Factories secure €9.6m windfall from QPS grid
The beef quality payment system (QPS) delivered a €9.6m windfall to factories last year, an analysis of factory grading patterns and payments has shown.
The beef grid gave a lift of €2.36m to producers of U grade steers and heifers in 2012 – compared to the pre-QPS pricing system – but the losses for O grade steers and heifers stood at €12m.
The calculations are based on the statistics compiled by the Department of Agriculture for the kill numbers, grading, weights and prices at the country's beef export plants last year.
After the higher return on U grade supplies is deducted from the lower payment for O grade, a net loss of €9.6m to beef producers is found.
This falls far short of the declared launch objective of the QPS in 2009 when supporters of the system said it would be 'cash neutral' relative to the old payment mechanism.
Traditionally beef producers were paid a premium for U grade animals of 6c/kg (2p/lb) over the R grade price and O grade were paid for at a penalty of 6c/kg (2p/lb) less than the R grade price.
However, between 2007 and 2009, the incentive to produce U grade stock was ramped up to 7-8c/kg, while the penalty on O grade animals was also increased to 11-13c/kg. These incentives and penalties were further increased by the QPS introduction in 2009.
Supporters of the grid would argue that changes to the bonuses and penalties ahead of its introduction altered the pricing structure to better reflect the actual market returns for the various cattle grades.