Profitability - the cancer eating away at the Irish meat sector
A new industry-commissioned report highlights the unhappy truth that Northern Irish beef and sheep farmers face a bleak future without change. Ed Bedington reports on the challenges that lie ahead
Ongoing difficulties with foot-and-mouth disease, bluetongue and the scramble following the partial lifting of the export ban for parts of the UK have gone a long way to masking what is rapidly becoming an increasingly more vital problem for farmers. A longer-term issue continues to eat away at the sector that could have a more lasting effect than any export ban or disease crisis. Of course, we are talking about profitability.
The situation is dire, according to various sectors of the industry, with some warning that suckler beef production, certainly in some areas of the UK, is facing extinction. The problem is perhaps being more acutely felt in Northern Ireland, an area with a high dependence on agriculture and its contribution to the local economy.
The province's industry recently teamed up to create the Northern Ireland Red Meat Taskforce and commissioned a report into the state of the sector, drawing on the expertise of international strategic consultancy organisation McKinsey & Company.
The report has shown that Northern Irish farmers are losing £180m a year, compared with the processing and retail sectors, which are making a combined profit of £40m a year.
Suckler beef prices need to rise to £3.20 per kg for farmers to achieve a viable return, while hill sheep producers require a price of £3.35 per kg.
The report stated that even the most aggressive cost-efficiency savings would not allow farmers to make money.
Richard Moore, joint MD of processors the Linden Food Group, says profitability and the survival of the supply base is the biggest isue facing the sector. "Farming in Northern Ireland is highly unprofitable and I think this year people will have to sit down and make some hard choices.
"As processors, farmers are saying 'advise me on what to do', but if there's a lack of response from the supply chain, farmers will be advised to stop."
Moore says people are not facing up to the problem. "If the herd does shrink, there will be more meat in the market, which masks the problem, so there's a lack of urgency - and if there's a lack of understanding of that, we're seen to be crying wolf."
The industry now hopes, however, that this report puts farmers' bleak position down in black and white.
The taskforce, which is made up of all sectors of the NI red meat industry, is now waiting for retailers to absorb the full details of the report, says David Rutledge, chief executive of the Livestock & Meat Commission.
"This is just the beginning," he says. "The strategy now is that we take this to the market. This report is not speculation: it's fact-based, evidence-based. It's work that is long overdue and takes us out of the realm of speculation."
He said the report poses a simple, yet stark question - do we want local suckler beef production? If the answer is yes, prices will have to rise. "We're urging retailers to read the report. We're not putting a gun to people's heads; we want to have a debate on this."
But will retailers take note? A Tesco spokeswoman said Tesco and other supermarkets were not the biggest purchasers of local meat, suggesting that the taskforce should also be tackling the foodservice sector. However, she added: "We welcome the clarity that the report has given the NI meat industry. It sets out the challenges being faced. We are very willing to be part of the discussions going forward."
Chris Brown, Asda's head of ethical and sustainable sourcing, said it was still early days. "I think it's a sensible piece of work and there's a lot that needs to be considered. There are some interesting conclusions and findings for the whole of the supply chain to think about."
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