Farm Ireland

Saturday 24 February 2018

Factories attempt to cut prices to €3.80/kg on back of sterling slump

3/8/2017 Castlerea Mart
Lo number 44E
Weight 455K
DOB 22/5/15
Breed CHX
Sex Bullock
Price €1120
Photo Brian Farrell
3/8/2017 Castlerea Mart Lo number 44E Weight 455K DOB 22/5/15 Breed CHX Sex Bullock Price €1120 Photo Brian Farrell
IFA President Joe Healy

The price battle between beef farmers and factories intensified this week, with beef processors pushing to get base quotes for bullocks back to €3.80c/kg.

The latest push on price came in the wake of continuing uncertainty over Brexit and the fall in sterling relative to the euro.

The euro hardened to 91p in recent days, as markets reacted negatively to the latest British government position papers on the UK's future trading relationship with the EU.

The euro's surge has been bad news for cattle prices, with beef processors maintaining that the latest currency increase had seriously dented the competitiveness of Irish beef on the crucial British market.

"At the moment it seems the uncertainty surrounding Brexit is deepening rather than dissipating which is clearly playing out in the continued weakening of sterling. The more sterling weakens, the greater the challenge for exporters to the UK market," said Cormac Healy of Meat Industry Ireland (MII).

"The value of sales are reduced and competitiveness is undermined. The fact that the US dollar has weakened by 11pc against the euro over the last number of months is also impacting on international sales outside the Eurozone."

This view is challenged by the farm organisations. A senior official in the IFA argued that movements in the value of sterling merited a 10c/kg price cut at most. He pointed out that the meat factories had already pulled quotes by 15c/kg from a high of 405c/kg, and were now trying a further 10c/kg cut.

IFA president Joe Healy said Agriculture Minister Michael Creed can no longer ignore the major cuts in cattle prices at the meat factories.

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He said cattle prices have been cut by over €100 per head in the last month, eroding any chance of profit for farmers selling cattle over the peak autumn months.

Edmond Phelan of ICSA said that demand for cows remained strong with up to 340c/kg being paid for O-grade stock. "Cow prices are still very solid compared to the efforts to drive down steer and heifer prices, which is a good sign that cattle supplies are not all that out of line with demand.

"UK steer price, converted to euros is steady, which shows that scaremongering over exchange rate movement is overdone," said Mr Phelan.

"Farmers should shop around, there are significant differences in deals between factories, with a range of at least 10c/kg between factories."

Last week most cattle were bought at 385c/kg, with some deals done as high as 390c/kg for big lots of quality cattle.

However, the ability of farmers to hold out for better prices has also been undermined by the recent poor weather. The 30-month age limit is also forcing finishers to offload stock a little softer than liked.

The weaker factory trade has been reflected in the marts, with store cattle back €40-50/hd in some western sales.

The ICMSA's Michael Guinan urged farmers to "sell hard" as markets are continuing to perform well. "If animals can wait a couple of weeks farmers can negotiate harder and alternatively they can come together in groups of three and four to bargain out a better deal."

Meanwhile, MII has called for increased Government support for the meat sector in light of the euro-sterling rate slump.

"The Government must secure the necessary state aid flexibilities in Brussels to allow short term supports in the form of an Enterprise Stabilisation Fund or Employment Support Scheme" said Cormac Healy.

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