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
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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
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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
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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
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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%)
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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
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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
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Source: Central Statistics Office
Irish Beef Exports (cwe) 2017
EU27_2019
UK
Rest of World
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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
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Live Cattle ExportsMarket Stage 1
Market Stage 2
Market Stage 4Market Stage 3
Market Stage 5
Live Cattle Markets, Factories and
Abattoirs
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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
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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
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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)
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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)
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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
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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
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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
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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
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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
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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
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“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
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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
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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
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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
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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 ?
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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
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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