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Independent.ie

Monday 18 December 2017

Irish beef barons eye up slice of American and Chinese markets

New trade deals could make billionaires out of a handful of tycoons who control the Irish beef industry and have already amassed vast personal fortunes, writes Simon Rowe

One in five beef burgers eaten in a McDonald's anywhere in Europe is made from Irish beef. Photo: Niall Carson/PA Wire
One in five beef burgers eaten in a McDonald's anywhere in Europe is made from Irish beef. Photo: Niall Carson/PA Wire

Simon Rowe

Ireland's beef barons are licking their lips as a new trade deal paves the way for them to recommence exports to the lucrative US market - and entry to the massive Chinese market looks imminent too.

The US market - the largest consumers of beef in the world - has re-opened to Irish exporters following a deal agreed in January.

The lifting of a 15-year ban imposed on European beef in the wake of the mad cow disease outbreak in the 1990s offers a major boost to processors whose profits were hit by the horsemeat scandal - and a lifeline to hard-pressed Irish beef farmers who face depressed prices at home.

Ireland has also moved a step closer to securing a slice of China's €51bn beef market, following a pre-Christmas meeting between top Irish and Chinese agriculture officials in Beijing.

The world's second largest economy has long-running bans on beef imports from many countries - but Ireland is one of just three countries that China is in talks with about opening up to beef (the other two are Canada and the USA).

If Ireland can capture even a small percentage of the US and Chinese markets, it could make billionaires out of a handful of tycoons who control the beef industry in this country and have already amassed vast personal fortunes.

Three firms dominate the beef processing market in Ireland - Larry Goodman's ABP; Dawn Meats, controlled by the Browne and Queally families; and the Kepak Group, owned by the Keating family. Together they control 60pc of the market.

A further four companies - Liffey Meats, Slaney Meats, Kildare Chilling and Dunbia - account for an additional 25pc of the Irish market.

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These seven firms sit at the apex of an industry that exports €2.3bn worth of Irish beef each year - about one-fifth of all Irish food and drink exports - making us the fourth largest beef exporter in the world.

However, while Ireland's beef barons are enormously wealthy, they are also notoriously media shy. Most of our top beef barons hide their fortunes from public view through their firms' unlimited status, as Kepak, ABP and Dawn Meats do not have to file detailed accounts.

More than 68,000 farms are involved in specialist beef production and approximately 7,000 jobs depend on beef processing in Ireland. Ireland exports 90pc of the beef we produce, with the UK being our biggest export market at 56pc and mainland Europe accounting for 46pc.

Such is Ireland's dominance of the market that one in five beef burgers eaten in a McDonald's anywhere in Europe is made from Irish beef.

However, as recent events have shown, our dominance is a two-edged sword whenever food scares strike, such as BSE or the horsemeat scandal. The industry's reliance on big retail multiples means that a scandal can have devastating consequences on Irish beef farmers.

When the Tesco horsemeat scandal struck back in 2013, the chain's sales of frozen burgers and frozen ready meals plummeted by nearly 43pc. Tesco buys approximately €180m or 14pc of the entire value of Irish beef exports - basically, if the retail giant sneezes, Irish farmers catch a cold.

Against a backdrop of retail multiples squeezing profit margins, Irish farmers frequently protest at low "factory gate" prices for their cattle.

But insiders blame market forces for the depressed market.

The problem is oversupply. While Ireland slaughters 1.6 million head of cattle annually, the industry has the capacity to slaughter 3.5 million. With such an oversupply, retailers and processors are choosier about the beef they want, and prices are kept low.

But despite such industry unrest, as well as the financial and reputational damage from the BSE and horsemeat scandals, our agribusiness tycoons have shown they are still hungry for success and have an appetite to take an even bigger slice of the global beef market.

Sunday Indo Business