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    Disastrous Profit and Loss Evidence for Beef Farmers
05/12/06

UK beef production can only be maintained in anything approaching its current volume if producer incomes increase by 20-25 per cent at the same time as production efficiency is lifted by around 30 per cent.

© www.jennifermackenzie.co.uk

Beef Cattle

This is the spot analysis of the National Beef Association after examining the newly modeled beef farm income figures for 2005-2006 which in broad terms confirm cross-UK net losses of around £450 per suckler cow and perhaps £150 per slaughter animal.

“The urgent message that lies behind these figures cannot be ignored. Only the very best intensive finishers are avoiding persistent heavy losses and suckled calf breeders are only able to find money for personal drawings if they spend what is left of their Single Farm Payment (SFP) after using the bulk to make up the enormous gap between cost of production and income figures,” explained NBA chairman, Duff Burrell.

“This disastrous profit and loss evidence must concentrate the minds of all businessmen, retailers and processors, who rely on the continued production of domestic beef cattle and wish to develop a sound future for an efficient UK industry.”

“It is obvious that beef sector structures will continue to be weakened by de-coupling unless farmers are given a chance to re-structure their businesses by using their ever declining SFP to fund new production efficiencies – and they can only do this if the pressure is taken off them by a substantial increase in direct market income.”

From the NBA’s point of view this twin pronged approach to the increasingly urgent survival challenge facing UK beef production is the only way domestic production levels have a chance of being maintained at a time when world production is creeping closer to global deficit.

“There has to be a co-ordinated effort. Farmers risk losing their businesses if their only response is to cross their fingers and wait for a timely lift in the market to ride to their rescue. Their contribution to industry survival is to make a determined effort to spread their overheads and invest money to achieve their lowest possible unit cost,” said Mr Burrell.

“And both retailers and processors are deceiving themselves if they think that all but the very best of beef producers can maintain stable businesses after 2008 without a lift in income that gives them at least a chance to divert SFP into much needed re-structuring.”

“We see 2008 as the crunch year. SFP in all UK countries will be slashed as a result of huge and ill-timed rises in voluntary modulation deductions and falls in LFA payments while England faces its special problem of SFP being progressively diverted onto non-beef producing farms.”

“Farmers, particularly tenants, who use all their SFP to cover losses risk bankruptcy from 2009 unless they can quickly raise efficiency.”

“And those retailers and processors who take the shortsighted view that nothing can be done to prevent an avoidable production collapse must consider a planned increase in producer incomes based on a cost justified rise in retail prices otherwise they could find themselves with sophisticated beef retailing businesses with very little beef to retail,” Mr Burrell added.

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