Multiples are not the only market for beef
Beef producers in the UK should forget mainstream commodity production and concentrate on the top and bottom ends of the market.
Norman Bagley, policy director of the Association of Independent Meat Suppliers, delivered this hard-hitting message at last week’s Cultivating the Future of the Red Meat Industry conference at Cullompton, Devon, organised by Meat South West, NFU and Taste of the West.
He said producers could not compete against imports in the commodity sector.
“I honestly believe UK retailers have built into their thinking that beef production will fall, and I think they are right.
But they have already made plans to import to make up for that (30-35%) shortfall.”
Mr Bagley said the three big processors had spent 90-100m recently, but plants were running at 50% capacity.
“If you think that capacity is for you, dream on.”
Retailers were not going to pitch contract prices above import levels, Mr Bagley added.
“It’s not going to happen.”
Referring to Tesco’s 2/kg contract price for suckler beef, he said: “We are talking about totally unsustainable forward contracts.
I don’t think British farmers are realistic players in the commodity sector any longer.”
However, the multiples only took 50% of south-west beef, Mr Bagley said.
The rest went through small and medium-sized abattoirs to supply a range of outlets including butchers, direct sales and farmers’ markets, and producers should take advantage of that.
“There are two markets out there, and one is just as big as the other.”
Tesco’s meat director, Sean McCurley, hit back at Mr Bagley’s claims.
“Let’s be clear,” he said.
There’s no money in the supply chain – you (farmers) are not subsidising Tesco’s 2bn profit.”
He said he recognised that ex-farm prices were unsustainable, but added that supermarkets were experiencing huge growth in their premium and organic ranges, as well as in the value sector, and it was here that producers could maximise their profitability.
Mr McCurley expected Tesco’s organic beef to treble its 3% share by 2010.
“This is not a niche business any more.”
And the “Finest” range was likely to grow from 8% now to 20%, and the value range from 4% to 15%.
Tesco’s value quick-fry steak – “which I could probably sole my shoes with” – would be replaced with “fantastic” UK cow beef, he said.
“And our intention is that our Finest range will be the best eating quality, always British, always suckler.”
He denied Tesco was “cultivating” imports – Brazil carried a foot-and-mouth risk and Argentina had an unstable export policy.
“It absolutely does not make common sense.
There is no sinister plan – you really have to believe me on that.”
Several producers challenged Tesco’s pricing, which forced farmers to produce beef at a loss.
Mr McCurley said: “Should Tesco take more responsibility in ensuring suppliers can make a living wage? Possibly.
Can I sleep at night? Yes.
“You can’t move from a subsidised to a non-subsidised industry quickly.
If we put the price up by 40% customers would move to chicken, or go to Asda.
But have we got to work at this over the next five years.”
Conference delegate Martin Howlett, the NFU’s south-west regional livestock chairman, was not impressed.
“What other business would be almost proud of saying it couldn’t make money out of a market?
“That’s been reflected in our discussions with processors, who said Tesco is not going to shift.
It begs the questions what we producers are doing.”