Calls for EU action on beef price
26th March 2015
Please note: the views expressed in this article are that of the author and do not necessarily reflect the views of SellMyLivestock.
This week, Robert Forster says it’s time the EU got tough on beef prices.
EU officials should investigate low prices for slaughter cattle
Yet more criticism of supermarket purchasing strategies has persuaded many breeders and finishers that their long term survival rests on securing a greater proportion of the retail price of beef than they do at present.
They are dismayed by on-going revelations that supermarket buyers stand accused of bullying and cheating at the farmers’ and processors’ expense and appear increasingly ready to challenge a situation in which they are required to be satisfied with trading cattle – which in pence per dwkg terms is worth only around half of the retail price of beef.
Currently finishers are taking just 51 per cent of the shelf price which points to beef from a £1200 bullock earning the retailer almost £2,400 in gross terms.
The most recent extremities have been 48 per cent towards the end of last year when ex-farm prices were in a trough and 54 per cent in 2013 when they hit an all-time high.
Some are thinking of following up recent reports that EU farm commissioner, Phil Hogan, is keen to curb excessive retail purchase power and is constructing plans to eliminate unfair treatment of food suppliers.
He has made clear his certainty that supermarkets are not responding to voluntary methods of improving purchase practice and wants to be able to force them, possibly through compulsory adjudication, to pay more attention to the consequences of their actions.
Or in other words realise that if they continue to squeeze the supply chain until its pips squeak they will shoot themselves in the foot by putting essential supply sources out of business.
As a result Hogan can expect to be told that retailers and processors must be able to demonstrate exactly why they need to take £1200 from the £2400 they earn from retail sales and pass back just £1200 to breeders and feeders who have spent as much as three years bringing their animals forward.
The gross margins sought by multiple retailers are a close kept secret but there is a suspicion that 17 per cent is the target of at least one company – which looks to be way too much.
In view of this Hogan can expect to be encouraged to ask retailers for a full cost breakdown so it can be seen whether a 50 per cent joint share of the retail price is justified or not.
It would also be useful to know how much processors can earn from offal, which they do not buy, but nevertheless sell to an increasingly enthusiastic range of domestic and international customers.
And it would interesting to discover whether or not retailers who trade huge volumes of beef each week can manipulate processor demand for prime cattle as easily as someone opening and shutting a tap by raising the retail price so less beef is purchased and both chill room stocks and slaughter-ready cattle supplies back up – as is happening at present.
And then opening the tap by reducing the price when cattle are cheaper so more beef can be retailed, some of it through promotions, at less cost.
Robert produces a subscription-only, Beef Industry Newsletter. It is published on Friday evenings and is recognised as the most informed source of beef sector information, including prime cattle market movements, available in the UK. Find out more by logging on to www.rforster.com or email firstname.lastname@example.org for a sample copy.
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