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Beef in a new era but €4.20/kg still a challenging goal for 2012

What now about those exorbitantly priced store cattle from last spring and summer? People should have bought more of them and kept them for longer, that's what. Sure, hindsight is great.

We all knew that Irish cattle numbers were down and that world demand for beef was strong. But the jump in the Irish beef price across the autumn was still quite remarkable -- even more so in light of the sickness in the rest of the economy.

There were weeks in October and November when both the weekly factory kill was up and the price rose. What happened to the traditional meat factory cohesion that keeps prices on such a tight rein?

It seems that the orders for beef had come in, especially from Britain. Prices were good. Factory agents were told to "get the cattle".

There certainly wasn't a glut of finished cattle around and when farmers saw prices rising, they got fonder of their animals. Price was pushed further as factories scrambled to assemble their Christmas stocks.

There was an especially strong demand for cow beef, which is always a sign of an absolute overall scarcity. In the last week of last month, compared to the same week last year, Grade R3 steers were up 32.2pc, R3 bulls rose by 30.5pc, R3 heifers were up 31.5pc and O3 cows rose by 35.7pc. So the €4/kg price has been reached and breached.

The question now is whether this newer higher price level can be sustained. Have the fundamentals of Irish beef farming changed? Has Irish beef farming entered a new era, price-wise and reputation-wise?

A nice figure is €4/kg, €1,000 for a light heifer carcass of 250kg, €1,600 for a decent steer or bull of 400kg carcass weight. It has even got farmers away from talking in pence/lb.

But before we lose the run of ourselves and think that cattle farmers are overnight millionaires, it's sobering to reflect that as far back as 1989 steer beef was making the equivalent of €3.25/kg (116p/lb). Since then we have had cumulative inflation of 73.9pc. For beef farmers to have the same buying power as they had in 1989, today's beef price would need to be €5.65/kg. (£2.02/lb). Even before the store cattle prices reached their peak, Teagasc reckoned that feeders needed a spring 2012 beef price of at least €4.20/kg.

Will this happen? Already we are seeing prices softening compared to the end of last month.

As ever, the signals are mixed but the overriding big picture is that the world is short of beef. Ireland was never in a stronger position to demand a fair price for beef.

Across much of the EU the recession is biting and consumption is down, especially in Italy and Spain. It was expected that in the past year, the EU would be in beef deficit, but instead the Union is a net exporter of both beef and live cattle to North Africa and the Middle East.

Britain has been different. According to Bord Bia, their consumption has held up. A switch to home eating and to fast food restaurants like McDonald's has increased demand for burgers and mince rather than pork, which is now only 40pc of the beef price. (It seems that the stronger flavour of beef allows it to be mixed with cheaper carriers, thus keeping down the end price to the consumer while helping the price of beef to the farmer.)

Up to September, Britain's domestic beef output was up 7pc but for the rest of the year their production was down 4pc. This shortfall, supported by reduced Irish supply, plus a bigger contribution from the fifth quarter, triggered the autumn price lift for Irish cattle.

This year's Irish factory kill will be down about 70,000hd (4.5pc). According to Bord Bia, next year's kill will contract another 60,000-70,000hd, with most of this shortfall occurring in the first six months. In the short term, the Irish factories are not carrying stocks -- and with Christmas falling on a Sunday, the holiday downtime will be shorter than normal.

There is often a spurt in price in the few days around Christmas and the New Year but there is some concern that prices may come under pressure in February.

For a goodly part of the past year, Irish beef price was actually ahead of much of the UK (excluding Scotland). That is a good precedent for next year.

Rather than chase the openings in the increasingly beef-deficient Middle East and North Africa, most Irish beef plants are concentrating on their EU supermarket business. Bord Bia reckons that Irish beef is now in 70 multiples across the EU and that they have developed about 20 specially branded Irish beef lines.

Our credibility on traceabilty and beef assurance is second to none and now Bord Bia is assessing the carbon footprint of farms as well.

The fact that Ireland was prepared to spend almost €200m on a pork recall in 2008 demonstrated the country's commitment to safe food, and this approach has been a good, long-term investment.

The increasing proportion of bulls being slaughtered may lead to a premium for steers as well as heifers in 2012, but €4.20 is still a challenging goal.

However, as mentioned above, Irish beef exporters, like never before, are in the position of being price makers, rather than price takers.

The exporters have seen that a return of confidence has stemmed the fall in the breeding herd and I assume that they will not want to put this beef farmer optimism in jeopardy by dropping the spring 2012 cattle price.

Indo Farming