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As exclusively revealed by the Irish Farmers Journal on Friday, the way has now been cleared for the ABP Food Group to acquire a 50% shareholding in Slaney Foods.
It effectively means that ABP will slaughter 30% of the national cattle kill and 40% of the sheep kill.
This of course does tell the full story when it comes to the level of control that ABP could now influence on the trade.
One thing that the horsemeat saga of 2014 showed us was the extent of the level of inter-trading that takes place between many of the independent plants and ABP; many of them heavily reliant on ABP as an outlet for carcases and various primal joints.
With zero transparency, it is difficult to get an accurate handle as to the volumes inter-traded. However, it is estimated that when inter-trading is included, ABP had over 30% control of the trade prior to the Slaney joint venture.
Farmers left in the dark
So does this effectively mean that ABP now controls almost 40% of the beef trade?
Such a dominant position would no doubt be of major concern to farmers. However, it is unlikely that this will be the case.
Instead, the joint venture is more likely to be aligned to ABP trying move away from the need to inter-trade and in doing so tighten their supply chain post horsemeat.
There is no doubt that this is something being demanded by its portfolio of top British retailers. Unfortunately, due to the lack of transparency in the sector, farmers will be left totally in the dark as to how this plays out.
What does the future hold for independents
Meanwhile, in the wake of the joint venture securing approval, we should ask what the future holds for the independents factories.
There is no doubt that traditionally it was the independent processors that were first to reflect any upturn in the demand in the price they paid farmers.
Similarly, they were the slowest to pull prices, with the big three usually leading the charge.
However, post-horsemeat, the landscape has changed dramatically.
To such an extent that in our most recent factory price leagues ABP was seen to be driving prices for in-spec stock, with many of the independent plants languishing at the bottom of the leagues.
The only real exception was Jennings in Ballinrobe, which with its strong retail partnership with Dunnes Stores, can compete with the big three for the type of animals that suits its business.
What is becoming clearer in the processing sector, is that it is a case of those that have and those that don't; those that have strong retail and food service business and those that don't and are subsequently dependant on the wholesale market.
In recent years ABP, Dawn Meats, Kepak and indeed Liffey Meats have all performed strongly in securing these premium markets.
ABP has strengthened its retail portfolio while significantly growing volume with its existing customers base while Dawn has cemented what appears to be an extremely successful partnership with McDonald's.
Difficult future
For the have-nots, there is no doubt that life has been more difficult in recent years.
There is no sign that life is going to get any easier for the smaller independent plants.
They were able to survive in an environment where Irish cattle prices were trading significantly below continental Europe. In that environment, they did not need a retail outlet and instead could compete on the wholesale market. The extent to which this has changed can be best measured by comparing the shift that has taken place between Irish and Italian beef prices.
Six years ago, Italian farmers consistently commanded an 80c/kg premium over their Irish counterparts. Over the past 12 months we have seen the Irish price consistently outpace the Italian market and indeed many other EU markets.
What does the future hold?
There is no doubt that we will see further activity over the next 12 months. Talks between Dawn and Kildare Chilling are likely to be reignited given the European Commission's overwhelming approval for the ABP-Slaney deal.
The future for some of the other smaller plants is less certain.
Will a new ownership structure in Dunbia see the processor maintain a presence in Slane and Kilbeggan? Who knows?
With the current level of transparency in the sector, this would be a major concern for farmers
.
The reality is we, as farmers, should now start planning as to how we protect our interests in a market that will become more concentrated.
Put simply, if Kepak, Dawn Meats and Liffey were to buy one more factory each, we would see the big four control 75% of the national beef kill.
With the current level of transparency in the sector, this would be a major concern for farmers.
However, there is no doubt that if Irish beef is to expand its reach beyond the EU in a meaningful way, that captures premium markets, then we need well-resourced processors that have scale and financial strength to carry upfront costs of developing markets.
The farmer response
So how should farmers respond? Clearly in such a concentrated market the focus has to be on delivering transparency.
Transparency around the weekly kill in each factory, transparency around market prices through the delivery of index equivalent to the PPI index in dairying, transparency on financial accounts, transparency on levels of beef inter-traded between plants and transparency on carcase trim and weighing through the introduction of new imaging technology.
Meanwhile, the producer group model hailed as one of the key successes of the beef forum has been a flop.
However, the concept of helping individual farmers pool their selling power should not be lost − the role of the co-op mart needs close investigation.
As the processing market becomes more concentrated, the role of the live market in keeping the dead market alive becomes ever more important.
Again, we highlight the importance of developing a live trade with Britain − something that has never received a meaningful commitment at political level. Brexit clearly adds further complications.
There is no doubt that the decision by Brussels to approve the ABP-Slaney deal is going to open the doors to a even more concentrated beef market.
Now is the time to put the measures in place to protect farmer interests. Let's not sit back and just watch it happen.
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