When factories are working out what they will pay for cattle, their calculations are based on a combination of what they can sell the various parts of the animal for in different markets and what it will cost to process and deliver the product to those markets.
Included in this calculation is the value of hides and offal, which are removed during the slaughter process and are therefore not part of the carcase weight on which farmers are paid.
However, factories do reflect the value of offal in the price they pay farmers for the carcase. If factories buy the cattle, either liveweight or through a mart, then they are included as part of the value.
The value of hides and offal fluctuate just as cattle prices and individual cuts of beef vary. The overall value hit a particular low in the summer of 2020, but has since recovered to the extent that it has been close to a five year high for most of the last 12 months.
Hide values, while recovering from the lows of 2020, are still only a fraction of their historic high at around €20 for steer and heifer hides.
Hide and offal values are not captured in Ireland or at an EU level, but there is comprehensive data available from the USDA which publishes daily values. Bord Bia uses this as a basis to calculate the contribution that hides and offal make to the value of a beef carcase. Hides currently contribute 8c/kg of carcase weight value, a fall of 4c compared with this time last year, though 2c better than in September 2020.
Red offal which includes products like tongues, hearts, liver, tails and cheek meat, contributes 18c/kg of carcase weight, the same as this time last year but twice the value it was in 2020.
White offal, which includes fat and tripe, part of the stomach, are currently adding 21c/kg of carcase weight value compared with 18c at this time last year and just 9c in September 2020.
Reasons for higher value
Joe Burke, senior meat and livestock manager with Bord Bia, told the Irish Farmers Journal that hide values are suffering because there is less demand for leather from the car, furniture and footwear industries, plus the tanning process is unwanted in many countries due to its environmental impact.
He pointed to continued strong demand in Japan for Irish beef tongues and for other red offal products in key export markets. He said the strong improvement in the value of tallow (fat) and tripe (lining recovered from the animal’s stomach) over the past two years have helped to drive the contribution from white offal.
Burke said: “In the early stages of lockdown, there was significant disruption to the global availability of shipping containers. The resulting cost-inflation put huge pressure on by-products like tallow and tripe, especially at a time when markets were quite depressed.
“However, the value of manufacturing beef has increased strongly this year, and in some markets this has led to a strong demand for edible tallow to blend with lean cuts of beef, to make an 80% or 85% lean meat product.”
Tallow is also regularly cooked by many meat plants and the resulting oil is used as a green energy (fuel) source.
Do farmers get the offal value?
Despite the fact that the hide and offal is removed from the animal and only the remaining carcase is weighed on the factory scales, and it is this weight on which the farmer is paid, its value is included in the price. This is currently worth 47c/kg of the carcase price, double the 24c/kg it was worth this time two years ago.
Beef carcases are dressed to a standard that applies across the EU and beef prices are reported on this basis. The offal is kept by the factory and is one of the elements that determines the overall price paid to farmers.
While offal is a revenue, factory costs are treated the same way. Energy and transport costs are variable and contribute to the price paid to farmers but are absorbed as an overall factory cost.
There was an exception in the grain sector earlier this year when Boortmalt added a €12.50/t energy charge on suppliers, which was particularly controversial given the particularly dry harvest of 2022.
Where there is a real gap is in access to information on offal value in Ireland. Bord Bia has to use USDA data and while reflective of overall values, it is another example of the lack of transparency in the Irish industry compared with its US counterparts.