Transparency in beef markets in Ireland · • Irish beef exports (volume) dominated by EU and...

Transparency in beef

markets in Ireland

Dr Kevin Hanrahan

Rural Economy Development Programme, Teagasc

Workshop on Market Transparency

Brussels

May 30/31, 2018

Market Transparency

Definition used by AMTF

• “Availability of relevant market information to market participants”

» Sounds a bit like “Brexit means Brexit”

» What markets & what participants?

» What information

• Objective of presentation is introduce the Irish beef sector, its markets and its peculiarities

• What (public) market information is available to market participants

• Won’t attempt to “call” Irish beef market transparency

Teagasc Presentation Footer2

Irish beef farming sector

One of the two pillars (with dairy) of Irish farming

Dominant farming type and agricultural land use in Ireland

Characterised by smaller than average farm sizes, relatively poor quality land, older farmers, greater prevalence of part-time farming and low farm incomes


Cattle share of Agricultural Goods Output

at basic prices (2017)

0%

5%

10%

15%

20%

25%

30%

35%B

E

BG

CZ

DK

DE

EE IE EL

ES

FR

HR IT

CY

LV

LT

LU

HU

MT

NL

AT

PL

PT

RO SI

SK FI

SE

UK

EU

28


Source: Eurostat aact_eaa01

Beef Farming Structures (FSS 2016 & NFS 2017)

Specialist cattle-rearing and fattening farms account for 53% of all Irish farms and 43% of Irish UAA

• Average farm size of 26.5 ha (< Irish average of 32.4 ha)

• Almost ¾ of all Irish cattle farms had a SO ≤ €25k

Teagasc 2017 FFI (direct payments) Preliminary Results

• Cattle Rearing Family Farm Income of €12,680 (€14,381)

• Cattle Other Family Farm Income of €16,651 (€16,044)

=> Irish farms (on average) market very few cattle p.a.

• Either via live cattle auctions (Cattle Rearing) or via sales to abattoirs/factories (Cattle Other)

With very few “trips” to market timing and pricing idiosyncrasies can be critical to farm incomes earned


Cattle Markets involving farmers

Live cattle sales of mostly younger cattle (2016) approximately 3 m cattle

• Farmer to Farmer transactions via public auction (58%) or via private sale (42%)

Live Cattle Exports (2016) 0.146 m head

• Increasingly dominated by male dairy calves

Finished Cattle Markets (Slaughter) in 2016 1.7 m head

• DAFM approved plants (95%)

• Local Government approved abattoirs (5%)


Irish Beef processing

Relatively concentrated Irish beef processing industry

• 30 DAFM approved plants (95% of total slaughter)

• Local government licensed abattoirs servicing some of the domestic butchery trade (5% of total slaughter)

• Industry dominated by four privately owned multiplant firms (ABP, Dawn, Kepak and Liffey Meats)

Given structure of cattle finishing farm sector likely high costs of cattle procurement to meat processing industry

Irish agri-food an export industry esp. true for beef

• 2016 Irish beef exports equalled 91.3% of production

• Irish beef exports (volume) dominated by EU and within EU by the UK


Irish Beef Supply and Use (kt cwe)

0

100

200

300

400

500

600

700

0

100

200

300

400

500

600

7001992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Tra

de

Pro

du

cti

on

, C

on

su

mp

tio

n

Production Domestic Use Imports Exports


Source: Central Statistics Office

Irish Beef Exports (cwe) 2017

EU27_2019

UK

Rest of World


Source: Eurostat COMEXT

Different Cattle/Beef Markets in Ireland

Cattle Rearing Farms & Dairy Farms

Cattle Finishing Farms

Beef Processors/Local Abattoirs

Irish Retail & Food Service Markets

Export Markets


Live Cattle ExportsMarket Stage 1

Market Stage 2

Market Stage 4Market Stage 3

Market Stage 5

Live Cattle Markets, Factories and

Abattoirs


Market Transparency: big messages

Lots of very detailed “information” available at a relatively high frequency for the farm/cattle market (s) on physicals and prices (stages 1 & 2)

There are fewer public data on retail (prices only)

• Private sector data on volumes and prices (Kantar)

Even fewer data on processing/wholesale supply chain stages

Extreme export orientation of Irish beef industry -how relevant are (Irish) retail developments ?

