Counting the cost

The government's speedy response to the latest outbreak of FMD proved vital in containing the disease this time, but processors and exporters could still be left in financial straits. Chloe Smith and Carina Perkins report

While much of the national focus on the latest foot-and-mouth disease (FMD) crisis has been on the plight of livestock farmers, processors and exporters are facing financial consequences that could be devastating.

Although the disease appears to have been contained, costs will continue to mount as a result of restrictions on national livestock movement and the international ban on meat exports.

Until more is known about when exports and free movement can resume, it is difficult to tell the extent of damage that will be felt by the UK meat

industry, but it could be considerable.

farmers' REPRIEVE

The movement of livestock under general licence has meant that farmers have been given a reprieve and

processors have been able start

operations again. One of the country's largest beef processing companies, ABP, has returned to relative normality

this week, an indication that the processing sector is at least back up and running. Alistair McDougall, the company's spokesman, says that because ABP sources its livestock directly from farms, "it was back to work as normal" when the movement ban was eased. ABP has not yet calculated how

much the disruption has cost it, but McDougall says: "Every day you close your slaughter operation, there will be substantial losses."

Aside from the obvious costs involved with the loss of three days slaughtering, plants are suffering from additional costs. "There are a number of issues," says Stuart Roberts, director of the British Meat Processing Association (BMPA). "Transport costs are rising because of the necessity to move animals straight from the farm to the abattoir and there are ongoing costs relating to what is effectively a devalued carcase."

COSTLY business

Robert Howe, the business unit

director for Adam's Pork, has already noticed costs that go beyond the temporary loss of operation. "What is proving most costly is the fact that, with the export ban, we have lost

international markets for our fifth-quarter products," he explains.

"It means that not only are we losing income from the sales of these products, but we now have to pay to dispose of them." Another concern for the company is that demand for pork appears to have dropped, which could suggest that supermarkets have started importing more meat. The multiples have been quick to offer assurances that this is not the case, but the British market is set to become increasingly crowded as a result of the export ban and this will affect British processors.

"The long-term effects will very much depend on how quickly we return to normality in terms of collection centres and the export market," says Roberts. "What we are looking for is an approach that will return us to normal movement in as quick a time as is sensible, without undermining our efforts on disease control so far."

Although it is difficult to know exactly how much the FMD outbreak will cost the processing sector, Roberts expects it to be very substantial. "I can certainly say it is going to be hundreds of thousands and probably millions of pounds," he says. "Some businesses will have lost tens of thousands of pounds for every day they could not operate."

Exporters are also facing significant financial consequences, and EBLEX has estimated industry losses at £10m a week for as long as UK suppliers cannot export. Andrew Garvey, marketing manager for EBLEX, says that, at the moment, it is the financial loss that is most significant to exporters, although there are concerns about whether the reputation of our meat will be tainted. "The monetary loss is by far and away the biggest issue at the moment, because the export market is important to the balance of the UK market," he says. As for the image of British meat abroad, Garvey is pleased there have not been too many negative reports about FMD overseas: "Our feedback from European member states is that the issue has been handled quite sensitively by the media there - no sensational stories, no critical lines about our industry."

The fact that it appears farmers hit by FMD were innocent victims has helped the perception of the British meat industry, he says. "As the story about where this outbreak could have come from becomes more obvious, there is probably an increasing level of support and empathy."

The long-term effect on exporters is difficult to judge because of uncertainties over when the export ban will be lifted. The EC's standing committee is due to meet on 25 August to decide what action to take next and if they decide it is no longer necessary for the whole of Great Britain to be classified as a high-risk area, parts of the country may be able to resume exports. "The big issue is that, at some stage, we have got to relaunch products back into the market," says Garvey.


Jean-Pierre Garnier, EBLEX's export manager, is not thinking that far ahead yet. He is still in the centre of the

crisis. "We export 6,000t of meat a week and it is catastrophic," he

says. "We're losing everything we've been working on." Garnier is most concerned about how markets for high-quality meat are going to be

re-established: "When you sell on price, commodity markets can recover quite quickly. But it will be very severe, particularly for quality markets. It is difficult to quantify," he says.

He gives the example of the

United Arab Emirates (UAE), which, last year, started importing Welsh lamb. It will be a lengthy process to try and re-establish trade," says Garnier: "It took us two to two-and-a-half years to open that market, then after that, we had to invest in promotional activities. Now we've lost the US market again, the Chinese market, the Japanese market - all of the Far Eastern markets." Faced with the loss of both continental and international markets, the UK meat industry will be entirely reliant on home market demand. The levy boards have been quick to react to this reality and a variety of marketing strategies are planned to encourage UK consumers to buy more British meat. Quality Meat Scotland (QMS) is planning to use reserve funds to finance a substantial burst of marketing activity during the annual Festival of Scotch Lamb, with a view to increasing the Scottish sheep sector's share of the domestic market. EBLEX has unveiled a giant sheep on a hillside beside the M62 in Bradford to mark the start of a campaign and to raise the profile of Quality Standard Mark (QSM) beef and lamb. And, as part of its QSM promotional work, it has launched a new foodservice campaign and will work with retailers to encourage them to source QSM products.

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