Taken to task

Ireland, the 'Emerald Isle', boasts lush pastures and abundant rainfall that put some other beef-producing regions to shame. Ireland produces some of the best grass-fed beef in the world and has a long-standing reputation on international markets.

While the Republic has enjoyed uninterrupted access to Europe, however, the North found the doors to the Continent slammed shut overnight, when BSE broke out on the UK mainland in 1995. Northern Ireland's red meat industry, which exported 52% of its beef outside the UK prior to the BSE ban, was forced to leave exports to its southern neighbours and concentrate on the UK retail market. Although the strategy was a success, with NI beef now a major part of supermarket supply, the region's livestock producers have suffered in the fiercely competitive UK market. Poor farmgate prices have put serious pressure on profits and the NI suckler beef herd has been in steady decline for years.

In 2006, Northern Ireland's red meat industry realised it was reaching crisis point, and set up a task force to develop a long-term strategy for improving the profitability and sustainability of the region's beef and sheepmeat industries. Following a year of industry consultation, the NI Red Meat Industry Task Force published its final report in October 2007. This made for stark reading, revealing that NI's red meat industry was generating a loss of over £200m per annum. The massive loss was attributed to "very poor economics of production"; NI's livestock production sector was losing an estimated £260m per annum, significantly higher than the £15m-£20m profit generated by red meat in the processing and retailing sectors.

The report recognised that producers were trying hard to reduce costs and improve efficiency, but pointed out that this was extremely difficult, given NI's fragmented producer base, with 20,000 farms engaged in red meat production and 80% of beef suckler farms with herds smaller than 30 cows. It concluded that, with NI's strong dairy industry, it might be possible to create an economically viable model for dairy-origin beef production, but said there was "no prospect" of creating an economically viable model of production for even the most efficient producer of suckler-origin beef unless prices rose significantly. Hill sheep production was also found to be "economically unviable", though the report concluded that "an economically viable model for upland-lowland (grassland) sheep may be attainable." The Task Force recommended that the industry should focus on creating efficient supply chains for dairy-origin beef and upland-lowland sheep, while facilitating the anticipated decline of the suckler-origin beef herd and the hill sheep flock.

Relief on returns

Just when it was looking like the end of the road for NI suckler beef production, however, farmgate prices began to surge upwards. Over the past 18 months returns have improved significantly, which has changed the outlook for many of NI's beef farmers. "When the Task Force report was published, we were identifying an exceedingly poor financial situation for suckler beef farmers, whose businesses were just not sustainable," explains David Routledge, chief executive of the Livestock & Meat Commission (LMC). "Over the past year, however, things have definitely improved and we have seen encouraging price increases at farm level."

The sector is certainly not in the clear yet. Feed and fuel costs have increased significantly alongside farmgate prices, but there is a ray of hope for efficient producers. "For those doing everything according to best practice at a reasonable scale and not expecting loads of profit, it is just about do-able," says Routledge.

Inversely, the dairy calf supply chain, hailed as the future of the NI beef trade, is facing more uncertainty than it was in October 2007. "Since the report, the dairy industry has come into difficult times," Routledge explains. "There has not been evidence of a massive decline in the dairy herd yet, but there could be some impact on the supply of dairy calves."

In the meantime, work on creating a more efficient dairy-origin beef chain has begun. Last month, the Task Force published a Production Protocol for Dairy Origin Calf Rearing, which provides practical advice on calf procurement, nutritional regimes, housing systems and health issues. A protocol has also been published for grassland sheep production. "These protocols have been written by Northern Ireland scientists and technologists and are therefore based on the best possible information specifically for our producers," says LMC's Dr Mike Tempest. "They are designed to support farmers in making production decisions, helping to make sure they address as many issues as possible when trying to achieve optimum profitability."

The Task Force recommended that dairy-beef production should be achieved through a "processor-led production system" and a number of NI processors are now looking at schemes to improve the quality and eating consistency of the dairy calf supply base. One such scheme is Linden Livestock, which was launched by the Linden Foods and is the first fully integrated beef model in NI. The scheme is based on the Blade Farming production model, with rearing and finishing franchise operations developed to exclusively supply Linden livestock. "The scheme is in development and we currently have three nurseries, to which we pay a husbandry fee to raise our calves," explains Linden Foods MD Gerry Maguire. "We buy the calves from dairy producers and take them to nurseries, which take them to 12 weeks of age. We then sell the calves to finishers, which raise them for beef and sell them back to us for a contract price." The scheme benefits both parties, giving farmers a more stable income and Linden a secure supply. "We are bringing producers closer to us at a time when the forecast is for production to fall, and actively doing something to keep raw material at home," says Maguire.

