Farm Ireland

Wednesday 21 February 2018

€150/hd difference in prices due to penalty variations

Martin Ryan

Beef producers may be losing up to €150/hd on the disposal of finished animals due to differences in the premiums paid and penalties levied by individual factories for animals of similar grade and weight.

Wide variations in both the premiums being paid for quality stock and the penalties being applied to the poorer animals have been revealed by the Department of Agriculture on actual prices being paid to producers.

A Department breakdown of the prices paid for the week ending September 29 show the prices paid for O=3+ heifers varied from a penalty of 42c/kg on base R=3= to a premium of 6c/kg, a massive difference of 48c/kg in producer return.

Given that the average kill-out for heifers is 330kg, this 48c/kg difference equates to €158/hd. Wide differences were also identified for U, R, and O grades with the better prices likely to be the result of keen demand for stock as well as hard selling by producers.

While base prices also varied somewhat between factories, it did not vary enough to alter the gap between prices for cattle of similar grades.

So while farmer focus is normally on base prices being offered at the factories, this analysis shows that there are very substantial gains or losses affecting actual returns, depending on the premiums and penalties applied to the other key grades.

Differences of €100-160/hd between individual factories for similar weight/grade animals have been identified.

The Department prices for the week ending September 29 show that base steer prices ranged from 387c/kg to 395c/kg between the individual factories but the premium/penalty at the factories varied widely.

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While the QPS guide for U=2+ steers is a premium of 18c/kg, individual factory prices varied from a premium of 25c/kg to as little as 4c/kg. The penalty applied on O+5- steers ranged from 15c/kg to 51c/kg.

The figures show that the pattern was similar for heifers. Against a national average base price of 405c/kg, base prices at the factories ranged from 395c/kg to 421c/kg. However, all but one processor fall into a much narrower range closer to €4/kg.

Despite this, the margin was much wider when premiums or penalties were applied.

Producers of U=4- heifers received premiums varying from 4c/kg to 27c/kg. The widest variation was for O=3+ heifers, with returns ranging from a penalty of 42c/kg to a premium of 6c/kg being applied. Up to 52c/kg penalty was applied to O-4= heifers.

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