Farm Ireland
Independent.ie

Monday 22 January 2018

Questions raised on viability of beef production targets

Analysis shows price fall when supply rises

Some heifer prices are back by over 6 per cent.
Some heifer prices are back by over 6 per cent.

Martin Ryan

An analysis of beef supply and price trends over the past two decades has raised questions about the viability of the Food Harvest 2020 beef production targets.

The 40pc increase outlined in the Food Harvest 2020 report in the total value of output from the beef sector has "largely been met", according to chairman of the activation group, Michael Dowling.

However, beef farmers are becoming increasingly disillusioned with initiatives designed to increase production as prices here come under more and more pressure.

Their pessimism is backed by analysis of supply and price data from 1992-2013.

Department of Agriculture and Bord Bia statistics on production and prices for these years reveal a worrying pattern for finishers planning to increase production.

The figures show that the average price paid to producers fell almost every year that supply increased (1996, 1999, 2001, 2003).

Conversely, farmer returns for their animals increased every year, bar 2012, that supply declined (2000, 2002, 2004, 2006, 2008, 2011).

Some of the standout examples from these years include 1996 when a 10pc increase in supply was accompanied by a 16pc drop in prices.

Also Read


Decline

In contrast, a 10pc decline in supply in 2000 resulted in a 10pc increase in the average price.

In seven of the years analysed, a 3pc to 12pc reduction in supply delivered price increases of 3pc to 18pc.

The supply of cattle increased by between 2pc and 13pc in five separate years, and resulted in a drop of 3-16pc in the prices paid. Five years out of the two decades stretching back to 1994 showed a neutral result or slight variation on the overall pattern.

This year's experience of declining prices as supply surges ahead strengthens the trend even further.

Year to date supplies of cattle to the factories are 13pc higher than 2013 and the average price paid for R4 steers for the first quarter is 5.5pc lower than for the same period last year and R3 heifer prices are back by 6.4pc.

Targets for increasing the output of the beef sector in the Food Harvest 2020 report were partly based on a 20pc increase in the annual national kill from recent averages of 1.5m head to 1.8m.

One of the key strategists behind the report, Michael Dowling, stood by the targets this week, claiming that increasing global demand would change the underlying trend.

"Normal economics would suggest that an increase in supply puts prices under pressure.

Demand

"But with increasing global demand, a relatively insignificant increase in Irish beef supply is not going to have a big effect on price," claimed Mr Dowling.

"In the teeth of this recession, demand for beef has not met expectations, but there's every indication that it will increase.

"The 1.5m head that we killed in 2013 wasn't anything exceptional.

"We've killed 1.7m head in the recent past so I don't think that (the 1.8m head kill projected in the Food Harvest 2020) is anything to worry about," he added.

Indo Farming