While most of our political parties are having think-ins this week, there would be no harm if our beef processors followed suit. They need to examine their interest in, and attitude towards, the Irish beef industry and Irish beef farmers. Their apparently joined-up thinking has resulted in weeks of falling quotes and prices.
This week, the 'line in the sand' – €4/kg – was breached as they pulled the base for steers down to 390c/kg. Considering the massive costs incurred by farmers throughout all of last year and for the first half of this year, the current carry on by the plants is soul destroying and unsustainable from a farmer's point of view. More importantly, it is killing the confidence in suckler herds at a time when registrations have shown a significant drop and lots of farmers are reducing numbers. There are suggestions that this is being driven by a major player who is anxious for store prices to be hit before he fills a lot of sheds with cattle to finish throughout the winter and spring. Supplies are also playing into the factories' hands, with last week's estimated kill of 32,170 being almost 3,000 higher than the corresponding week last year.
Base quotes for steers have fallen to 390c/kg almost everywhere. There are a number of farmers securing a base of up to 395c/kg while others are sending their cattle to the North and getting an R price of 410c/kg and free transport. This might be worth examining if you are selling at the moment. The heifers have also been hit as quotes dip to the €4/kg. This is 80c/kg below the levels they were at just three months ago in mid-June which, on a 350kg carcase, equates to a loss of around €280/hd.
It is a similar story with the bulls. Top quotes for U grades are now only at €4/kg with the Rs selling from 390-400c/kg; O grades are at 360-370c/kg.
IFA National Livestock Committee chairman Henry Burns said the factories had crossed the line with the latest price cut and warned there would be repercussions. He pointed out that prices in our main export market in Britain were at the equivalent of €4.97/kg and were rising. This leaves an unprecedented price gap with Britain of €1/kg, or up to €370 per animal.
Top quality cows have seen up to 30c/kg being wiped off their quotes as some plants reduce from 390c/kg to 360c/kg. Overall, the Us are making from 360-370c/kg. R grades are at 340-370c/kg with the Os at 320-330c/kg. P grade cow quotes are in a range of 300-310c/kg.
Bord Bia said prices eased due to the seasonal increase in cattle supplies at the factories. Trade is also being affected by some slowdown in demand for manufacturing product.
Base quotes under the Quality Payment System last week were between €4.00 to €4.05/kg for steers and €4.10 to €4.15/kg for heifers. The trade for cull cows remained steady, with quotes for O grades generally between €3.30 and €3.45/kg.
For the year to date, cattle throughput is running almost 83,500 head above last year's levels. Steers and cows continue to account for most of the increase in supplies.
In Britain, trade continues to remain steady as demand and supplies remain evenly matched. Demand is steady for steak cuts and forequarter product. However, trade for round cuts remains subdued. Reported prices from the AHDB last week increased, with the GB R4L steer price making the equivalent of €4.97/kg including VAT.
On the continent, the seasonal shift towards forequarter cuts from hindquarter cuts continues. Some promotional activity across the forequarter category has helped to offset the seasonal decline in hindquarter sales across some of the key export markets. In Italy, the R3 young bull price is making €4.16/kg inclusive of VAT, while the O3 cow price is making €2.99/kg. The R3 young bull price in France fell by 3/c to €4.01/kg, while the O3 cow price fell by 6c/kg to €3.84/kg incl VAT.
Meanwhile, Bord Bia is launching a new digital campaign promoting Irish beef in the Netherlands this week. Exports to Holland hit €152m in 2012 and have risen by 15pc during the first half of 2013.
Elsewhere, a recent report released by Rabobank indicates Chinese demand for beef continues to rise, heralding positive news for a number of international beef exporters. The report cites several factors for the increase, including continued income growth, increased urbanisation, dietary shifts and the growing popularity of international beefburger restaurants such as McDonald's and Burger King. Beef consumption also received a boost earlier this year in the wake of high-profile food scares surrounding pork and chicken which are China's two most popular meats.