Research highlights ‘massive profiteering‘ on beef – ICSA

The ICSA claims that fresh analysis it conducted reveals the scale of the margins being made by processors and retailers on heifers destined for the supermarket shelf – the mark-up for an animal‘s meat is well over 100pc on what the farmer receives at the farm gate.

ICSA beef chairman Edmund Graham described the situation as “massive profiteering” and called for action.

The analysis found that higher-grade suckler-type animals are yielding a lot of added value through higher meat yield which is not reflected in the beef grid payment system.

Trial

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The ICSA trial showed that an O= heifer (Angus dairy cross) under 30 months was priced at €1,043 (VAT exclusive) and its meat could fetch €2,217 in the supermarket – a mark-up before costs of €1,174. The R+ grade Limousin suckler animal, under 30 months, was priced at €1,228 and its meat €2,741 – a mark-up of €1,512.

 

O=grade dairy cross heifer

 

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Fresh weight:590kg

Cold weight: 308.1kg

Kill out %: 52.2%

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Boned out: 163.4kg

Meat yield:52.9%

Price (VAT excl):€1,043

Meat price:€2,217

Mark-up: €1,174 (112.6%)

 

R+ grade suckler heifer:

 

Fresh weight:600kg

Cold weight: 339.9kg

Kill out %: 56.6%

Boned out: 205.2kg

Meat yield:60.4%

Price (VAT excl): €1,228

Meat price:€2,741

Mark-up: €1,512 (123.1%)

The trial was conducted taking two heifers from the farm of Dan Lynam in Westmeath.

The mark-up figures do not take into account of processing, distribution and retail costs.

The animals were weighed live, slaughtered and hung for 28 days. The meat was then carefully weighed, category by category, and then priced according to a range of prices available in the main retail outlets. While the trial has the limitation of being based on just two animals, ICSA says the outcomes point the way for further research and investigation.

“This information will inform the ICSA approach at the Beef Markets Taskforce, particularly in relation to the Teagasc review of the grid and the study into price composition,” said Mr Graham (pictured).

“The method was to weigh every cut and price it in all the main supermarkets. There is a lot of variation in pricing not only between supermarket chains but within supermarkets. This points to the need for a debate about the sustainability of pricing policy.

“We excluded very high prices which are not reflective. For example, we have taken a price of €28.73 for fillet steak even though we have seen it priced at €37.50.

“On the other hand, some supermarkets are selling beef under special offers without any regard for the fact that you cannot feed two animals for the price of one or decide that this month I am going to cut my heifers‘ feed by 33pc.

“A farmer might get €1,100 for an animal that has taken over three years to bring from breeding to slaughter, whereas processors and retailers expect to make more than that for processing the animal and putting it on shelf, a process which takes three weeks.

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“In addition, meat processors make significant earnings from the fifth quarter which the farmer doesn‘t get paid for. In 2018, beef offal was worth €385m, which works out at just over €200 per animal.”

According to Mr Graham, the story gets worse when you consider that this animal will have cost €1,300 to bring to slaughter and the farmer will be expected to have levels of traceability seen nowhere else in the world, be quality assured and be actively investing in saving the planet.

“The real insight here is that there is a lot of extra value in the suckler animal that the current beef grid price does not reward,” he said.

“From a starting point of two heifers of almost identical liveweights (590kg v 600kg) the suckler animal outperforms the dairy animal all along the food chain to yield €573 more value in retail sales.

“Allowing for her higher kill out and better grade, the farmer makes €184 (VAT excl) more on the suckler animal. But is this enough of a fair reflection?

“It is true the suckler animal takes up more shelf space and has more distribution and retailing costs simply down to more packets of meat to sell.

“But with the massive efficiencies and economies of scale both in processing and retailing, it seems incomprehensible that a lot more of this extra €523 cannot be returned for the suckler-type animal.

“It is also important to note that there is a lot of value added without any major addition of cost other than processing to the O-grade animal.”

Mr Graham highlighted the cheap food strategy which is destroying value for everyone.

“While the prices quoted here reflect prices charged in a supermarket in the past week, there are plenty of examples of similar meat cuts being flogged off cheaply,” he said.

“Supermarkets are notorious for using primary agricultural produce as a kind of loss leader to attract in the customers. They sell the meat or vegetables for unsustainably low prices from the perspective of the primary producer, but it doesn‘t matter if other products are being sold to consumers at inflated prices.

“For example, one supermarket was selling 400g of mince meat for €2 and a few aisles down was charging €32 for eight replacement shaving blades!

“When this happens, the farmer is essentially subsidising other over-priced goods in the supermarket.

“When you look at how much meat can be got from a suckler-type heifer, it beggars belief that the suckler farming sector is on its knees.

“It is clear that further subsidies for sucklers are a waste of time if we do not effectively address the massive profiteering on these animals in particular.

“The carcass weight of this animal was absolutely spot-on when it comes to in-spec demands and therefore ideally suited to all retail markets.

“Yet the price of €1,228 is an absolute scandal when you consider the time, effort and cost of producing her in a world where there are more and more demands on farmers.”

Mr Graham acknowledged that this trial has its limitations; ICSA wants similar exercises to be done on a wider basis, both domestically and internationally, as part of the Beef Markets Taskforce work programme.

Indo Farming

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