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Chairman, Deputies and Senators,
As your Committee members will be well aware there is real anger and frustration among farmers over what has happened in the beef sector since the beginning of the year.
Beef price cuts and specifications changes at factory level are seriously eroding confidence in the sector and threating to derail the Government’s Food Harvest 2020 plan for the €2bn beef and livestock sector.
At farm level, the price cuts and specification changes will hit all livestock producers over time. At the moment, winter finishers and particularly bull beef finishers are in the eye of the storm. Some bull beef finishers are at their wits end, unable to get cattle killed.
When the cattle are killed, farmers they are facing price cuts of 50c/kg plus, which can be between €200 to €300 per head. Some of these producers are facing very real and very substantial financial losses this spring.
With your permission Chairman, I would like to go through some of the details of what has happened in the beef sector and how things have changed over the last year.
First of all, cattle prices are well down, at levels where winter finisher cannot make a margin.
Based on official Bord Bia data, compared to this time last year, steer prices are down 21c/kg or
€77 /head. Heifer pieces are back 26c/kg or €80/head. Bull beef and cow prices have taken much larger hits. Cow prices are back 56c/kg or €174/head. Bull beef prices are down an average of 55c/kg or €204/head.
To put the magnitude of these price cuts in perspective, if these cuts were to be maintained for a full year, the losses to the Irish beef sector would be in the order of €172m p.a.
In addition to the price cuts, the factories have moved very substantially on specification changes without giving producers adequate notice or time to make adjustments to their stock.
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On bulls, the factories have introduced age and weight limits. Bulls over 16 months of age and/or over 400kg are now hit with price penalties.
In fact, most of the factories have said they don’t really want bulls, they would prefer steers or heifer when the kill has moved up from just over 100,000 head in 2007/2008 to over 200,000 head in 2012. It was the factories that developed this trade with producers.
Indeed in 2011, factories strongly encouraged farmers not to export their dairy calves and to keep them for bull beef. Farmers responded and now these same farmers cannot get their bulls killed, let alone get a viable price.
Farmers have been let down and feel the factories have reneged on their commitments. Farmers increased their production of bull beef as part of the Food Harvest 2020 plan and in conjunction with the state advisory service, Teagasc.
Bull beef production was promoted based on efficiency and performance. Indeed, the Teagasc model, Derrypatrick suckler beef herd in Grange Co Meath was developed on an 18 month old bull beef system, with the meat factories involved.
A key element of the Food Harvest 2020 plan was to increase the beef kill from 30,000 per week to 40,000 per week.
At the moment the kill is running at 31,000 to 32,000 per week and factories are telling farmers they are not able to kill their cattle and are pushing stock back several weeks. In many cases, because of these delays, farmers are getting caught by age and weight limits and incurring very severe financial penalties of another 20c to 50c/kg.
The most recent move by the factories to target prime in-spec steers and heifers with new price and weight cuts, following their meeting with Agriculture Minister Simon Coveney, was a step too far and shows disregard for both the Minister and farmer suppliers.
The steer and heifer price was reasonably stable since Christmas at €4.00/kg for steers and
€4.10/kg for heifers. Prices have now been cut back to €3.95/kg for steers and €4.00/kg for heifers.
In addition, some factories have introduced a weight penalty of 20c/kg on any animal over
400kgs. Others are using dual base prices on the quality payment system for over 30 month stock. None of these conditions were part of the quality payment system.
Winter finishers simply cannot endure such losses. The time has come for Minister Coveney to stand up for farmers and reject the factories’ tactics. He must insist that stability and confidence are restored to the beef sector.
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The reality is, there is good market demand for in-spec steers and heifers. There is no excuse for factories not maintaining the base prices of €4.00/kg for steers and €4.10/kg for heifers.
In our main export market for steers and heifers in the UK, Bord Bia report the R grade steer price at the equivalent of €4.69/kg and the R grade heifer price at €4.66/kg. For the average steer, the UK prices are €250 per head over Irish prices. For heifers the price gap is €163.
The gap between prices in Ireland and those in our main export market, where half of all our beef is sold is way too large and must be narrowed. At these price levels in our largest export market, it is very difficult for farmers to understand why prices have come back so much in Ireland.
On our main European markets, cattle prices are reasonably stable:
 In Italy, R grade male animals are making the equivalent of €4.24/kg, including vat, down
1.5% on last year.
 In France, R grade males are on €4.12/kg including vat, the same price as last year.
 In German, R grade males are on €4.02/kg including vat, down 7% on last year.
 In Spain, R grade bulls are making €4.10/kg including vat, the same as last year’s levels.
In general, cattle prices across the main European markets are stable at slightly over €4.00/kg.
Since problems first began to emerge with the beef prices last December, IFA moved and met the meat plants at local level in early January, outlining the losses at farm level, demanding price stability and a move on the backlog of bulls.
In late January, after our AGM, IFA met with Meat Industry Ireland and senior factory management demanding a halt in the price cuts and an increase in the kill to shift any backlog of bulls. Following this meeting the bull kill increased significantly but the continuing price drops and specification changes were totally unacceptable.
