Farming

Friday 1 August 2014

The big dilemma facing Irish beef farmers

Agri-business

Darragh McCullough

Published 06/03/2014|02:30

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Farmers attending an IFA protest
Farmers attending an IFA protest

Is there really a crisis in the beef sector? You wouldn't think it going by the paltry 200-300 farmers that turned up outside the Department of Agriculture for the"mass protest" that had been predicted by the IFA. This was despite IFA headquarters sending out thousands of text messages to their members flagging the protest and the assembly details.

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It is true, however, that the vast majority of beef farmers make little or nothing from their enterprises. Worse still, many of them actually subsidise what it costs them to bring their cattle to slaughter. Perversely, this usually comes from another subsidy, the Single Farm Payment that pours €1.5bn of European taxpayers' money into farmers' bank accounts every year.

No wonder the likes of the Goodmans, Keatings, Queallys and Browns that collectively own the vast majority of the Irish beef processing industry through ABP, Kepak and Dawn are now spreading their tentacles across the Irish sea into Britain and the Continent.

These are all billion-euro operations in their own right, and have made multi-millionaires out of their owners.

But here's the really baffling part. The same farmers that dip into their EU farm payments to continue supplying cheap cattle to these multinational companies would still be entitled to their subsidies even if they kept no cattle at all.

EU rules stipulate that farmers must simply keep their land in good agricultural condition to qualify for the payment. If a farmer wishes, he can simply keep the weeds topped with a mower and still cash the subsidy cheques.

The reality is that the majority of the 100,000 farmers that send cattle to the meat factories are accidental beef farmers. About 18,000 are dairy farmers that need to replace 20pc of their dairy cows every year. But a much bigger portion are landowners that have a bit of land and keep a few bullocks out of habit or hobby, while an off-farm job or Single Farm Payment pays the majority of bills.

The number of farmers that actually depend on an income from the beef that they sell is probably closer to 10,000.

Of this group, a small portion finish a lot of animals every year – somewhere between 500-2,500. There are bigger finishers, but only a handful. Collectively, this group of highly professional beef finishers account for well over half of the 1.5m cattle that are slaughtered here every year.

By virtue of their scale and their professionalism, the majority of these operators make a good living from the business. Advisors to these operators say that the best of them make about €200/hd.

The recent sabre rattling by farm organisations started when the meat processors started tightening up the specifications that bulls would need to meet before securing a premium price.

Farmers had been warned that the markets really wanted younger and lighter bulls. But because it was cheaper to supply bigger and older bulls, some finishers continued in the hope that nobody would shout stop.

The horsemeat crisis was the beginning of the end for big bulls over 16 months old. Supermarkets suddenly cranked up the pressure on the meat processors to stick more rigidly to the specifications and the price began to fall for farmers who continued supplying out-of-spec stock.

The ripple effect of the fall in bull prices has affected all classes of stock. Even after the recent 10pc fall, beef prices here are 25pc higher than they were four years ago.

In addition, they are higher than the prices that many of Europe's farmers are getting for their cattle.

Granted, they are still up to €300/hd lower than what is available in Britain, which absorbs a full 50pc of Ireland's beef output.

But this is a result of the pressure on British retailers to source only British stock. British farmers, who are much less heavily subsidised, turned their backs on unprofitable beef production years ago. The resultant shortage is a huge boon to the remaining few that have stuck with it.

The fact is that Ireland's beef producers will have to put up with lower margins than their British counterparts until they stop subsidising the processors who set the price. With so many 'accidental' beef producers still involved, it's hard to see when that day will come.

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