Focus on Ireland: Leading by example

Beef prices

After a tough year in 2009, 2010/11 has proved stronger — particularly for beef, which forms the greater part of Ireland’s meat output. Difficult trading conditions — and a decline in beef suckler cows during 2009 — resulted in tightened supply, which has helped push beef prices up, reversing the trend of the last few years.

Although the cattle price was relatively sluggish during 2010, this recovered in the latter half of the year, and has continued throughout 2011. Live cattle exports, which were particularly strong in 2010, have hit this year’s availability of cattle for finishing. 


“Cattle throughput is up 4% year-to-date,” says Henry Horkan, trade and marketing specialist at Irish food board Bord Bía, “and it will probably tighten even further over the course of the year. The great thing is that this has led to firmer prices — which are up about 16% on where they would have been last year — so that has certainly injected a lot of confidence in the market.”  


Beef farmgate prices have also increased significantly year-on-year. As Eddie Punch, general secretary of the Irish Cattle and Sheep Farmers Association (ICSA) points out: “The average R3 price to-date for this year is €3.37/kg (£2.88/kg) compared to €2.90/kg (£2.48/kg) in 2010. That’s a 16% increase.

“The store cattle are also way up in the livestock marts,” he continues. “If I were to go into a livestock market last week, I could show you animals that are making 50% more than they made in the equivalent mart last year. The issue is that beef finishers are paying substantially higher prices and that has continued to rise literally week-on-week right throughout 2011. The worry is that those store prices need the beef price to stay as close as possible to €4/kg (£3.42/kg), including VAT for 2012. Any upsets in the market could mean that those farmers could get burnt badly.”


So far, in domestic terms, retailers have absorbed the better prices paid to producers and the consumer is still paying the same price for beef on supermarket shelves. As Punch says, “That suggests that either the margin was particularly good for the last couple years and has shrunk now or maybe they are absorbing some of the costs.” 


Exports


However, it is in exports rather than the more sluggish domestic market that the biggest profit lies for Ireland. Improving global prices and tightening supplies have helped. “World prices had moved very favourably towards the autumn of 2010 and early spring 2011,” says Punch. “We saw a substantial improvement on world market prices in key beef exporting countries, such as Brazil, Australia and the US, and that has helped the general buoyancy.”


Irish beef exports have seen very healthy year-on-year growth, up 10% in 2010 and a further 14% for the first six months of 2011. Although the UK is the principal destination, closely followed by Continental Europe, growth has primarily occurred outside these traditional markets, with growing interest from Asia, Russia, the Middle East, Eastern Europe and the US.

In September this year, the Singapore market opened up to Irish beef exports of cattle aged under 30 months, a move that Agriculture Minister Simon Coveney said would have a positive effect on Ireland’s efforts to gain access to other markets in the region.  


However, fluctuations in the exchange rate have presented some challenges to Irish exporters, with the euro 9% stronger against the US dollar and 5% stronger than sterling, compared to September 2010.

Sheep and pigmeat

The weak pound, in particular, undermined sheepmeat exports, but scarcity again has been key. Sheep prices in Ireland have risen 10% in 2011 to date and New Zealand’s struggle to meet its 
EU quota has had a positive effect on 
the overall Irish export situation. A 
sharp slowdown in domestic sheep consumption in 2010, when Irish retail fell 10%, helped to offset export demand and, while volumes still fell by 11% in 2010 to 36,000t, prices rose 17% on 2009’s figures and have continued to climb in 2011.

The value of sheepmeat exports, therefore, rose by 4% to €170m (£145m) in 2010. Meanwhile, the rising cost of feed has continued to have a significant impact on both the pig and poultry sector. 
As Horkan point outs, there has been a slight increase in pigmeat prices during 2011, which has helped the market remain robust, despite pressures on producers.

A marginal increase in the breeding herd has seen higher disposals at both export meat plants and finished pigs exported to Northern Ireland. The UK is still the largest export market, but fell 3% in 2010, partly due to competitively priced Danish pigmeat. Stronger supplies and stable prices led export values to rise by 10% in 2010. However, the outlook for the latter half of 2011 and 2012 is still very much dependent on feed prices, which will need market prices to remain high to keep production viable.

Government initiatives

Despite the strength of exports, last November’s bail-out has left its mark: government initiatives have been constrained by the difficult budgetary position and, within the last few weeks, the government announced cuts of around €7.75bn (£6.63bn) over the next four years, as part of the plan to bring the deficit under control.
This has raised fears in some quarters that the cuts may disproportionately hit the industry.

“We have a €30m (£25.6m) suckler welfare scheme to support farmers,” says Punch, “and there is a worry that that is going to come under threat, as it’s easier for the government to chop those kinds of schemes than to get into a battle with the public sector unions over pay rates.”


Notwithstanding the financial position and IMF constraints, the government has pledged its support of the agri-food sector. In July it announced funding of nearly €1m (£0.85m) for cattle- and sheep-breeding projects, citing science-based improvements as critical to achieve increased targets for production and export. It has also doubled the level of export anticipated in Food Harvest 2020, the ministerial business plan for agri-food recovery, from 20% to 40%, to be worth around €12bn (£10.3bn) by 2020.


