Beef industry benchmark figures fail to take into account farmers’ true costs of production and give retailers misleading ideas of livestock profitability, says the National Beef Association.
Widely used enterprise costings, such as those published by the English Beef and Lamb Executive last week, do not include farmers’ own labour, business drawings, or reinvestment funds.
NBA chairman Duff Burrell was concerned the processing and retailing sectors were unaware of the true costs faced by beef farmers.
“It beggars belief to think that discussions on the future of the beef industry are being based on the false assumption that farmers are prepared to work for nothing, live on nothing and set nothing aside to finance management changes,” he said.
Mr Burrell called for the adoption of a nationwide formula to calculate beef production costs.
“For example, it has been said that the top 25% of farmers can produce beef at 195-200p/kg deadweight, while the average cost is 240-250p/kg. But the non-farmers who have heard this have not been told what is missing from the figures, which means any future analysis of theirs is flawed.
“If a farmer’s own labour is included, even at the modest cost of 10,000 a year, the average cost per kg jumps to 300p and even the best farmers need 240p/kg to break even,” said Mr Burrell.
He criticised the recent EBLEX costings for including beef special premium and slaughter premium payments some animals would have benefited from.
“We need to throw away the rear-view mirror.”
But Meat and Livestock Commission economics manager Duncan Sinclair defended the figures, saying it was clearly stated that they included only casual and employed labour paid through the farms’ trading accounts.
“Our data make it clear that family labour costs are excluded.
We did not want to include information that is already available in DEFRA’s Farm Business Survey.
“The EBLEX costings aren’t a purely statistical exercise, they are intended to show a snapshot of beef production based on information from farmers’ accounts.”
And as the data gathered ran up to March 2005, it was essential to include the incremental value of direct subsidies associated with those animals.
“It would be false to suggest there were no direct subsidies.”
NFU livestock adviser Peter King said the industry needed to make it clear to retailers what the popular enterprise costs included.
“This illustrates that the most efficient beef farmers need a minimum of 2/kg to break even.
Given that this doesn’t include any drawings suggests most are still operating below cost price.”