Beef price index a step in building farmer confidence

The beef price index, which was agreed at the beef talks in September, has been launched by Minister for Agriculture Michael Creed. The index was developed by Bord Bia over recent weeks. It has three main components, a cattle price index, beef market price index and an offal indicator.

Within these, there are three different R3 steer prices as reported to the European Commission since January 2014 which are benchmarked against the EU average for R3 young bulls and UK R3 steers. (Figure 1).

Composite and export benchmark prices

Using the price reported information and applying it to the national cattle kill, Bord Bia has created an Irish composite price, which reflects the national weekly average beef price when the mix of cattle killed in Irish factories and prices paid are combined. This weekly average also runs from January 2014 and is compared with another Bord Bia calculated figure, the export benchmark price. This is a market indicator reflecting the prices paid to farmers across all grades in the countries to which 90% of Irish beef exports are sold to. These include the UK, France, Netherlands, Germany, Italy and Sweden. This is what is described as the theoretical price if Irish weekly cattle purchases by factories, across all categories and grades, were paid at an average of what was paid to farmers for each grade across the countries referred to. An average Irish composite price and average export benchmark price for the year to date and last year are highlighted (Figure 2).

The final part of the cattle price index is a prime Irish composite price which is calculated on the same basis but is applied only to prime cattle, ie steers, heifers and young bulls (Figure 3). Cows are excluded both for the actual Irish composite price and prime export benchmark, again applying the average prices paid in the main export markets to the Irish national kill.

Offal indicator

As there are no Irish or EU offal prices reported, Bord Bia has taken the US offal value, which is published by USDA on a daily basis. It has converted the US data to calculate an offal contribution value to the worth of the carcase. (Figure 5) This is made up of red offal which includes products such as the tongue, heart, liver tail, etc, while the white offal includes the tripe, fats, etc. Using the US values, Bord Bia has calculated a value in euro per kilo of value that factories receive for the offal and hide.

There will be disappointment that no Irish value for offal is available but as offal is a globally traded product, the US values are a good indicator of values.

Wholesale and retail price indices

Bord Bia collects retail and wholesale beef values in the main export markets for Irish beef that accounts for over 90% of Irish beef sales. Using these, it has produced a retail beef price index, a wholesale beef price index and a combined or overall beef price index (Figure 3). This commenced in September 2019 starting at 100 points. After one month of data, the indices have moved to 100.3 for the retail price index, 100.8 for the wholesale price index and 100.5 for the combined or overall beef price index.

Minster Michael Creed said that his Department had listened to calls for increased transparency in the sector and was making every effort to contribute to this.

Tara McCarthy of Bord Bia said: “The indices will be updated on an ongoing basis and are designed to track overall trends in beef cattle, wholesale, retail and fifth-quarter prices” and the organisation would continue to work with the Beef Market Taskforce to develop the range of market information available to farmers.

IFA president Joe Healy said: “The new indices will provide greater transparency on cattle and beef prices and the new beef price indices published by Bord Bia show that the beef market is improving and that farmers must get an immediate price increase.”

Comment

These indices are an important step in building farmer confidence in Irish factories that handle virtually all finished cattle. Prices paid to farmers by grade are already reported but Bord Bia – by creating an average Irish beef price for all cattle and prime cattle only – has added to the information available on cattle prices.

It is disappointing that it has to rely on the USDA to create an offal value indicator. This is an area that Minister Creed should aim to have remedied in the near future and the US value for offal should be seen and used as an interim measure.

What is truly unique and particularly welcome is the development by Bord Bia on a retail and wholesale beef price index. It is a long way from what is available in the US on boxed beef sales and values but it is an important start that can be built on and developed further.

A further step in building farmer confidence that they are getting a fair deal from their beef factory is the issue of factory profitability. Irish beef factories should publish annual accounts on a voluntary basis but if they don’t, the minister should legislate to make it compulsory. It would actually be in factories’ interests, as much as farmers’, for this information to be in the open as the reality is meat processing is a high-volume, low-margin business.