A few weeks ago, Minerva Foods, one of South America’s leading beef exporters, announced to its shareholders and market in general that it had entered “a mutually exclusive supply agreement in the United Kingdom with Hilton Food Solutions”.
In the announcement, it highlighted that this a great opportunity for Minerva Foods to expand its presence in the UK and "better understand the dynamics of this market and the profile of local customers”.
Hilton Foods differs from traditional beef factories, in that they are only involved at the final stage of processing, sourcing raw material from abattoirs and cutting plants.
It is a publicly listed company in the UK, having been established in 1994 to essentially manage its beef and lamb category.
It built a factory in Drogheda, Co Louth, in 2004 to provide the same service in Ireland and it is a model it has repeated since all over the world.
Relevance for Irish farmers
Irish farmers will have, at most, a passing interest in the affairs of either Hilton Foods or indeed Minerva, as neither are in the market to buy cattle directly in the way that our established beef factories are.
However, the announcement of this partnership is an insight into how the processing business is preparing for a future in which beef supply is constrained by EU and government policy through Farm to Fork and a requirement to achieve 25% reduction in emissions.
It is no more than good business practice to take steps to secure supply and many of our large companies have trading divisions alongside independent traders or brokers that source and trade meat from all over the world supplying multiple markets.
It is inevitable that with the intention to increase organic production four-fold in Ireland and having 25% of EU land farmed organically will mean less production.
This is added to by the requirement to achieve reductions in emissions from agriculture, as, with specialised beef production being a low-margin business, it becomes the most vulnerable sector.
Factories, particularly those with divisions in the UK, will be aware of this and take whatever measures necessary to maintain supplies and in the process reducing their dependence on Irish farmers.
Inflation creates opportunity
With inflation forecast to increase to over 13% by the Bank of England, UK retailers will be looking further at how they can reduce supply costs and present customers with lower cost options.
Tesco is currently the biggest retail user of Irish beef as its imported offering, alongside British beef.
Given Hilton’s three-decade-long relationship with Tesco, it doesn’t take a huge leap of imagination to foresee the Minerva-Hilton partnership leading to a value-price South American-sourced beef range being offered to Tesco customers in the future.
Current UK government trade policy will also encourage development of these supply chains.
There is a long-established practice for New Zealand meat being sold in the UK retail sector, with well-established packing and distribution channels.
All of this can only mean downward pressure on Irish farmgate prices
It is perfectly logical that these channels would also be used to offer New Zealand beef once it starts coming in tariff-free, given its competitive price of €3.65/kg (European Commission, 20 July).
Australian beef and sheepmeat will follow and a UK-Brazil trade deal would really open up the UK market to beef supplies.
All of this can only mean downward pressure on Irish farmgate prices as options in the UK increase, something Irish farmers cannot afford.
Irish legislation means that Irish agriculture has to reduce emissions by 25%, but, unfortunately, this will have no benefit on global emissions, as others are in the process of preparing to fill any gap left in the market by Ireland and often with higher emissions per kilo of beef - the ultimate irony.