Much market information particularly on physicals is not well structured in terms of being useful to decision makers


Market Transparency

Data aren’t information and data processing challenges for market participants (particularly farmers) likely to be high

Irish agri-media play a large role in translating & communicating market price developments

• Traditional agri press e.g. Irish Farmers Journal

• Newer internet based services Agriland.ie

Department of Agriculture, Food and the Marine

• Price watch smart phone App


https://publicapps.agriculture.gov.ie/bpw/index.htm#factoriesPage

First Stage Markets (Marts)

Livestock Auction Markets

• Mostly cooperatively owned

» Play an important intermediation role (reducing counterparty risk)

Average national weekly live cattle prices published by DAFM (and communicated to DG Agri)

» Some monthly aggregates published by CSO

Detail on prices at individual market level collected but not published officially

• Reported in detail by agricultural press

Little hard data offered on physical volumes transacted

• Monthly data on Mart transactions reported in annual reports from animal movement and identification system database (AIMS)


First Stage Market (private sales)

No data on prices

• Private sales

Established networks of farmers who buy and sell to one another on an annual basis

Live Exporters and their agents/cattle dealers

• Counterparty risk

Detailed weekly data on live export flows

Information on other transaction volumes transacted published with long lag in Annual AIMS report from Ministry (DAFM)


Second Stage Cattle Markets(farms to meat factories/abattoirs)

Weekly data on aggregate slaughter (heads) at DAFM approved plants by category of animal

• No plant specific volume data reported

Weekly data on average deadweight prices paid across a 15 x 15 (conformation x fat cover) carcass grid for 5 categories of cattle for each of the 30 DAFM approved meat plants

• That is an awful lots of price data

Weekly average carcass and live cattle prices reported to and published by DG AGRI


Second Stage Cattle Markets

(farms to meat factories/abattoirs)

Quarterly/Half yearly/Annual data on

carcass classification shares and

average weights across Grid for each

cattle type for each DAFM approved

plants

Monthly slaughter (heads/carcass) data

published by CSO and Eurostat

• More detail in published Eurostat data for

some reason


Third Stage (meat plants to Retail/Food Service Sector)

No public data on volume or prices of sales by meat processing industry to Retail sector and/or Foods service Markets

• Private (Kantar Panel) data on retail sales (price & volumes)

• Other intermediate firms operating between Meat Companies and small retailers/small food service outlets

Supply and Use data indicate that these markets account for < 10% of domestic production


Fourth Stage (meat plants to export markets )

Supply and Use data indicate that these

markets account for > 90% of domestic

production

Only data available are from monthly trade

statistics (Eurostat COMEXT)

Show volume and value

• Implicit unit value of trade at CN8 level

• No data on Volumes/Value/prices at cuts level


Fifth Stage (Retail to Consumer)

Only publically data available from CSO national average consumer price data sets (Inflation)

• Detailed private sector (Kantar Panel) data – but not public

Monthly price in euro/kg for 4 beef consumer products

• Sirloin

• Striploin

• Roast beef topside or rib

• Sliced/Diced beef pieces

Monthly consumer price sub-index for beef & veal

CSO annual domestic use (disappearance) data not estimated as a residual

• “estimate” provided by Bord Bia


Other data on physicals

Monthly physical data on cattle inventories and cattle flows from animal identification and movement system (AIMS DAFM)

• Detailed data on national cattle herd profile with cattle disaggregated by dairy/non-dairy sire and cow/other and by 18 age cohorts