Although striking the right visionary approach for many, this has not been greeted with unalloyed pleasure from all quarters. The ICSA has described the increase as “gung-ho”, saying that improved prices were due primarily to scarcity of supply and that flooding the market could be a risky move, especially if it meant reversing the decoupling of farm payments to artificially boost supply.


As Punch points out, decoupled payments are working well in Ireland, as production is less influenced by the availability of subsidies and more influenced by the returns of the marketplace. The question, he says, is how sustainable is the current price? “The mood is optimistic,” he says, “but that can easily change if prices are hit by increased supplies.”


Differentiation

Food Harvest’s ambitious targets will depend on Ireland’s ability to differentiate itself in the marketplace, and this is increasingly dependent on the premiumisation of the meat sector and the development of Brand Ireland.


Bord Bía is set to prove Ireland’s green credentials, by launching a market-leading initiative for beef production to measure the industry’s carbon footprint, which has been accredited by the Carbon Trust. Horkan explains: “It’s the only national assurance scheme that’s using a carbon measurement as part of the beef quality assurance scheme (BQAS), so it is unique in that respect.”


A pilot audit of over 200 farms was conducted in March 2010, which allowed Bord Bía to build a profile of the carbon footprint of the entire Irish beef production system and develop a measurement engine with Teasgasc (Ireland’s Agriculture and Food Development Authority).

It has now been rolled out across all 32,000 members of the beef quality assurance scheme (BQAS), and there are currently 500 audits taking place on Irish farms on a weekly basis, with feedback provided to help farmers increase on-farm efficiencies and provide cost-saving advice to lower emissions.

“Because it has been built into our regular audits, it allows us to roll it out quite rapidly,” Horkan says. “Farms are audited on a rolling basis over the course of about a year-and-a-half, so when they are due to come up for their BQAS audit, then they are audited on sustainability as well. We’re probably looking at about 60-70% of all Irish farms that will be fully audited by the end of the year.”


At present, the initiative is used solely as a trade communication tool and there are no plans to launch it to the wider consumer market. However, as Horkan points out, Bord Bía intending to develop a similar system to cover the beef processing industry as well and a pilot scheme is already under way.

He says: “It details our sustainable advantage to the trade, to give buyers the confidence that when they are buying Irish beef, they know that it has gone through the full rigours of the quality assurance mechanisms, that it adheres to the highest levels of welfare, and also has very strong sustainability credentials.”


Although sustainability, in itself, will not guarantee a price premium, it is a step further to create ‘Brand Ireland’. The industry has also made great strides in tailoring its exports, targeting particular markets for particular products. It also works with over 40 Michelin-starred chefs in the UK and Europe, who endorse Irish beef. 
As Horkan points out, beef and livestock are the largest exports Ireland has to offer, so giving it a distinct and promotional advantage may be the thing that brings back, maybe not the Celtic Tiger, but certainly the Irish spirit.

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Ireland at a glance

The volume of Irish meat and livestock exports grew by an estimated 9% in 2010 to just over €2.44bn (£2.09bn), boosted by strong cattle and pig exports. Figures for 2011 to date look set to boost this by a 
further 14%. 


Beef


Total Irish beef production in 2010 was 559,000t, with around 505,000t of exports. 
Cattle supplies rose 8% during 2010, while prices increased by 1% over the 12 months.

The value of beef exports grew by 8% to an estimated €1,510m (£1,295m) during 2010, with volumes 
also rising 8%.Exports to the UK were worth €685m (£588m) in 2010, up 7% to 260,000t, while exports to Continental Europe were up 12% to 237,000t. Live exports rose 19% by volume to 339,000 head in 2010, increasing in value to €183m/£157m (a 16% rise).


Pigmeat


Total Irish pigmeat production in 2010 was 215,000t, with exports of 147,000t. The value of pigmeat exports grew by 10% to an estimated €317m (£272m) in 2010, driven by a 10% rise 
in volume. 
Live exports of finished pigs to Northern Ireland rose by 16% during 2010.
Sheepmeat
l Total Irish sheepmeat production for 2010 was 49,000t. The value of sheepmeat exports grew 4% to €170m (£146m) in 2010, although export volumes fell by 11% 
to 36,500t. Domestic consumption slowed down, with Irish retail sales dropping 10% to 15,700t to November 2010. 
Chief export markets are France, worth €95m (£81.5m) at 18,500t and the UK, at 9,500t.


Poultry


The value of poultry exports grew 9% to €200m (£171.6m) in 2010, boosted by higher average prices as well as increased volumes. 


Source: Bord Bía’s Meat and Livestock Review 2010

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Furthering sustainability

The carbon measuring scheme is just the latest initiative aimed at improving environmental protection and conservation across Ireland. Biodiversity and water footprint measuring systems are also in the pipeline, building on the Rural Environment Protection Scheme (REPS), the Department of Agriculture’s initiative helping farmers farm in a more sustainable way. More than 80% of farmers took up the scheme, but there have 
been a number of teething problems with its replacement, the Agri Environmental Options Scheme (AEOS), which was introduced earlier this year.

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