16 January 1998

Price gap but no foul play

A WIDENING gap between farm gate and retail beef prices has been identified by the Meat and Livestock Commission, but there is no evidence of profiteering.

A report, commissioned by the House of Commons Welsh Affairs Committee, is due to be completed by MLC in the next week. Preliminary figures show that producer prices for beef fell by 14% in the year to Dec 1997, while retail prices fell by only 4%.

Yet MLC industry strategy manager Martin Palmer insisted there was no proof to support widespread claims by farmers that the supermarkets have been profiteering at their expense.

"The meat cuts that the retailer buys are often the higher value cuts, such as steaks, which have not seen as great a fall in demand as for forequarter cuts," explained Dr Palmer.

"It may be, therefore, that the retailer is continuing to buy in these cuts from processors at a similar price level. Retailers may even be taking a loss on some beef cuts," he suggested.

Meanwhile, the producer selling the whole carcass did not see this differentiation in value, and had to bear the cost of the lower value forequarter cuts when selling the entire beef animal.

Bob Bansback, corporate strategy director at MLC, said processing costs had increased in the past year, due to the withdrawal of government rendering aid and increased labour bills for additional processing requirements.

"Also the fact that previously saleable products from the carcass are now banned have squeezed the processors margins," he said.

Mr Bansback.

Only last week Tesco chief executive Terry Leahy told the Oxford Farming Conference that his firm barely broke even on red meat (News, Jan 9). And he announced that he had commissioned an independent report by London consultants to establish who in the sector was making a profit.