Some of the calves produced by Linden Livestock will go for the production of Rosé Veal, which Linden had been developing for several years and launched in February. "With Dutch white veal no longer on the shelves in the UK, we believe there is a huge gap in the market for Rosé Veal, which is much higher welfare," explains Maguire. The calves not used for veal will go for beef production, either as Aberdeen Angus crosses for beef or just normal dairy-beef.

Recession takes its toll

Stability of supply is only half the equation for NI's red meat industry, and the recession has certainly taken its toll on demand. "People still want to buy beef, but the recession means there has been a dramatic shift from expensive cuts to cheaper products such as mince and burgers," says Maguire. "We have had to be quite clever in what we do to maximise the value of our product, we are almost starting at a price point and moving back."

The industry's customer base of UK supermarkets and foodservice chains are thriving, however, so business is still strong. And with a large dairy herd and increasingly robust dairy-beef supply chain, NI is well placed to meet the demand for value cuts. "Dairy animals will not produce the best steaks in the world, but are ideal to manufacture minced beef," says Phelim O'Neill, of the Northern Ireland Meat Exporters Association (NIMEA). "We are in a good position to respond to the circumstances of the day."

The recession has also provided a welcome boost for exports, which have helped NI's processors maintain carcase balance in the face of changing demand. "There has been a huge movement towards visual lean (VL) products at UK level, so we are relying on our export markets to get higher-value cuts away," says Paul Armstrong, commercial director of Foyle Meats.

NI processors are keen to rebuild some of the export trade they lost during the BSE ban, and Mark Maguire, Invest NI client manager for red meat and dairy, says they are well-placed to do so. "The main four processors had facilities in Southern Ireland, so the BSE ban did not stop their contracts," he says. "They lost volume, but they did not lose markets."

Invest NI, the country's economic development agency, has been central to NI's export efforts. The agency's specialist food division has organised a number of inward and outward missions to meet retail and foodservice representatives in the major European markets. "We have completed five selling missions in the last 18 months to Spain, Italy, the Netherlands and the Nordic Countries," explains Nigel Hardy, Invest NI's food strategy marketing manager. "We are also directly involved in brokering sales for NI businesses - our marketing team searches out buyers and sets up initial meetings."

Invest NI also employs a number of sales advisors with experience in the meat industry, who visit their contacts with a portfolio of all of the NI meat companies. "We have generated tens of millions of extra sales in this way. The biggest problem is keeping up with the orders," says Hardy.

O'Neill estimates that NI is now exporting upwards of 20% of its meat outside the UK, but he does not expect exports to reach pre-BSE levels. "I don't ever see us getting back to where we were before, because we have now established ourselves with the major supermarkets and foodservice groups. I don't see that being business that the industry would walk away from," he says.

ABP sales and marketing manager Norbert Quinn agrees that the UK will remain NI's most important market, but sees exports as "dovetailing" in with UK business. "We can still provide excellent service to UK customers and provide us with the cuts they need, but exporting allows us to get maximum value and helps with the carcase equation," he says.

NI's export efforts are not just concentrated on EU markets, and the country's processors are working with Defra and DARD to push for health certificates in third countries. "There is a lot of potential for fifth-quarter products in Far Eastern, African and Eastern European markets," say Quinn. "If we can get the relevant health certificates, there is serious potential for adding value to the bits of the carcase that we cannot get value from at the moment."

World-class traceability

Looking to the future there are certainly challenges ahead for NI, not least the possibility of Brazilian beef coming back into the market, an event which all of the processors admit would impact on trade. But there are also plenty of opportunities and the industry is working hard to differentiate itself. The country already has a world-class traceability system, and it looks likely that processors and producers will introduce electronic identification (EID) of cattle in the near future. "We have always had superior traceability systems in NI, but one issue is the human element of reading a tag number wrongly," explains Routledge. "EID would allow the industry to be 100% sure that every animal is identified correctly, which would be a major advantage."

Aside from strong animal welfare claims and outstanding traceability, NI's red meat industry has an incredible ability to adapt and remain flexible, as it has already demonstrated. "We have gone from an industry where we exported over half of what we produced, lost that market overnight and almost seamlessly developed to supplying the GB market," says O'Neill. "We are currently in the middle of one of the worst recessions in decades and we are adapting to it pretty well."

And then, of course, there is the grass. "The reality is that grass-based beef is a relatively rare commodity in Europe, and if there is one thing we do well in NI, it's growing grass," laughs O'Neill. "It's the upside to all the rain we have here. We tolerate the rain so we can produce the grass that produces the beef to supply to the world."

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