Farm Ireland

Wednesday 23 January 2019

Farmers feel squeeze on beef prices as processors tighten grip


Factories are reportedly reluctant to take the large numbers of cows being offered
Factories are reportedly reluctant to take the large numbers of cows being offered
Martin Coughlan

Martin Coughlan

I had a conversation last weekend with a chef in a city hotel which told me a lot about how non-farming people can perceive issues in the farming sector.

This man told me he expected his beef wholesaler to put up his prices, as he imagined supplies were running low due to the drought. He reasoned that with having to feed round bales and grass supplies very tight, finished cattle had to be scarce.

I explained the actual situation: factories awash with stock and factory bosses having succeeded in reducing prices to farmers by over €150/hd in the last five to six weeks - so if anything it is less the chef should be paying going forward.

The processors now have control over not only pricing, but also conditions of sale. Prices continue to be hammered with quotes for bullocks now in the €3.90-3.95/kg price range, while heifers totter on €4.00-4.05/kg.

Once you've agreed these reduced prices you have to also navigate a raft of penal sales conditions, weight limits and age-profile penalties being the main ones. The question of when you can get your stock away has also surfaced.

Part of the problem, as we all know, is the continuing number of cull cows being off-loaded by the dairy sector: 9,282 for the week ending July 8, which is 1,732 ahead of the same week last year.

The number of young bulls going through the system was also up on 2017 by 929 to 4,111, while heifers were 415 ahead of last year. In contrast, bullock numbers were down by 942.

Last week's kill was 35,610, which is nearly 1,400 up on 2017.

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Returning to prices, cull cows see their increasing numbers further weaken their price this week with R's now on €3.35-3.40/kg, O's at €3.15-3.20/kg while the P+ grade just about hangs on at €3.00/kg.

The bottom of the ladder as far as those under-finished cull cows coming straight from the parlour is concerned appears to be about €2.00, although I heard reports that prices on at least one occasion slipped to €1.40/kg.

Bull numbers are rising but their prices - while under pressure - do not appear to be falling as quickly as might be expected. Yesterday I was told that your good U-grade could still click €4.05/kg, although €4.00/kg was what was being quoted. Rs were on €3.90-3.95/kg, with O grades back to €3.70-3.80/kg.

The approach of our three main farm organisations to this crisis is interesting. The IFA said senior figures "are meeting with factory management throughout the country this week to highlight the damage from the cattle price cuts and the need to stabilise the price and markets, and restore confidence." Des Morrison, livestock chairman with ICMSA, said: "ICMSA does not accept the idea that the current drought is an explanation or basis for the sudden decision to cut price. It looks to farmers very much like a business decision to drop our prices for no reason other than to increase factory profit margins."

With those fattening beef now facing negativity equity I think they need to learn from their dairying cousins. Tap the minister up for support the same way the milk men did a few years ago when their prices tanked.

Indo Farming