Farm Ireland

Friday 20 April 2018

'No future for Irish beef in China' claims top processor

Hong Kong, where the meeting took place
Hong Kong, where the meeting took place
Darragh McCullough

Darragh McCullough

A leading Irish meat processor is pulling out of the Chinese market as it highlighted poor prospects for beef exports to China.

Beef processor Dunbia reported sales through channels such as Hong Kong have collapsed by 80pc in the last 12 months to levels that are "hardly worth it".

"We're moving out of China, we think that day is over. Our focus is going to be Africa, the Philippines and India over the coming years," said Jack Dobson, founder of the Tyrone-headquartered Dunbia.

He spoke to the Farming Independent from Hong Kong where he met with top officials from China's food safety authority, the ASQIQ.

"After spending time talking to the ASQIQ I don't think we have a hope of getting any beef in there before Christmas, and I'm not sure that it's going to be any different in the years to come. They don't see themselves being short of beef and they want to protect their own producers," he said.

China has been pinpointed as massive potential growth market for processors, as an additional 115,000 head are due to begin filtering through to the meat plants here next year following the expansion of the dairy herd.

But a key analysis has shown beef finishers may be on track for a price disaster next spring.

Store cattle prices continued to soar at marts around the country in recent months, with calves changing hands ringside last week for more than €700 in some cases, despite factory quotes falling again this week. Steers took a 5c/kg drop to €3.90-3.95/kg, while heifers fell to €4.00-4.05.

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Projections show that  finishers will require strong figures of €4.47/kg for steers and an unprecedented €4.75/kg for heifers just to break even.

“People have an anticipation that factory prices will be higher with the prices of cattle strong. Yet prices have weakened in recent weeks. There is a nervousness about, that unless the prices stays up those who bought for the expensive winter feed period will get roasted,” said the ICSA's Edmond Phelan.

“Beef prices have to come up significantly or finishers will have a real Armageddon .”

Factory sources have already moved to dismiss hopes that prices will reach these levels in 2016.

“It’s highly unlikely that quotes will reach €4.47/kg next year. They barely hit that level at their peak last year,” commented Slaney Foods boss, Rory Fanning.

Teagasc’s beef specialist, Aidan Murray said that even though ration prices could be back by €10/t this year, it was the outlay at the mart that accounted for 75pc of the costs associated with finishing.

“Even if a farmer is getting meal at €40/t cheaper than average, it is only worth an extra 4c/kg to them at slaughter,” he said. In contrast, a 10c/kg change in the price paid for steers at the mart has the power to reduce the breakeven price by 16c/kg, according to Mr Murray.

“If you give it away on day one, it’s very hard to get it back. Having said that, the suckler farmer is making no fortune at the moment, with just €774 on average for weanlings not really a great return on keeping the suckler cow for a year,” he said.

He noted that the daily liveweight gain achieved by a finisher would also have a huge bearing on profits.

“Improving the daily liveweight gain by 0.2kg/day has the potential to lower the breakeven selling price required at slaughter by 17-30c/kg.”

The meat factories’ lobby group, MII, said that next spring’s prices would be determined by markets rather than current store prices, which it claimed were “particularly unreflective of the current beef market trends”.

It added that the Teagasc analysis could not be simply used as a ‘cost-plus’ calculation that focuses on what the finished cattle price needs to be to cover all other costs.  “Unfortunately, the market doesn’t work that way. Given the major share that store price accounts for in the wintering finishing system, these budgets must be used as a tool to inform sound purchasing decisions,” it stated.

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