mid west with the closure of Rathkeale and Sixmilebridge (although this mart is now set to open under new ownership). In the west midlands, Birr, Roscrea and Nenagh have come together to form Central Auctions.

Elsewhere Kerry has seen little change except for the opening of a mart in Kenmare. Galway, a county with at least nine marts, including private and co-op ventures, has also resisted change.

At last week's conference, the co-op mart managers and board members were given an update on the roles and responsibilities of directors by ICOS Secretary Seamus O'Donohoe. He warned that up to nine State agencies are involved in co-op governance and ignorance of rules is not a defence for directors. He predicted that the Companies Office will increasingly strike off co-ops that are late in submitting annual returns.

Michael Spellman, chairman of the ICOS Livestock and Marts Committee, said that Ireland's €1.3bn Single Farm Payment (SFP) must be protected in the upcoming CAP review. He said that the SFP is key to keeping activity and production on Irish farms which are adhering to the highest standards on animal welfare and traceability.

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