In mid-February, 1,500 farmers protested on the cattle price issue outside a number of the main processing plants in Meath, Waterford and Tipperary.
IFA subsequently called on Minister Coveney to call in the factories and challenge them on their commitment to paying a viable cattle price to farmers. IFA met the Minister and made it clear that if cattle prices are not stabilised, the current crisis has the potential to totally derail the Food
Harvest 2020 plan for the €2bn beef and livestock sector.
IFA also made it clear that it is not acceptable to farmers that Minister Coveney would consider he has little or no role with the factories on cattle prices, as he had outlined in the Dáil.
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The Minister met the factories on Thursday February 20 th .
On Monday February 24 th , the factories reduced the price of steers, heifers, bulls and cows again. This is clear from the official Department of Agriculture price reports printed in last week’s
Farmers’ Journal. These figures show that the price of all four categories of stock came back by between 1c and 7c/kg on the week.
IFA is demanding that the Minister take immediate action to restore some confidence into the beef trade at farm level. The Minister needs to challenge the factories head-on, on the price and specification issues. He must stand up for farmers and make it crystal clear to the factories that the price cuts must stop.
The factories need to send a positive signal that beef prices have bottomed out and will not fall further. In addition, the factories have to send a clear signal to their suppliers that the price of in-spec steers and heifers will not come under further attack and will improve over the Spring period.
The factories and their supermarket clients cannot change the goalposts with new specifications in the middle of the production season. At this point, farmers calving cows or buying cattle this
Spring are at a loss as to the direction they should take. There needs to be real debate and analysis on the specification and the direction we want to take our grass based beef production in Ireland.
The Minister must bring Teagasc, Bord Bia, ICBF, the factories and most importantly the farmers around the table on this. Under 16-month bull beef production doesn’t work in a grass based system. Tight carcase weights will leave our quality continental-cross suckler cows uneconomical.
The Minister must also tackle the lack of competition in the beef sector and take action to close the large price gap between Irish beef prices and those in our main export market in Great
Britain.
IFA has worked hard to secure a new ferry route for live cattle to the UK. What we need now is for Minister Coveney to remove the artificial blockages preventing the expansion of the live trade to the UK, including addressing the labelling difficulties. This is a market access issue, which is preventing the proper operation of the EU single market.
It has also hit the important store trade with Northern Ireland, affecting the mart trade and suckler farmers all across the West and Midlands. The Minister and Bord Bia need go to the UK and meet with the supermarket bosses and their Government and agency counterparts to resolve these difficulties.
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Doing nothing on this is no longer acceptable. The large price gap between Irish and UK cattle prices must be closed. It is not acceptable that Irish cattle are being blocked out of part of the single EU market.
The Minister must also become an advocate for the live export trade to European and other markets. By doing so, he will improve price competition and increase market outlets.
Farmers believe a strong live export trade for Friesian calves to Spain and Holland, weanlings to continental EU markets and stores to North Africa, are essential to keep a competitive balance in the trade.
Farmers are concerned that factories are being allowed use the Department of Agriculture AIMS database to monitor livestock numbers on individual farmers. IFA want a guarantee from the
Minister that the AIMS system is absolutely confidential and that factories do not have access to the herd profile of individual farmers.
Action from the Minister to restore confidence in the beef sector is urgent and essential. If the problems in the beef market are not addressed and prices stabilised quickly, the sector faces wider implications, particularly regarding the targets set down in Food Harvest 2020 including exports and jobs. As previously outlined the price cuts alone will cost €172m over a full year.
The suckler herd is under severe pressure and the price cuts and specification limits will ultimately hit weanling and store prices, and compound this situation.
Minister Coveney made a positive investment of €52m p.a. with the new €80 per cow Beef
Genomics scheme for sucklers. We cannot allow the benefits of this investment be totally undermined by price cuts and specification changes. Our suckler herd must be maintained and the factories must invest in this also.
The fallout from the current difficulties has left winter finishers in a very difficult position financially. Winter finishing and year-round beef production is essential to service the higher priced retail contracts.
The recent market developments have left farmers very sceptical about the industry’s expansion plans for beef. The minute the beef kill goes over 30,000 head per week, the price seems to collapse. Any future expansion in the sector must be fully planned.
Factories have to be prepared to provide viable price contracts if there is to be growth in the sector. Otherwise, farmers must be strongly encouraged to export any additional dairy calves live, in order to avoid damage to the beef price, as is happening this spring.
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IFA is also demanding Minister Coveney takes action on a number of other important issues affecting the beef sector and its future.
The Minister and the Government must strongly defend the beef sector in the current trade negotiations (TTIP and Mercosur) with the US and Brazil.
Minister Coveney cannot allow beef onto our markets from production systems that do not meet
European standards.
Minister Coveney and the Government must also introduce retail regulation to restore some balance and fairness in the food chain.
IFA acknowledges Minister Coveney’s work on opening new markets all around the world. He has driven our Origin Green sustainability programme with Bord Bia.
However, the benefits of this work cannot just be enjoyed by only a small number of processors and retailers. The development of the sector requires the benefits of expansion to be shared throughout the entire sector. This must start by a viable cattle price being delivered to farmers.
Thank you.
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