‘Wake up call’ for beef farmers

Beef producers have been told not to use their Single Farm Payment (SFP) to make life easier for supermarkets, shoppers and slaughterers.

National Beef Association Robert Forster said members were using coupled support payments to make up for market income that is lower than their production costs.

This meant beef farmers were effectively subsidising consumers, retailers and processors, he told journalists at the Beef Expo 2004 event near Edinburgh.

Producers should wake up to the threats and opportunities that will follow the switch to decoupled payments in January, he added.

“For decades farmers have been falsely accused of growing fat on tax payers‘ money,” said Mr Forster.

But most – and sometimes all – of their subsidy income had been used to underpin the sale price of slaughter cattle and make beef cheaper.

This could continue after decoupling because their the SFP will be lower than their previous receipts and by 2012 it will be phased out altogether.

Farmers who used the SFP to make up the gap between production costs and market income would “paint themselves into a financial corner from which it will be impossible to escape when SFP payments are finally withdrawn.”

The only possible response was to not enter the SFP into the accounts as trading income.

Instead it should be used as a capital fund to assist cost reduction and help the business reach 2012 able to generate profit without any support income at all.

According to the NBA the average hill suckler herd earned around £270 per calf from the market in 2002/2003 but faced total costs per calf of £365.

This left a loss of £95 that was only countered by £182 per head in subsidy, said Mr Forster.

On a lowland herd, each calf earns £260 leaving a loss of £140 a head which is only just covered by a £158 subsidy cheque.

Grass-based dairy beef finishers were even worse off with an average sales income after purchase costs of £340.

Against this producers incurred £445 in costs and received only £70 in subsidy income leaving a real loss of £35 per head.

Intensive finishers who enjoyed £235 in net sales income faced £400 in costs. They received £175 in direct support payments.

“This is convincing evidence that contrary to the popular public view the coupled subsidy system has delivered consistently cheap food to the consumer,” said Mr Forster.

“The entire beef supply chain must adjust virtually overnight to the temporary, and much lower levels of  SFP, otherwise home production will be crippled.”

“Attitudes in the retail and slaughter sectors have to change dramatically.”