• Monthly Data on calf births (Dairy/non-Dairy sires), DAFM plant slaughter and Live exports

• No published disaggregation of cow slaughter across dairy/non-dairy


“Beef” prices across four “Irish” markets

Liveweight Price (Stage 1)

• Bullock (200-249 kg) per 100kg lw

Finished cattle market (farm gate price) (Stage 2)

• R3 Steer Price €/100kg

Export Unit Values (Stage 4)

• 02013000 Fresh or Chilled Bovine Meat, Boneless

• UV (export “price”) €/100kg product weight

Retail Prices of Beef (Stage 5)

• Retail Price (€/kg product weight)

• Sirloin

• Roast beef topside/rib

• Sliced/diced beef pieces


Four Irish “beef” prices per 100kg

02004006008001.0001.2001.4001.6001.800

050

100150200250300350400450500

2002M

12

2003M

10

2004M

08

2005M

06

2006M

04

2007M

02

20

07

M12

2008M

10

2009M

08

2010M

06

2011M

04

20

12

M02

2012M

12

2013M

10

2014M

08

2015M

06

2016M

04

2017M

02

2017M

12

Reta

il p

rice

Farm

an

d F

acto

ry P

rices

Bullock 250-299 kg lwR3 Steer PriceFresh or Chilled Bovine Meat, DebonedSirloin


Source: DG Agri, Eurostat COMEXT and CSO

Four Irish “beef” price indices (Dec 2010=100)

0

20

40

60

80

100

120

140

1602003M

11

2004M

06

2005M

01

2005M

08

2006M

03

2006M

10

2007M

05

20

07

M1

2

2008M

07

2009M

02

2009M

09

2010M

04

2010M

11

2011M

06

2012M

01

2012M

08

2013M

03

2013M

10

2014M

05

2014M

12

2015M

07

2016M

02

2016M

09

2017M

04

2017M

11

Sm

oo

thed

Pri

ce

s(i

nd

ex D

ec 2

010 =

100)

Bullock 250-299kg

R3 Steer Price

Fresh or Chilled Bovine Meat, Deboned

Sirloin


Conclusions

Differing levels of market information

available to market participants in

different sub-markets

• Publically available information/data “volume”

declines as you go down the supply chain

• Reflecting finding of AMTF very little data

available at meat processing/wholesale and

retail market levels

• Data from trade statistics on beef exports


Conclusions

No work in Ireland to date on calculating

farm/processor/retailer shares of Irish consumer’s euro

spent on beef

• May make little sense in Ireland given export dominance

Work on farmer/processor share of export euro likely to

be of more value

• Will require careful work on reconstituting export flows to

carcass equivalent

• How to deal with allocation of the farmer share between Cattle

Rearers (backgrounders & dairy farmers) and Cattle Finishers ?


Conclusions

Farm gate prices for cattle (young animals and

finished cattle) In Ireland are based on supply and

demand for cattle within these separate but related

markets

• Demand derived largely from export demand for Irish beef and

ultimately from “foreign” consumer demand for beef

Available price trends appear to indicate that Irish

retail prices are not driving Irish farm gate prices

Fits with prior that Irish beef export markets more

important in determining farm gate prices for both

finished cattle and younger cattle


Conclusions

Low to negligible & frequently negative farm margins

• Exclusive of decoupled direct payments

Ongoing controversy/conflicts between Irish

farmers/meat companies/retail multiples

Lack of information on margins in processing

Could the absence/low level of trust along the Irish

beef supply chain be improved with more information

on margins in the meat processing industry and info

on farmer/processor shares of the beef export euro?

30

Conclusions

Comparative analysis of transparency across EU markets will be very complicated

Challenge to make available market information more useful to market participants

• So as to provide insights on what might happen tomorrow/next week/next year

DG Agri Market Transparency Workshop, Brussel May 30/31 201831

Transparency in beef markets in Ireland · • Irish beef exports (volume) dominated by EU and...

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