The National Beef Association is urging more processors to make new efforts to develop the export market – and in so doing rescue themselves, and others in the beef sector, from avoidable long term supply problems created by the routine under pricing of prime cattle.
It says that the processing sector’s excessive focus on providing dominant domestic retailers with beef is visibly killing off home production because neither breeders, nor feeders, are earning enough to bridge the ever-widening gap between production costs and market income.
“The beef industry is being suffocated because of the lack of competition with the biggest domestic supermarkets for prime cattle. The multiples are therefore enjoying an iron grip on supply - and the absence of any meaningful purchasing challenge allows them to continue with discount led, domestic, retail policies which permanently undermine the value of the farmer’s high cost product,” explained NBA chairman, Oisin Murnion.
The Association wants processors to break the multiple’s supply-price stranglehold by opening new outlets for UK beef in the increasingly undersupplied EU market. Although, exports are up 16% so far this year to 47,000 tonnes in the first six months of 2010, the potential to increase exports further based on the quality and value of UK beef is sizeable.
“Export competition forces multiples to pay more because home produced beef will be harder to find and they know the majority of their customers are not satisfied with imports,” said Mr Murnion.
“The extra income that is passed back to producers as a result of this much needed competition will ensure future supplies for both the domestic and export markets – so in the end everybody wins including the consumer”
“The UK beef industry is burdened with a lopsided structural legacy created by the BSE export ban in 1996. At that time beef exporters put heat in the beef cattle market but after 1996 the UK beef industry was forced to survive exclusively on domestic sales. Major processors must now put the right marketing structure in place for export. They should do it not from an altruistic point of view but because they will improve their margins by selling to a wider number of markets”.
“Some processors may be reluctant to re-start export sales because they know that widening their market will lift cattle prices and put them on a collision course with their bargain seeking, supermarket, customers.”
“But the NBA says this pressure must be ignored. Processors must seize profitable export opportunities and if the multiples are allowed to continue to under-price UK beef as much as they are at present they will force processors out of existence because farmers simply cannot cover their costs at today’s prices and progressively fewer cattle will come forward,” Mr Murnion added.
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